A $5.7m windfall

Christmas is arriving early in 2018. About 11 months early, to be precise. On Thursday, January 25, North Carolina retirees began receiving their monthly state retirement benefit payments.

According to the office of North Carolina State Treasurer Dale R. Folwell, payments to retirees have increased by a total of $5.7 million this month. The windfall was triggered by two developments. One is the very well publicized federal tax reform signed by President Donald Trump after Congressional Republicans came through with a bill late last year.

The other development flew under the radar. An obscure state entity, the Retirement Systems Division (RSD), simply did its job beating the clock on an IRS deadline that was set after Trump signed sweeping tax cuts into law.

Among those cuts are federal taxes deducted from 2018 benefit payments to North Carolina retirees and benefit recipients. The RSD Operations Team within the N.C. Department of State Treasurer was able to update the tables ahead of the IRS’s deadline.

“I’m very proud of our team for taking the initiative so quickly after the new tax law was passed by Congress and signed by President Trump. While we are in the check delivery business, it involves more than just buying ink and stamps,” said Treasurer Folwell. “This is a testament to the outstanding job that our career public servants do to serve government workers.”

More than $500 million is paid out each month to more than 312,000 retirees and benefit recipients.

“Our team, led by Tom Causey and Susan Fordham, decided not to wait until February to enact this increase in our members’ benefit payments,” explained Steve Toole, Executive Director of RSD. “By updating these tax schedules sooner, our members will see larger January benefit payments.”

Washed away

“For centuries,” writes our frequent RESOLVE contributor Walter B. Bull Jr., “rapid radical change has been designated as a sea-change.” In fact, William Shakespeare used the phrase as long ago as 1610 when penning a lyric.

American society is witnessing a dramatic sea-change that has been intensified by the election of President Donald Trump and the mainstream media’s intent to derail, if not end, his presidency. But the change, writes Bull, began toward the end of the previous century.

“Various electronic devices were developed to record, categorize, store and analyze large amounts of data at light speed. … At the same time, information delivery systems, mainly televisions, became available to most households for use as an entertainment gathering focal point.”

Radio and television changed the way we experienced historic, including tragic, events, such as the assassinations of President John F. Kennedy and presidential candidate Robert F. Kennedy, the Vietnam War, the space shuttle Challenger’s mid-air explosion and, most chillingly, Sept. 11, 2001.

Now, in the era of Trump, news and analysis delivery, extending to laptops, tablets and smartphones, is being de-emphasized, replaced, Bull points out, by “brash claims or subtle messaging (Trump is mentally unstable) with an intent that goes beyond delivery of basic facts.”

The sea change playing out before us as 2018 begins is driven by two forces working in lockstep. The Democrat Party, now completely devoid of moderates, is lurching further and further into a state of frothing-at-the-mouth, radical progressivism. And the mainstream media, of similar mindset, questions nothing and gleefully advances the agenda.

These two camps, so obsessed with diminishing Trump, seem no longer to care they are diminishing themselves. The FBI and Justice Department, as evidenced by the existence of the phony “Steele dossier”, apparently are not afraid of being diminished, as well.

No single news story demonstrates the impact of the media-fueled Democrat agenda to obstruct Trump and the Republican Congressional majority more than the passage of tax cuts at year’s end.

The media’s forecast on corporate and household tax cuts looked like this: Tax-Reform Bill is Unpopular Because Media Mislead Americans (National Review, Dec. 20, 2017).

It’s very clear that the tax bill passed by both the House and Senate (Dec. 19) is indisputably unpopular among Americans. But the reasons for that unpopularity are much less clear. Left-wing bias in the media likely has a lot to do with it.

National Review further pointed out that formerly reliable wire service Associated Press reported passage of the bill via Twitter as providing “steep tax cuts for businesses, the wealthy”. Talking points, not journalism.

As we move into mid-January, about a month after the bill’s passage, most media outlets are straining to avoid almost daily evidence that tax cuts for businesses are having the effect Republicans forecast all along (even as polls reflected a skeptical public). Thankfully, the Washington Examiner shared what its reporters learned when they reviewed a meticulous bit of tallying by Americans for Tax Reform.

list of 40 firms offering millions of employees bonuses and customers fee cuts has surged to 164 in just 10 days as the likely financial benefit of President Trump’s tax reform has started to settle in.

Perhaps, retorts the media’s mainstreamers, adrift in their turbulent sea. On to other narratives they turn even as Americans rejoice in economic liberation. Trump is a racist, an insane one at that.

And, of course, Russia, Russia, Russia.

Tired of winning yet?

The Washington Examiner unwrapped an early Christmas present today, publishing a list of 81 major victories by the Trump administration in 12 categories since President Donald Trump was inaugurated last January 20.

Jobs and the economy

  • Passage of the tax reform bill providing $5.5 billion in cuts and repealing the Obamacare mandate.
  • Increase of the GDP above 3 percent.
  • Creation of 1.7 million new jobs, cutting unemployment to 4.1 percent.
  • Saw the Dow Jones reach record highs.
  • A rebound in economic confidence to a 17-year high.
  • A new executive order to boost apprenticeships.
  • A move to boost computer sciences in Education Department programs.
  • Prioritizing women-owned businesses for some $500 million in SBA loans.

Killing job-stifling regulations

  • Signed an Executive Order demanding that two regulations be killed for every new one creates. He beat that big and cut 16 rules and regulations for every one created, saving $8.1 billion.
  • Signed 15 congressional regulatory cuts.
  • Withdrew from the Obama-era Paris Climate Agreement, ending the threat of environmental regulations.
  • Signed an Executive Order cutting the time for infrastructure permit approvals.
  • Eliminated an Obama rule on streams that Trump felt unfairly targeted the coal industry.

Fair trade

  • Made good on his campaign promise to withdraw from the Trans-Pacific Partnership.
  • Opened up the North American Free Trade Agreement for talks to better the deal for the U.S.
  • Worked to bring companies back to the U.S., and companies like Toyota, Mazda, Broadcom Limited, and Foxconn announced plans to open U.S. plants.
  • Worked to promote the sale of U.S products abroad.
  • Made enforcement of U.S. trade laws, especially those that involve national security, a priority.
  • Ended Obama’s deal with Cuba.

Boosting U.S. energy dominance

  • The Department of Interior, which has led the way in cutting regulations, opened plans to lease 77 million acres in the Gulf of Mexico for oil and gas drilling.
  • Trump traveled the world to promote the sale and use of U.S. energy.
  • Expanded energy infrastructure projects like the Keystone XL Pipeline snubbed by Obama.
  • Ordered the Environmental Protection Agency to kill Obama’s Clean Power Plan.
  • EPA is reconsidering Obama rules on methane emissions.

Protecting the U.S. homeland

  • Laid out new principles for reforming immigration and announced plan to end “chain migration,” which lets one legal immigrant to bring in dozens of family members.
  • Made progress to build the border wall with Mexico.
  • Ended the Obama-era “catch and release” of illegal immigrants.
  • Boosted the arrests of illegals inside the U.S.
  • Doubled the number of counties participating with Immigration and Customs Enforcement charged with deporting illegals.
  • Removed 36 percent more criminal gang members than in fiscal 2016.
  • Started the end of the Deferred Action for Childhood Arrival program.
  • Ditto for other amnesty programs like Deferred Action for Parents of Americans.
  • Cracking down on some 300 sanctuary cities that defy ICE but still get federal dollars.
  • Added some 100 new immigration judges.

Protecting communities

  • Justice announced grants of $98 million to fund 802 new cops.
  • Justice worked with Central American nations to arrest and charge 4,000 MS-13 members.
  • Homeland rounded up nearly 800 MS-13 members, an 83 percent one-year increase.
  • Signed three executive orders aimed at cracking down on international criminal organizations.
  • Attorney General Jeff Sessions created new National Public Safety Partnership, a cooperative initiative with cities to reduce violent crimes.

Accountability

  • Trump has nominated 73 federal judges and won his nomination of Neil Gorsuch to the Supreme Court.
  • Ordered ethical standards including a lobbying ban.
  • Called for a comprehensive plan to reorganize the executive branch.
  • Ordered an overhaul to modernize the digital government.
  • Called for a full audit of the Pentagon and its spending.

Combatting opioids

  • First, the president declared a Nationwide Public Health Emergency on opioids.
  • His Council of Economic Advisors played a role in determining that overdoses are underreported by as much as 24 percent.
  • The Department of Health and Human Services laid out a new five-point strategy to fight the crisis.
  • Justice announced it was scheduling fentanyl substances as a drug class under the Controlled Substances Act.
  • Justice started a fraud crackdown, arresting more than 400.
  • The administration added $500 million to fight the crisis.
  • On National Drug Take Back Day, the Drug Enforcement Agency collected 456 tons.

Protecting life

  • In his first week, Trump reinstated and expanded the Mexico City Policy that blocks some $9 billion in foreign aid being used for abortions.
  • Worked with Congress on a bill overturning an Obama regulation that blocked states from defunding abortion providers.
  • Published guidance to block Obamacare money from supporting abortion.

Helping veterans

  • Signed the Veterans Accountability and Whistleblower Protection Act to allow senior officials in the Department of Veterans Affairs to fire failing employees and establish safeguards to protect whistleblowers.
  • Signed the Veterans Appeals Improvement and Modernization Act.
  • Signed the Harry W. Colmery Veterans Educational Assistance Act, to provide support.
  • Signed the VA Choice and Quality Employment Act of 2017 to authorize $2.1 billion in additional funds for the Veterans Choice Program.
  • Created a VA hotline.
  • Had the VA launch an online “Access and Quality Tool,” providing veterans with a way to access wait time and quality of care data.
  • With VA Secretary Dr. David Shulkin, announced three initiatives to expand access to healthcare for veterans using telehealth technology.

Promoting peace through strength

  • Directed the rebuilding of the military and ordered a new national strategy and nuclear posture review.
  • Worked to increase defense spending.
  • Empowered military leaders to “seize the initiative and win,” reducing the need for a White House sign off on every mission.
  • Directed the revival of the National Space Council to develop space war strategies.
  • Elevated U.S. Cyber Command into a major warfighting command.
  • Withdrew from the U.N. Global Compact on Migration, which Trump saw as a threat to borders.
  • Imposed a travel ban on nations that lack border and anti-terrorism security.
  • Saw ISIS lose virtually all of its territory.
  • Pushed for strong action against global outlaw North Korea and its development of nuclear weapons.
  • Announced a new Afghanistan strategy that strengthens support for U.S. forces at war with terrorism.
  • NATO increased support for the war in Afghanistan.
  • Approved a new Iran strategy plan focused on neutralizing the country’s influence in the region.
  • Ordered missile strikes against a Syrian airbase used in a chemical weapons attack.
  • Prevented subsequent chemical attacks by announcing a plan to detect them better and warned of future strikes if they were used.
  • Ordered new sanctions on the dictatorship in Venezuela.

Restoring confidence in and respect for America

  • Trump won the release of Americans held abroad, often using his personal relationships with world leaders.
  • Made good on a campaign promise to recognize Jerusalem as the capital of Israel.
  • Conducted a historic 12-day trip through Asia, winning new cooperative deals. On the trip, he attended three regional summits to promote American interests.
  • He traveled to the Middle East and Europe to build new relationships with leaders.
  • Traveled to Poland and on to German for the G-20 meeting where he pushed again for funding of women entrepreneurs.

 

Small business 101

Writes one Lowell Simon of Seven Lakes, NC, in a letter published by The Pilot in its Dec. 10 editions, “Can someone please point me to a third-party source that says the GOP tax plan will help small businesses?”

Our gut reaction is to answer his question with one of our own. Can someone please identify a third-party source that says a GOP tax reform bill will hurt small businesses, or for that matter, corporations or individual taxpayers? One third-party who explained this concisely came quickly to mind. He had this to say about cutting federal taxes, in general:

An economy hampered by restrictive tax rates will never produce enough revenues to balance our budget — just as it will never produce enough jobs or enough profits. Surely the lesson of the last decade is that budget deficits are not caused by wild-eyed spenders but by slow economic growth and periodic recessions.

This third-party message was delivered in December 1962 by President John F. Kennedy. The Democrat Party JFK was affiliated with was so dramatically more centrist than today’s far-left Democrat Party, surely we now can accurately identify JFK as a third-party voice.

Mr. Simon might agree or disagree with this premise, but we’re fairly certain as to what he’d ask next. “What does this philosophical viewpoint have to do with tax reform helping small businesses entering 2018?” Answer: It has everything to do with an improved economic outlook for small business owners, employees and customers, which is what the pending tax reform bill being debated by Congressional Republicans will accomplish over time.

Small business owners are essentially self-employed individuals. Their income is not taxed as if they are an entity, such as a corporation. Their profit is their income and is taxed at individual rates, known as pass-through taxation, within their household federal tax return. Unlike an independent contractor (such as a lawyer or tax advisor), small business owners contemplate their after-tax income more broadly. If it’s a start-up small business, the owner often contemplates allocating some of his income back to the business. Perhaps a new piece of equipment is needed. Perhaps he wants to launch a radio ad campaign to raise awareness of the new business. Most small business owners do not think of a tax break as the government “lining their pockets”.

So, back to the question, how do the GOP tax reform bills (one passed by the House; the other passed by the Senate) help small businesses? Without getting into the weeds of when or if a small business owner qualifies for pass-through taxation (assume the mom-and-pop businesses and franchised stores you frequent in your community do), here is a third-party overview by the Director of Investment Planning for The Motley Fool, Dan Caplinger:

The Senate decided to give small businesses a tax break by offering their owners a deduction on a portion of the income that passes through to their individual tax returns. Under the final proposal, qualifying business owners will be able to deduct 23% of their pass-through income on their tax returns, subject to a limit of 50% of wage income in order to prevent potential abuse.

Rather than offering a deduction, the House suggested changing the tax rate that applied to the business income that pass-through businesses generated. A maximum tax rate of 25% would have applied to pass-through income, but limitations would have treated 70% of income as wages at the full ordinary tax rate unless a business could prove that a different percentage was appropriate. An even lower rate of 9% would apply to businesses earnings less than $75,000. Professional services companies, such as those operated by lawyers and accountants, would have been excluded from the preferential rate entirely.

It is obvious, to some, that either approach would be a welcome benefit to the small business owner, who heretofore might have seen his total household income (business income plus, as an example, a spouse’s income as a school teacher) taxed at 35%.

We mention that help being contemplated for small businesses is obvious to some because yet another third-party report on the subject, by the polling agency SurveyMonkey, finds that small business owners who identify as Democrats dispute the merits of the tax reform bills:

For those small-business owners who identify as Republicans or who lean toward the GOP, tax reform couldn’t come soon enough. A huge majority (85 percent) supports the passage of the tax reform. These data come from the newest CNBC/SurveyMonkey Small Business Survey, conducted Nov. 20–Dec. 4 among 2,043 small-business owners.

Democratic-siding small-business owners take a harder line. Eight in 10 (80 percent) oppose the tax reform proposals, and they do not mince words when asked about their thoughts. “Unfair” is the most frequently mentioned single-word response, but “rich” and “wealthy” come up frequently in longer responses, as in, “It’s not a reform, it’s a tax cut for the wealthy.”

The ideological polarization that defines 21st Century America apparently is so entrenched that even some small business owners would forgo tax relief in order to stop “big (evil) corporations” from seeing relief from burdensome taxation as well.

So misguided is this logic that we must harken back to the words of American economist Walter E. Williams, cited by this blog in October. Wrote Williams, explaining the crippling impact of our nation’s 38.91% tax on corporate earnings (proposed to be reduced to 20% by both pending bills):

If a tax is levied on a corporation, it will have one of four responses or some combination thereof. It will raise the price of its product, lower dividends, cut salaries, or lay off workers. In each case, a flesh-and-blood person bears the tax burden.

 

 

Taxing distortions

In a Twitter post, North Carolina Sen. Thom Tillis this week called out a Washington Post reporter’s visit to Burlington, NC, where he sought to demonstrate that pending Republican legislation to cut taxes and liberate businesses offers little relief to the little guy. The premise of the Post report is that the state’s tax cutting endeavors have done next to nothing to help small business so, by extension, federal tax relief is likely to have minimal impact going forward.

The Post obviously assigned the reporter to find a rural business owner who is, for whatever reason, an unhappy camper in a state where many businesses are thriving, and into which new businesses are relocating.

The extremes to which the Left is going to stop the unleashing of the full potential of the American economy is not limited to the corrupt mainstream media. It is seeping into our own community.

Apparently, it is the policy of our local liberal house organ, The Pilot newspaper, to allow a reader to submit a letter-to-the-editor that does little more than regurgitate extreme Left Wing talking points. There is scarcely a thread of truth in this missive by the misinformed Ms. MeNeish. She laments over “a few years of tiny (tax) cuts”. About half the U.S. population pays no federal or state taxes, thus can not be granted a “cut”. The highest producers (in the 39.6% bracket) are not likely to see a federal tax cut, even a tiny one, and some very high earners might find themselves in a new 45% bracket, pending the final terms of the bill. The author also claims tax reform will “make it harder for young people to go to college”. This obviously is drawn from warnings by people such as University of North Carolina President Maragaret Spellings who oppose the removal of tax deductions for private giving (to schools such as UNC). But why does she assume that, for example, a UNC alum who owns a successful business, would not give more to the school as his tax burden declines, even absent a deduction for his charitable activity? This seems to suggest that her alums care little about the institution but give only to add a deduction to their filings. Quite an insult. How, you ask, does the elimination of private giving deductions “make it harder for young people to go to college”? Because the Left accepts that tuitions must continue to skyrocket and, thus, youngsters will need academic scholarships more than ever. Left unsaid is that many of these scholarships go to students who are not U.S. citizens.

Ms. MeNeish also wrings her wrists about tax reform burdening “our children and grandchildren with more than $1 trillion in addtional federal debt.” This is based on models that are typically inaccurate and on the smear campaign now being waged by billionaire investor Tom Steyer, who writes this week in the Wall Street Journal that tax cuts for “the wealthy” will be “paid for with money taken out of the pockets of working Americans and their children.” This outlook defies the outcomes of the economic impact of the last sweeping reform, under President Reagan in 1986, which handed President Clinton a booming economy throughout the 1990s. Projected debt increases under the current government spending trajectory — apart from tax reform becoming reality — far exceed $1 trillion over the next decade (the Congressional Budget Office estimates $10 million). Easy to dismiss, apparently. But, worse, her misgivings also conveniently ignore the $9 trillion in federal debt added during the eight unchecked years of spending under President Obama. Are her children and grandchildren somehow unscathed by Obama’s reckless legacy?

Tale of ‘The Tape’

The markets referred to daily in the financial press are composed of Wall Street trading on regulated stock exchanges, less formal Over the Counter (NASDAQ) markets, organized commodity exchanges worldwide, and specialized trading in major financial centers across the globe.

Old timers often refer to price reporting as “the tape”, a reference to a 19th century telegraphic system that reported individual security transactions. By extension, one “fighting the tape” meant going against factual trends (i.e., the markets are poised to remain positive) because he presumes to be better informed. This also would be known as a contrarian.

In a vast industrial sector, price levels are indicative of anticipated corporate performance. Recent markets that have risen to record breaking levels have given huge thumbs up to GOP economics and the leadership of President Donald J. Trump.

High speed electronic data transfers have sent Edison’s ticker tape to museums. Modern trading desks are where authority to assume billions of dollars of risk is granted to alert young people who may not have reached their 30th birthdays.

Many believe the free market performance in a competitive marketplace driven by perfect competition is the most reliable indicator of future pricing of equities and commodities. Perfect competition is defined as the situation prevailing in a market in which buyers and sellers are so numerous and well informed that all elements of monopoly are absent, and the market price of a commodity is beyond the control of any single individual buyer or seller. It is a classical economic theory.

The world’s trading in wheat, crude oil, strategic metals and international markets for a nation’s currency, provide spot pricing (today) or a fixed future price defined by delivery at distant point of time. A user of cotton, for example, will set his raw material cost by purchasing a given amount of the commodity at a fixed price for future delivery. Sellers of cotton, farmers for example, eliminate market risk by selling their anticipated production for future delivery.

There are many investors who enter the market as speculators and their risk is their own capital based on an individual analysis of market conditions. Publicly traded stocks anticipate corporate earnings and dividends and a rising equity price indicates belief in an enterprise’s growth over time. Collective wisdom, many economists believe, has a superior predictive capability.

So, today’s “tape” is saying that tax reductions, less regulation and decentralization of decision making is good for most Americans. Anticipated growth seems to be a more laudable goal than redistribution, espoused by the left.

Let’s turn to the anti-Trump political climate that emanates from believers in progressivism. They believe so strongly in government control they are unrealistic in their analysis of public data. They are fighting the tape.

The Trump assertive leadership, while something new to Washington, has found favor among Americans. Wall Street performance says so and all the tales of gloom and doom from the disciples of the FDR New Deal and the Johnson Great Society are clearly backward looking using faulty economic logic. Similarly flawed logic was expressed, ahead of Trump’s election, by Pulitzer Prize-winning New York Times columnist Paul Krugman, who predicted that a Trump victory would trigger an economic collapse from which the United States might never recover.

Current Democrat party leadership has adopted a policy they have called “The Resistance.” This is proving to be not very useful thinking to combat international threats stirring in North Korea and Iran to world peace and prosperity. It is a policy risk that is devoid of constructive thinking at a time when it may be clear to voters that policy changes are urgently needed.

The party of Sen. Chuck Schumer (D-NY), California Gov. Jerry Brown, and Rep. Nancy Pelosi (D-CA) is not the party of FDR, Kennedy, or even Barack Obama. It offers no ideas about production and preaches consumption with fairness predicated on a system that buries individual responsibility.

American success is due to creative individuals who shoulder responsibility, show up on time and take pride in a job well done. Collective performance leads to collective prosperity. Yet the Democrat Party continues fighting the tape.

– Walter B. Bull, Jr.
 

Reform terrifies tax addicts

High profile individuals in American society when caught engaging in criminal, deviant or unethical activity disappear into rehab programs, hoping to recast themselves as victims. Addicts are sympathetic figures, the thinking goes.

But how are we to feel about addicts who won’t/can’t seek treatment? In the case of tax addicted Washington politicians on the left, they should be judged as scoundrels, at the very least. How else to characterize tax-and-spend zealots such as Sen. Elizabeth Warren (D-MA), who says the Trump administration’s proposed tax cuts are “just plain immoral.”

Warren and her fellow tax revenue addicts break into sweats at the mention of tax cuts like alcoholics hearing suggestions of a return to Prohibition. They always fall back on the same tired rant. Tax cuts benefit only the richest Americans and give little relief to working class citizens (as if Warren, Senate Minority Leader Chuck Schumer, et al, actually know any such people). Corporate tax cuts only enrich the titans, not the factory workers. On and on they drone.

That’s why Republicans need to do a better job when it comes to promoting the actual effects of the tax cuts they propose under President Trump. They need to be very specific about the objectives of cutting taxes by drawing on jaw dropping data neatly summarized by columnist Walter E. Williams writing for DailySignal.com, “The Facts About Who Pays the Most in Taxes in America”.

Thirty-seven million tax filers have no tax obligation at all. (That’s 45.5% of American households). … These Americans become natural constituencies for big-spending (Democrat) politicians. After all, if you don’t pay federal taxes, what do you care about big spending?

But the average hard working American typically does not fixate on federal spending and national debt. That’s Washington insider stuff. Working class Americans want a path to higher wages and upward mobility within their chosen industry. The surest way to make that a realistic goal is to ease the tax burden on American corporations.

Williams deftly points out that the current 38.91% tax on U.S. corporate earnings, the fourth-highest in the world, is a tax on living, breathing people. A corporate tax cut potentially has more impact on a middle-class family than a tax cut on its take-home pay. Democrats refuse to acknowledge this because, of course, the narrative must always be that corporations are evil.

If a tax is levied on a corporation, it will have one of four responses or some combination thereof. It will raise the price of its product, lower dividends, cut salaries, or lay off workers. In each case, a flesh-and-blood person bears the tax burden.

The messaging is really simple. President Trump and fellow Republicans must not be trapped into using empty jargon when talking about tax reform.

More than 45% of American households pay zero federal income tax. Just say it. Less than 1% of the population, according to data Williams cites, pays 70.6% of federal income taxes. Just say it, while advocating for some relief for these folks, too. But most importantly, just say that a significant corporate tax rate cut from about 39% to 20% will open floodgates of higher wages and greater upward mobility for working class Americans.

If passing real tax cuts means that scores of Congressional Democrats disappear to enter fiscal rehab, just think of what that would do to ease gridlock in Washington.