Home LIFESTYLE Style News G.O.P. Tax Plan “Riddled“ with Loopholes Just Begging to Be Exploited

G.O.P. Tax Plan “Riddled“ with Loopholes Just Begging to Be Exploited

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During the first presidential debate of the 2016 election, Hillary Clinton went after Donald Trump for refusing to release his tax returns, arguing that the scant documents that had been made public showed Trump did not pay any federal income tax, to which the real-estate mogul replied, “That makes me smart.” Obviously, Donald Trump is not smart. But like any person with a decent chunk of change in the bank, he’d hired smart accountants and tax attorneys to legally—we assume—game the system, using the maze of loopholes and work-arounds in the tax code to do so. Trump claimed, not in a braggadocios way, that his ability to rip off Uncle Sam made him uniquely qualified to be president because, if elected, he could fix things so that the “forgotten” man would be on an even playing field with the 1 percent. Spoiler alert: that’s not exactly what happened.

Instead, Team Trump and congressional Republicans have come up with a pair of tax plans that disproportionately help the wealthy and do little for, and in some cases hurt, the lower and middle class. That, of course, was always going to happen, considering people like House Speaker Paul Ryan have dreamt of facilitating a historic transfer of wealth since they were wee tots at Young Republican Camp, where they learned to tie box knots and to argue convincingly that if grandma gets sick, it should be grandma who pays to get better. But because of the absolutely mind-boggling pace at which they’re attempting to push them through, their plans are, according to a new report by Politico, “riddled with bugs, loopholes, and other potential problems that could plague lawmakers long after their legislation is signed into law.” And—and you might want to sit down for this part—we’re sure it will come as a yuge surprise that many of said bugs and loopholes just happen to benefit the rich.

The most obvious example is the call to cut taxes on “pass-through” businesses such as the Trump Organization. In theory, and in selling the plan, Republicans have said this is all about easing the burden on mom-and-pop operations. But the move is expected to motivate a stampede of people like lawyers, doctors, consultants, and their dogs to reclassify themselves in order to take advantage of the windfall that would come with lowering their tax rates. “Once you offer a 25 percent [rate] to someone who is looking at 39.6 percent there is a tremendous incentive to find ways to drop from basically 40 to 25,” Alex Raskolnikov, a tax professor at Columbia Law School, told me. “This is going to put tax planning on a whole new level.”

But wait, you say, what about the “guardrails” Republicans promised to put in place to prevent thing like that from happening? “Historical experience is that guardrails don’t work,” Adam Looney, a senior fellow at the Brookings Institution, told me. “Part of the reason, one, is that for anybody who is married and making $500K there are no guardrails, so anyone can be a qualified small-business owner. And above 500 there are guardrails, but they’ll be easy to circumvent. The rules they’ve proposed have never been used before [in cases like these]. There’s going to be a lot of [opportunities for] tax arbitrage.”

As Raskolnikov told me, “loopholes always exist in legislation, you need to get the votes so you give away little deals. That‘s par for the course. What is not par for the course is that this is being done so fast that no one has time to sit down and think things through and get feedback . . . this is a different level of magnitude for how fast this is [happening] . . . there seems to be a new screwup that comes up very 10 minutes.” He added that the “fixing of the screwups is not going to be randomly distributed.”

Meanwhile, there are all kinds of breaks for industries like oil and gas (but solar, natch), and the bill happens to be a veritable bonanza for the real-estate industry. “Suddenly, there are a dozen different tax rates that apply to different businesses, in different industries, and to different investments,” Looney told the Times. “That means opportunities to come out ahead by making deals between these different groups or structuring businesses to take advantage of various provisions.”

In some areas, last-minute decisions like the one by the Senate to keep the alternative minimum tax would have the unintended result of making popular deductions like those for research and development expenses essentially pointless. In others, vague language has left experts at a loss. For example, the bill includes a proposal to tax the investment earnings of private universities’ endowments, but as Politico points out, “the legislation doesn’t explain what’s considered an endowment, and some colleges have more than 1,000 accounts.” Yet the major changes are set to go into effect on January 1, just days after lawmakers hope to have this thing topped off and tied with a bow. “The more you read, the more you go, ‘Holy crap, what’s this?’” Greg Jenner, a former tax official in George W. Bush’s Treasury Department told Politico. “We will be dealing with unintended consequences for months to come because the bill is moving too fast.” Even a Republican lobbyist couldn’t make sense of it all. “It’s crazy,” the person said. “I don’t think anyone could explain it, let alone comply with it” by January 1.

Naturally, the take from the White House is that 1) everything is totally cool, and 2) lawmakers shouldn’t slow down to make sense of the thing but should instead pick up the pace. “We want it to proceed as quickly as possible, and we’ve communicated that to the Hill in a lot of ways,” Marc Short, director of legislative affairs, said. “There are not a lot of outstanding issues remaining, and we’re not looking to open up Pandora’s box.”

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Team Trump to gut budget, staff of group tasked with spotting risks at financial institutions

Nothing to see here:

The Trump administration has told employees of the U.S. Office of Financial Research to expect deep budget and staffing cuts, according to people familiar with the matter, the latest example of its efforts to undo policies put in place under former President Barack Obama.

Senior officials at the Treasury Department delivered the news to OFR employees at a Nov. 30 meeting on the 10th floor of the agency’s headquarters in downtown Washington, according to people who attended. It was the strongest indication yet of the Trump administration’s plans for the OFR, which Congress created in 2010 to improve financial data and spot risks.

Incidentally, on Tuesday the office published a report warning that even with rules in place regarding what to do in the event of the collapse of a large institution, the crisis system could nonetheless experience a crisis.

Hedge-fund manager finds a weird hill to die on

Paul Tudor Jones is a legendary hedge-fund manager whose long track record for success has made him billions. Recently, though, some unfortunate bets have caused returns at his firm to falter. And apparently Jones’s bad choices and flatly wrong predictions have extended beyond the stock market: “I love you,” The New York Times reports Jones wrote to Harvey Weinstein in an e-mail sent days after sexual harassment and abuse allegations against the movie producer surfaced. “Focus on the future as America loves a great comeback story.” Amazingly, the investor concluded the note by telling Weinstein, “The good news is, this will go away sooner than you think and it will be forgotten!”

In a memo sent to employees on Wednesday, Jones, unsurprisingly, sought to distance himself from the disgraced movie mogul. “Please also understand that I first learned about the revelations about Harvey only as they began to be reported in the media. They were 100% a surprise to me,” he wrote. “Harvey’s actions were horribly wrong, and in the wake of these disclosures I told him that. I also encouraged Harvey to get the help he truly needed and to begin to change his life. Because some of the arguments I personally made to Harvey to try and be more like the person so many of us thought he was sound excessively encouraging now, I want you to understand the context in which they were made.”

Elsewhere!

Trump: Government Shutdown “Could Happen” Saturday (CNBC)

Biotech Hedge-Fund Titan Sam Isaly Harassed, Demeaned Women for Years, Former Employees Say (Stat News)

Banker Pay Will Probably Fall When Robots Take Over (Bloomberg)

Goldman, Barclays Bust into Jamie Dimon’s Game (W.S.J.)

Apple Will See Up to $47bn Potential Benefit from Tax Reform (Financial Times)

Millions Are Hounded for Debt They Don’t Owe. One Victim Fought Back, with a Vengeance (Bloomberg)

How Ackman Hopes to Beat Insider-Trading Lawsuit (Bloomberg)

Wall Street’s Fracking Frenzy Runs Dry as Profits Fail to Materialize (W.S.J)

On Twitter, Farmers Are Begging Trump Not to Bail on NAFTA (Bloomberg)

Texas Renaissance Festival Marks Record 63 Weddings (UPI)

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