For the last couple of days we’ve been fielding questions about the proposed tax bill from clients and friends, and each time we do my only real answer is “I don’t know.”
I write this early on Friday before I get on a plane, and like many elected U.S. senators I have no real idea what’s in this bill and how it will affect our clients or frankly, me. When I land in a few hours it may all be over, or we could be back at the beginning.
The political forces of the current generation in power are all converging in this one place. A House Speaker (raised in relative poverty, with much assistance from the government) believes that those most in need of government assistance today are the corporations enjoying the highest profits (as a share of GDP) since 1929. Let that wash over you for a moment. These are the same companies that bury $billions in profits off shore through accounting dodges to avoid U.S. taxes.
The majority leader of the Senate has built his political base on the patronage of a billionaire class that believes they are entitled to a return on the investment they have made in him and his team. He is determined to go to his political grave fending off the left as well as his own lunatic-fringe right (the Roy Moore wing) to get this done. Yesterday we saw the market surge when John McCain (an 80 year old man dying of brain cancer) decided to lay down for this steamroller and let it go right over him.
Sitting at the other end of Pennsylvania Avenue is a cognitively-impaired president waiting to sign whatever lands on his desk. I promise you he has no idea what’s in the bill (even the parts his staff tried to explain to him) yet he knows he has zero legislative accomplishments to show for ten months in office and he is at least smart enough to know that his act has a short shelf-life.
There is no economic justification for this bill on any level. Corporations that benefit from this windfall will return the money to their shareholders through dividends and buy-backs. How do we know this? Because that’s all they have ever done with tax breaks before.
From an advisor’s perspective there is precious little I can advise my clients to do with regard to their taxes. The break for state & local taxes (“SALT”) will probably be eliminated or at least knee-capped by this law. Mortgage deduction? It probably deserves to die but may survive due to effective lobbying.
As for the estate tax, I continue to believe it’s not going away, at least not for people named “Koch” or “DeVos.” (It doesn’t really matter for Trump because I maintain much of his wealth is a fraud.) The most aggressive bill does not kill it until 2023 and we have three different Congresses and one more president who will have to address it before then.
Back in 1986 it took over a year to do what the current power structure is jamming through Congress in about a month. There were hearings, mark-ups, meetings, floor debate, and finally buy-in from both sides of the aisle. Those days are long gone.
The GOP is using its bare majority to achieve that for which they have always dreamed: an economic superpower that promotes and defends their interests but for which they do not pay. And as one composer might say, they are not throwing away their shot.
The Fiduciary Pledge
For the last couple of days we’ve been fielding questions about the proposed...