Entries Tagged 'Taxes' ↓

Will We See Inflation in 2017?

Now that the US Presidential election is decided, it’s time for us all to try to anticipate what it might mean for each of us. For some, inflation would be a good thing; for others it won’t be. You know what it would mean for you.

Many people, and particularly investors, seem to be convinced that Fed raises in interest rates will bring on inflation. Why? That’s what has happened in the past.

But we are in a whole new world right now. A world that will be hugely shaped by Donald Trump and company. And by robots which Oxford University experts expect “will replace almost half of all American jobs in the next two decades.”

During his campaign, Donald Trump counted on corporations’ ability to step up and provide new jobs for Americans via funding infrastructure projects using their own money.

Trump soon ran into trouble, halving his estimated spending on new jobs from $1 trillion into $500 billion. My last post, “The Emperor Has No Clothes,” explained why even that estimate might be too much.

The Fed is hoping that an interest-rate rise in the cost corporations pay to borrow capital will bring on a cycle of new investment by corporations. But right now, making capital more expensive will not encourage corporations to spend more.

As of spring 2016, 99% of 2,000 US corporations were deeply in debt. Only 25 large companies hold half of all US corporate cash. Even the amount of cash the richest companies hold is nowhere near the billions of dollars needed for new jobs. Continue reading →

The Emperor Has No Clothes

“To every thing there is a season, and a time to every purpose under the heaven:” (Ecclesiastes 3)

—————————-

President-elect Donald Trump has been releasing his economic plan piece by piece each week. I want to put four of those pieces together here to show why Trump’s economic jigsaw puzzle won’t work.

Here are four major parts of Trump’s plan to “make America great again”:

  • Infrastructure projects funded by private investments to create new jobs
  • A 35% tariff on foreign imports by US corporations
  • A tax amnesty of 10% for US corporations who bring foreign earnings home
  • Tax cuts up to 15% of actual income for the wealthy

Why can’t they work? Could some of them work? The answer to both question is “no” — and for the very same reason.

US corporations deep in debt

Continue reading →

Taxes – Impact on Income Inequality

“These jobs are goin’ boys and they ain’t comin’ back” Bruce Springsteen “My Hometown”

Review of Robert Reich’s 2013 Documentary “Inequality for All” – part 3 of 4

Two economists, Piketty and Saez have studied US income tax rates over the past one hundred years. Their graph of income inequality looks similar to the iconic Golden Gate Bridge with its two peaks occurring in 1928 and 2007, right before the biggest economic crises in the US.

Golden Gate Bridge stock photo

From this study, Robert Reich can conclude that:

Income inequality correlates directly with lower taxes on the rich and higher taxes on the middle class

Yes, history shows that the lower the tax rates for the wealthy, the higher income inequality in the US becomes. The higher the tax rates on the wealthy, the lower income inequality becomes. Continue reading →