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Old 12-21-2017, 08:13 AM   #41
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I think this was already baked in. Who's to say which is right?

Keeping this on the economics side of things, I believe the AT&T and W-F announcements were a marketing/publicity stunt. They've got cash sitting around anyway and I believe they figured it was worth the commitment of cash to employees now to make the new corporate rate look good, thereby improving the public perception and perhaps defending the lower rate in the future. The future of this lower corporate rate is by no means assured for the long-term (or perhaps even a few years).

For the businesses of this country to be able to keep this windfall, the tax-paying individuals have to believe it really is good for them.
Buy on the rumor, sell on the news...

There really is no windfall, it's just a lower taxing of the future profits. A windfall is defined as "a piece of unexpected good fortune, typically one that involves receiving a large amount of money.". No one actually gives the businesses anything, they already have the money.
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Old 12-21-2017, 08:14 AM   #42
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No one has a crystal ball, so the impact of the tax change is unknown. Folks are arguing its merits/demerits but no one really knows now how people and corporations will actually react to the changes.

As a risk taker, I'm willing to have the action taken to see what happens. If the "good" things occur, fine. If the "bad" things occur... well, that is why we have elections.

For me personally it looks like either a wash or slight increase in taxes. But I can accept that if the overall impact is to improve the economy and individual economic opportunity.

I'll just revisit this thread a year from now to see who was right and who was wrong .
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Old 12-21-2017, 08:33 AM   #43
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ACA >>>> that name needs to be changed unaffordable Care Act.
Absolutely, for most. Politico says rates have increased 105% in the last 4 years. Hardly a great thing. The effort needs to now be put on cost control, not insurance subsidy.
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Old 12-21-2017, 08:35 AM   #44
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Agreed - itís quite clear to me that job creation is unlikely to happen as this does nothing to increase demand, and companies will use extra cash to pay down debt (much issued to buy back stock) and buy back more stock like they have for the past many years, rewarding top executives and shareholders. Companies havenít been investing more in their businesses or hiring for a while now, in spite of already improving economic conditions and super low interest rates. Borrowing has been used for stock buy backs rather than business investment. Itís a bit of a catch 22 - with low demand, there is no incentive to invest more in the business or hire more employees. More cash in hand does not create this incentive - and corporate overall tax rates were already way lower than the advertised high 35% rate, many businesses paying $0. Yet without companies investing in their business or hiring more people, no additional demand is created in the economy. This is where investing in revamping aging infrastructure might have been more effective as it would have created more demand and jobs. But where are funds going to come for this now as I think we just spent it on tax cuts?

With unemployment already at historical lows, companies clearly have no incentive to hire more folks. Focus seems to be more on continuing to streamline - maximizing the profits at current business levels rather than growing the business to capture more and compete. I donít think more profits will change this. Itís just perhaps more rewards at the current business levels.

Our current slow growth and low inflation is also structural. Itís a combination of demographics and global slower growth due to low demand. 4 to 6%? Who is dreaming?

In terms of benefits to corporations and shareholders, the stock market has already anticipated highly favorable outcomes. I donít think it will be stimulative to the economy. History shows that when the wealthiest get more income they tend to hoard it rather than spend more.

I think our taxes will be lower, but Iím more anxious about way overvalued markets and taking a big hit to net worth due to markets correcting.

We shall see. Iíll be watching the yield curve. If it continues to flatten then a slowdown/recession is getting closer - the inevitable end to a long expansion. If it reverses direction and starts to steepen then more inflation is showing up and perhaps more economic growth is happening.
+1 ... While unemployment is near historic lows, credit card debt is near historic highs. People are working but they're falling behind economically. If consumers can't afford to drive our economy (and they are the No. 1 driver), businesses have no motivation to grow.
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Old 12-21-2017, 08:46 AM   #45
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Absolutely, for most. Politico says rates have increased 105% in the last 4 years. Hardly a great thing. The effort needs to now be put on cost control, not insurance subsidy.
Structural change to the system is needed, for sure. Premiums were on a rocket ride years before 2013.

So far in 2017, policy changes in Washington have only served to increase the burden of premium subsidies on federal revenue IMO. I think the mandate repeal will probably continue that trend if it reduces the pool of insured to fewer healthy people. If the risk goes up, premiums will go up -- and so will premium subsidies.
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Old 12-21-2017, 08:46 AM   #46
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+1 ... While unemployment is near historic lows, credit card debt is near historic highs. People are working but they're falling behind economically. If consumers can't afford to drive our economy (and they are the No. 1 driver), businesses have no motivation to grow.
You are correct. If this doesn't work, we are in dire straights. The path you identified is/was not sustainable.

I see more people investing in real estate because it will now be more profitable. More buildings/apartments/housing are going to be built. That drives wages and jobs, and increases competition for housing providers, which may lower rents.

Higher wages as announced by Well Fargo, Boeing, ATT and others will give money to consumers to spend or save or pay off the credit card debt.
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Old 12-21-2017, 08:48 AM   #47
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Originally Posted by street View Post
ACA >>>> that name needs to be changed unaffordable Care Act.
Quote:
Originally Posted by Pilot2013 View Post
Absolutely, for most. Politico says rates have increased 105% in the last 4 years. Hardly a great thing. The effort needs to now be put on cost control, not insurance subsidy.
+1 - Rates were already going up but the ACA just added more fuel to the fire IMO.
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Old 12-21-2017, 09:29 AM   #48
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For me the ACA greatly reduced rates before slowing the increase in them. In 2018, my rate (excluding the small subsidy, if I qualify for it) will be about the same as what I paid in 2010. From 2009-2011, pre-ACA, I saw my rates rise by nearly 50% in 2 years. Under the ACA, after my rates dropped a lot, my rates grew by nearly 50%, but at least it took 4 years (2014-2018) for that to happen.


I shudder to think how much I'd be paying without the ACA, or what I would have been on the hook for back in 2015 (when I was in the hospital) if I had been underinsured.
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Old 12-21-2017, 09:33 AM   #49
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With unemployment already at historical lows, companies clearly have no incentive to hire more folks. .
Don't understand. That companies may/will have a tougher time finding workers doesn't mean their businesses don't want them. Why would that (not wanting to hire) be?
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Old 12-21-2017, 09:39 AM   #50
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health care premiums have been going up for a long time

http://www.factcheck.org/UploadedFil.../kff-chart.png
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Old 12-21-2017, 09:48 AM   #51
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Originally Posted by LRDave View Post
I think this was already baked in. Who's to say which is right?

Keeping this on the economics side of things, I believe the AT&T and W-F announcements were a marketing/publicity stunt. They've got cash sitting around anyway and I believe they figured it was worth the commitment of cash to employees now to make the new corporate rate look good, thereby improving the public perception and perhaps defending the lower rate in the future. The future of this lower corporate rate is by no means assured for the long-term (or perhaps even a few years).

For the businesses of this country to be able to keep this windfall, the tax-paying individuals have to believe it really is good for them.
Thatís what I think - certainly smells like it.
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Old 12-21-2017, 09:57 AM   #52
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For me the ACA greatly reduced rates before slowing the increase in them. In 2018, my rate (excluding the small subsidy, if I qualify for it) will be about the same as what I paid in 2010. From 2009-2011, pre-ACA, I saw my rates rise by nearly 50% in 2 years. Under the ACA, after my rates dropped a lot, my rates grew by nearly 50%, but at least it took 4 years (2014-2018) for that to happen.


I shudder to think how much I'd be paying without the ACA, or what I would have been on the hook for back in 2015 (when I was in the hospital) if I had been underinsured.
This isn't my situation. Just sayin'
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Old 12-21-2017, 10:08 AM   #53
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At best, I will save a little bit on my taxes and be able to file using Form 1040A, a simpler form.
Yeah, about that - what happened to a 'simpler tax code' and 'you'll be able to file on a postcard'? All we did here is shuffle the deck chairs around IMO, while simultaneously jacking up the deficit.

As investors we're all going to benefit from increased corp profits, but let's see if that translates into real growth and better-paying jobs.
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Old 12-21-2017, 10:20 AM   #54
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I appreciate the enthusiasm and optimism expressed in this thread. I was thinking that the stock market impact was already baked in. Maybe not?

I would be interested in any analysis of what the changes do to the effective tax rate to corporations. Will it be close to a 40% reduction?
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Old 12-21-2017, 10:36 AM   #55
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Originally Posted by audreyh1 View Post
Agreed - itís quite clear to me that job creation is unlikely to happen as this does nothing to increase demand, and companies will use extra cash to pay down debt (much issued to buy back stock) and buy back more stock like they have for the past many years, rewarding top executives and shareholders. Companies havenít been investing more in their businesses or hiring for a while now, in spite of already improving economic conditions and super low interest rates. Borrowing has been used for stock buy backs rather than business investment. Itís a bit of a catch 22 - with low demand, there is no incentive to invest more in the business or hire more employees. More cash in hand does not create this incentive - and corporate overall tax rates were already way lower than the advertised high 35% rate, many businesses paying $0. Yet without companies investing in their business or hiring more people, no additional demand is created in the economy. This is where investing in revamping aging infrastructure might have been more effective as it would have created more demand and jobs. But where are funds going to come for this now as I think we just spent it on tax cuts?

With unemployment already at historical lows, companies clearly have no incentive to hire more folks. Focus seems to be more on continuing to streamline - maximizing the profits at current business levels rather than growing the business to capture more and compete. I donít think more profits will change this. Itís just perhaps more rewards at the current business levels.

Our current slow growth and low inflation is also structural. Itís a combination of demographics and global slower growth due to low demand. 4 to 6%? Who is dreaming?

In terms of benefits to corporations and shareholders, the stock market has already anticipated highly favorable outcomes. I donít think it will be stimulative to the economy. History shows that when the wealthiest get more income they tend to hoard it rather than spend more.

I think our taxes will be lower, but Iím more anxious about way overvalued markets and taking a big hit to net worth due to markets correcting.

We shall see. Iíll be watching the yield curve. If it continues to flatten then a slowdown/recession is getting closer - the inevitable end to a long expansion. If it reverses direction and starts to steepen then more inflation is showing up and perhaps more economic growth is happening.
+2

New capital expenditures and hiring only happen when sustainable demand increases beyond current capacity. My former Mega has publicly stated that *all* benefits from tax reform will go toward increased dividends and stock buy-backs. The reason is simple... they already have more-than-enough cash on-hand, and generate sufficient ongoing free cashflow, to fund any level of future expansion and hiring, should there be an uptick in demand. They borrowed heavily over the last 5 years at ridiculously low rates and used *all* the proceeds to fund increased dividends and stock buy-backs. They are certainly not alone in this strategy.

Even if the tax reduction spurs some consumer spending (I'm skeptical), there is zero assurance that the resulting capex and hiring will occur in the US. We are still midway through a decades-long period of global wage equalization. It's still considerably cheaper to build a plant and employ people in the developing world than in the US. Most US multinationals don't pay anything close to 35%, so this reduction does little to change the overall equation.

I recently read that the number of open jobs advertised in the US exceeds the number of unemployed. That seems to imply that we have a serious skills mix problem, not an unemployment problem. I would have preferred to see $1.5T spent on infrastructure and education.

Personally, we will see modestly lower taxes in the near-term, mostly because the impact of lower rates will slightly exceed the impact of SALT limitations. Longer-term, with chained CPI and reversion to current rates in 10 years, I'm quite concerned that the tax torpedo just got bigger. I'll be looking at whether it makes sense to do Roth conversions into the 22% bracket.
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Old 12-21-2017, 10:37 AM   #56
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Thanks for keeping politics out of this thread. This is about taxes for our future and is law so we really do need to see how it will effect our money.

Some very good information and has brought up some good questions.
Thanks
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Old 12-21-2017, 11:17 AM   #57
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So no more property tax or local income tax deductions, that's not good news for tax payers in states like CA.

Mortgage interest is still deductible from what I read so I guess folks (especially in high priced housing markets) will still see owning a home as a benefit?

I wonder if people will be less inclined to make charitable donations now too since you don't get to itemize, or you might not benefit from itemizing.
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Old 12-21-2017, 11:39 AM   #58
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For me the ACA greatly reduced rates before slowing the increase in them. In 2018, my rate (excluding the small subsidy, if I qualify for it) will be about the same as what I paid in 2010. From 2009-2011, pre-ACA, I saw my rates rise by nearly 50% in 2 years. Under the ACA, after my rates dropped a lot, my rates grew by nearly 50%, but at least it took 4 years (2014-2018) for that to happen.


I shudder to think how much I'd be paying without the ACA, or what I would have been on the hook for back in 2015 (when I was in the hospital) if I had been underinsured.
Individual situations can be out-liers for sure. The Politico report says that "on average" the increase has been 105%. that means for each case like yours, there's one on the other end of the spectrum.

I agree HC Insurance costs have been going up for a long time. ACA did not solve that root cause issue, so the problem continues until it is (HC cost itself).
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Old 12-21-2017, 11:47 AM   #59
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Agreed - itís quite clear to me that job creation is unlikely to happen as this does nothing to increase demand,
...
With unemployment already at historical lows, companies clearly have no incentive to hire more folks. ....
MegaCorp was involved with heavy manufacturing all over the world. I am seeing manufacturing that had been off-shored coming back to the US. (In the heavy manufacturing arena). A lot of work was sent overseas when the MBAs were preaching that every company should have a significant amount of low cost country sourcing. We were told to source new designs from India or China, even if it was at a cost premium up to 30%. We built factories in India, China, and Mexico. Over the years, some of the shine has dulled from low cost country sourcing. The combination of quality issues coupled with the amount of inventory floating on water creates many problems. And the cost advantages did not materialize to the extent that was forecast.

The new factories in low cost countries were also located with expectations of developing the local market there. In most cases, this has happened. Net result- we need more manufacturing capacity. So I see new manufacturing cells built in the US near the US factories. A combination of automation, a different quality mentality, and a return to just in time delivery can create improved financial results. And it takes people to run these machines and assembly lines.

The new tax & jobs bill may give management a new script to work from when they bring back some of the manufacturing and put in some new assembly lines. Much like the automakers from foreign countries have established US manufacturing or assembly facilities, I think we will see heavy industry grow also.
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Old 12-21-2017, 11:51 AM   #60
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So no more property tax or local income tax deductions, that's not good news for tax payers in states like CA.

Mortgage interest is still deductible from what I read so I guess folks (especially in high priced housing markets) will still see owning a home as a benefit?

I wonder if people will be less inclined to make charitable donations now too since you don't get to itemize, or you might not benefit from itemizing.
No, it is capped at 10,000. So unless your property taxes exceed that it doesn't affect you.

I just read about another change: 529 plans are now eligible to pay for elementary and high school tuition at private schools.
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