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Ryan Beck
411 followers -
An engineer and a geek
An engineer and a geek

411 followers
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I'm actually a fan of the Republican corporate tax plan, which they outlined in a guide document published in June. Under the plan the way corporations are taxed would completely change. Instead of taxing corporate profits we would have a new system where the tax is based on where the goods are sold instead of where they are produced and on cash flow instead of profits. That's why it's called a destination-based cash flow tax (or DBCFT). The cash flow part of the name means it looks kind of like a value added tax (VAT) which is common in many other countries. A VAT taxes a company based on the value added to a product. So a company buys some raw materials, makes changes if they want, and then sells those materials. They get taxed based on the value added, or all of their labor and expenses minus the cost of the materials. The DBCFT would be a modification to that, with labor also being able to be deducted from the tax basis.

The destination based part has to do with where the products are sold. If a company sells their products in the USA they would be charged a 20% tax. If they export their products they would get charged no tax. Additionally, all imports would be taxed at 20% (this is likely where Sean Spicer and president Trump have been getting their 20% import fee on Mexico in reference to paying for the wall. So this 20% would not be exclusive to Mexico, and it wouldn't actually pay for the wall, which will make sense in a bit).

But wait, I thought tariffs were bad and raised prices for Americans? They are, but this is not a tariff. It's referred to as a border adjustment. As the example used in the first linked article states, imagine two US states. One has a sales tax, one doesn't. If the no tax state imports a product from the tax state, that product will sell in their state without a sales tax. If the tax state imports a product from the no tax state, that product will sell in their state with sales tax. So the destination of the product determines whether it has sales tax or not. If the taxed state imported products from the no tax state and sold those products without sales tax it would be a big advantage for imported products. Everything imported from the no tax state would be cheaper than the taxed domestic products. This would be unfair to the domestic products, and they would lose business to the imported products. So that's why the DBCFT has a 20% border adjustment, so that imported products are not artificially cheaper than domestic products and so the tax is applied equally. Many countries with a VAT do this as well.

Another confusing aspect of this is that exporters pay no tax. Isn't that an unfair advantage for exporters? And also, doesn't the border adjustment still mean Americans pay more? Will this mean our trade imbalance will go away and we'll export more than we import? No to all of these, and the reason has to do with exchange rates. When a 20% border adjustment gets applied to imports the demand for imports goes down. This makes the demand for foreign currency go down (Americans don't need as much foreign currency because they don't import as many things). Lower demand for foreign currency lowers the value of foreign currency relative to the dollar. Additionally, exports aren't taxed, so the price of US exports falls, making US exports have a higher demand. People want more US dollars to buy US exports, and the value of the dollar rises even more. So the value of the dollar goes up a lot. And when the dollar goes up, it gets more expensive for foreign people to buy dollars. This makes American exports more expensive. The increased dollar value also means that Americans can buy foreign currency much cheaper, which makes imports less expensive. After this balancing act happens, the theory of DBCFT is that the border adjustment tax of 20% and the benefit of untaxed exports will be completely offset by the rising value of the dollar. Therefore the DBCFT does not advantage exports nor disadvantage imports. And finally this has basically no impact on US domestic prices because the border adjustment of 20% on imports is offset by the cheaper imports due to the higher valued dollar.

Okay, so everything evens out and it doesn't fix the trade imbalance, so why do all this weird stuff? Well the beauty of the destination based tax is that there is no more incentive for companies to leave the US. If you leave the US and sell back to the US you're suddenly paying taxes when you sell back to the US thanks to the border adjustment. Your profits aren't taxed so you can't hide your money overseas. If it gets sold in the US it gets taxed at 20%. And if you're an exporter you pay no tax, and can sometimes get a refund, so it becomes more attractive to stay in the US.

Wait, why would US exporters pay no tax or get a refund? Every company should pay their fair share! But they are all paying their fair share. The new US tax policy directly charges importers a 20% tax. That's offset by the increased currency value. Exporters pay no tax, but US tax policy causes the dollar to be more valuable, which disadvantages exporters because it makes their products more expensive for foreigners. So not taxing exports makes up for the disadvantage. For some companies that export a lot they'll do their taxes and when they deduct exports, labor, and materials from their tax basis they may end up with a negative tax basis, meaning the government owes them money. It seems weird, but they were disadvantaged by US tax policy and need to be reimbursed for the disadvantage. That's how they can keep the price of their products low enough to compete in other countries with the high value of the dollar. Without the ability to give rebates to exporters the exporters would be disadvantaged and the DBCFT would not work correctly.

So overall this plan seems complicated but is actually probably simpler for companies and could really help keep jobs in the US. All a company has to do is figure out what it imported, what it exported, and figure out its deductions and pay tax on what it owes. No more trying to skirt the system by routing money into overseas headquarters or having to depreciate assets. It's simpler, more straightforward, and doesn't incentivize bad behavior.

But there are some problems that it would need to overcome. The first big one is that the World Trade Organization does not allow border adjustments on income taxes, only on VATs. The DBCFT looks like a VAT, but it allows companies to deduct wages from their tax basis so it is not the same. This might be enough for the WTO to not allow the tax, and could be seen as unfair trade practices by foreign countries. This could probably be fixed, it's still early on.

Another issue is that the 20% tax might be too low. Even with a 25% or 30% tax it's still a tax decrease for most companies, and the 20% tax would provide less revenue and lead to increased deficits. The second article linked also suggests that if the corporate tax is set lower than the top tax bracket it provides an incentive for top earners to hide wage income in business income.

Finally, there is some worry about what a sudden 25% increase in the value of the dollar would due globally. People invested in US dollars would win pretty big, people invested in other currencies or who owe US dollars would lose. I don't know how big a concern that is because the dollar fluctuates anyway, but it is a downside.

Overall it seems like a really great idea. It's only a general policy proposal put forth by Paul Ryan and Kevin Brady so it hasn't been written yet, but if it stays similar to what it is now and some of the issues are ironed out it could be a great proposal.

And Donald Trump has nothing to do with this plan so far. It isn't his plan, and he's only vaguely talked about it and doesn't seem to have decided if he likes it or not. You can also see now why this has nothing to do with paying for the wall. The 20% is applied to all countries and this tax plan replaces the existing tax plan and doesn't provide any additional revenue to the US government and actually may provide less revenue. So really the wall should have nothing to do with this tax plan, and any confusion on that is due to confusing statements by President Trump and Sean Spicer.

In summary, US corporate taxes need fixing and this seems like it could be a really good idea.

Here's a good article summarizing the whole thing:
http://conversableeconomist.blogspot.com/2017/01/border-adjustments-tariffs-vat-and.html

Here's a good article explaining common misconceptions about it:
http://www.taxpolicycenter.org/taxvox/understanding-republicans-corporate-tax-reform-proposals

Another article that's easier to understand and answers questions about it (the last line is hilarious too):
http://www.forbes.com/sites/anthonynitti/2017/01/26/the-border-adjustment-tax-for-dummies-who-will-pay-for-the-wall/#3ae8948215b6

An article by Krugman explaining why VATs don't give countries a competitive advantage:
https://krugman.blogs.nytimes.com/2017/01/27/border-tax-two-step-wonkish/?_r=0


First linked article found via +Steven Flaeck​

I'd like to warn you all about a very real, very imminent threat. Across the country our local governments have made a fatal error. Over the years they have given away keys to our cities to people they have deemed "worthy". At this very moment there are people throughout the country (we don't know how many but it could be in the thousands) who could use these keys at any time to enter our glorious cities and commit any nefarious deed they wish. These people have not been properly vetted, and if they were to work together they could commit catastrophic damage to our great nation. I am here to tell you that these people are working together, forming a massive group operating in the shadows, and that they must be stopped. Please, contact your local city officials and warn them of this imminent threat. We must be vigilant, only together can we overcome this danger!

95% of the social media outrage cycle lately seems to revolve around taking a small sample of a group and assuming their behavior is representative of the group. And sadly that's how most stereotypes and incorrect beliefs are formed. People don't care about subtle or nuanced news, they want shocking revelations. So the news gives it to them. Combine that with the worldwide connectivity provided by the internet and you can easily find someone or some group doing something awful. The always on, always awful news that we experience leads a lot of people to the conclusion that the country and the world are getting worse. More violent and more divided. Which, in my opinion and based on data, don't seem to be true. Really the world is constantly getting more peaceful. Violence is on the decline. Division appears to be on the rise, but is that the reality, or have opinions always widely varied and really you're just being confronted with different opinions more often because they're harder to avoid on the internet?

So to generate news we'll often see stories about bad behavior by some people. This behavior is then picked up by more partisan people and outlets and used to paint their opposition as bad people. It's really dumb, and it depends entirely on people's willingness to assume the worst about others. With most of these stories a more understanding person could recognize the bad behavior, but also realize that the small subset of the group does not represent the whole. An understanding person gives people the benefit of the doubt, and assumes that they don't condone the behavior of that small portion of the group.

We should all try to be more understanding, and realize that the poor behavior of a very small portion of a group is not representative of the whole. Here is a non-comprehensive list of examples:
-Just because some members of the women's march littered does not mean that most of them are awful litterers
-Just because some Trump supporters are racist does not mean that most of them are
-Just because some of Hillary's Foundation's contributions came from countries that support Sharia law does not mean that she or her supporters want Sharia law
-Just because some of Bernie's supporters just want free stuff does not mean must of his supporters do
-Just because some Black Lives Matter Supporters are racist or commit violent deeds does not mean most are racist or violent
-Just because some police are racist or commit violent deeds does not mean most police are racist or violent
-Just because some immigrants or refugees are violent or criminals does not most immigrants or refugees are violent or criminals
-Just because some gun owners are irresponsible does not mean most gun owners are
-Just because some feminists are anti-men and extreme does not mean most feminists are
-Just because some men are sexist or rapists does not mean most men are
-Just because some politicians are selfish and self-serving does not mean most politicians are
-Just because some news organizations or journalists are biased does not mean most news media is biased

Avoiding stereotypes and not assuming the worst about people does not mean that an issue should be ignored. It just means you wouldn't condemn an entire group for the actions of their worst. The group may still need to make some changes, but pointing to their worst members as representative of the whole will not convince them of anything and will only create divides instead of encouraging cooperation.

We did it! We managed to make it to 2017, and now no more celebrities will die ever again!

Someone with money to waste and long-ish hair should go get their hair trimmed a fraction of an inch every other day so that it looks like their hair is growing in reverse. See if anyone mentions it, and if they do, act like you don't know what they're talking about.

Why are news articles always using the word "slam" instead of criticize? "Senator slams Trump" or "Trump slams media". What is this, the WWE?

Hillary won the popular vote but lost the election, and I'm seeing a lot of people talking about how we should get rid of the electoral college. It seems counterintuitive that you can win the popular vote and lose the election, which would seem to go against the whole point of democracy. But I think there is more to it than that.

States are awarded electoral votes based on the number of congressional representatives they have. That means each state gets two, because every state gets two senators, plus the number of representatives they have, which is based on the size of the state (DC gets the same amount as the smallest state, which is 3, bringing the total electoral votes to 538). So already you can see that by giving each state two electoral votes, which aren't based on the size of the state, the results are being skewed so that the number of electoral votes a state gets are not proportional to its size.

So what happens if we only gave each state electoral votes based on its size? Well we could see what that looks like by subtracting two electoral votes from each state (I'm going to ignore DC in this). Trump won 30 states (assuming Arizona and Michigan go entirely to him) which would be 306 electoral votes. Subtracting two votes for each state he won is 60 votes, which would give him 246. Clinton won 20 states (assuming New Hampshire is called for her) which would be 232 electoral votes. Subtracting two for each gives you 192 electoral votes. This brings Clinton a little closer to Trump, but barely (she would go from 43.1 to 43.8 percent of the electoral vote). The remaining difference between the electoral votes and the popular vote has to do with the winner take all rules in the states. Even if you win a state with 51% of the vote, you get all of the electoral vote from that state (with the exception of a couple states with different rules).

So should we change it? We could get rid of the electoral votes for senators in each state, but part of the way this country was established was to give states a say in our national government. That's why we have the senate instead of just having the house of representatives. The senate gives the states equal representation in a portion of our government. If you think that our democracy should be run by popular vote only, would you also feel comfortable getting rid of the senate and only having the house of representatives?

Another way it could be changed is to get rid of the winner-take-all rule and distribute electoral votes within a state based on the outcome of smaller districts within that state. But if winner-take-all isn't okay at a statewide level, why is it okay at a district wide level? You're still ignoring the votes of the minority within that district. And if you keep breaking it down further you end up with the same thing as going by the popular vote, so why bother? Winner-take-all seems to be another way that the states receive representation in the federal government.

I think getting rid of the electoral college is more than the simple task people make it out to be. The entire framework of our country is based on a compromise between direct democracy and equal representation of states. This gives rural people living in less populous states a voice, and balances that with the will of the majority. States were given representation in our constitution for a reason, and I think any discussion of getting rid of the electoral college should examine why our country was set up this way and whether changing that is really a good idea.

I know a lot of people in the country are probably disappointed right now. Judging by the popular vote probably around 50% are. I know I am. But I hope that we can be positive and constructive over these next four years. Please, be the bigger people and do not treat President Trump the way conservative media has treated President Obama. President Trump will not be the cause of all evil in the United States during his presidency. You can criticize or oppose him for what he's directly responsible for, but please don't place every frustration you have with the country at President Trump's feet. Don't fall for hoaxes, fake scandals, and lies. Don't take his words out of context. Make your arguments constructive. If Trump improves something or creates a good policy, recognize it, don't ignore it and point to his other failings. Everyone wants what's best for the country, even if we don't agree on what that is.

I'd also like to address some of the unrealistic expectations I've seen about the upcoming presidential term. I know some of us are distressed right now, and we have reason to be, but unrealistic and exaggerated expectations don't do anyone any favors. I don't think President Trump will lead us into war. I can't guarantee that, but it doesn't seem likely. Even though the house and Senate are in his favor the Republicans still oppose some of his more extreme ideas. Things we don't like will probably happen, like repeal of the ACA, weakening of the EPA and the fight against climate change, and conservative justices on the supreme court. But Trump can not push a magic button and turn the country into an unrecognizable place.

On a similar note, I hope conservatives have realistic expectations of what Trump can accomplish. His own party will oppose a decent chunk of his platform. I predict that Trump will accomplish some of the things he promised, like repealing the ACA, possibly backing out of the Paris climate change agreement, appointing conservative justices, and weakening the EPA. But I also think that many of his promises will go unfulfilled. I'll be a little surprised if the wall happens. He may ban immigration from largely Muslim countries, but I'm a little skeptical of that too. He probably won't bring back manufacturing jobs, he won't hit his GDP goal, the economy will continue its slow recovery that Obama had created, ISIS will continue to be slowly pushed back and Trump will probably try to claim that he has defeated them. If he manages to impose tariffs or renegotiate trade deals it probably won't do anything except increase the prices of the goods we buy more than they would have increased otherwise. Race relations won't improve, because he has no plan to improve them. His tax plans will probably be heavily revised and unrecognizable by the time they get passed. Our national debt will continue to increase. Healthcare costs will too, even without the ACA.

But I hope he can accomplish some common sense things that everyone wants, like increasing infrastructure funding, and if any of his plans do improve the country I'll be happy. I'm pessimistic about the next term, but I hope we can all recognize good things when they happen.

Also, I'm disappointed in Hillary for not giving a concession speech, leaving her supporters hanging around. That's something I would have expected out of Trump, not her, and I think that was very poor form. 

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This is one of the greatest things I have ever seen. I don't think anyone could make a movie scene this dramatic if they tried. Watch it until the end.

This obsession with writing arguments and articles as a series of tweets is going to be an embarrassing part of history. Future teenager: "So you're telling me that back in 2016 you had the ability to post as many words as you wanted on tons of websites, but people chose to create long posts in 140 character chunks on Twitter instead? And people actually read it like that?"
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