Trump’s proposed tax rate for “pass-through” businesses is unfair

President Trump has proposed a maximum 25% tax rate on income that individuals receive from “pass through entities”.  Pass through entities are businesses that don’t pay corporate income taxes, but rather pass their net income each year through to the owners to be taxed as part of the owners’ individual tax return.  These pass through entities include S-Corporations, partnerships, limited liability companies (LLCs), and sole proprietorships.  Currently, income from pass through entities is taxed at the same rate as any other ordinary income – up to a maximum rate of 39.5%.  (President Trump’s proposal for ordinary income for most taxpayers is a maximum tax rate of 35%.)  He justifies the lower tax rate for pass through entities because, he says, these pass through businesses are the job creators.

This begs at least two questions:  Do pass through entities really create more jobs than non-pass through entities?  Even if so, why should the income of an employer be taxed at a lower rate than an employee if they earn the same amount?  Tax fairness would dictate that two people with the same income would pay the same amount of tax, regardless of source.

Regarding job creation, it is important to know that pass through entities are not just manufacturers, wholesalers or retailers, who may or may not be job creators.  They are also professionals such as doctors, lawyers, accountants. Most hedge funds and private equity funds are pass through entities.  About 95% of all businesses are pass through entities.  Of those, about 99% have revenues of less than $10 million.  The 1% of pass through entities with revenues of more than $10 million earn about 83% of all profits!  So, some pass through entities are very large, and many owners of pass through entities have very high incomes.  Is it fair for business owners to pay at a 25% rate while regular workers with the same income pay at a 35% rate?  I don’t think so.

I expect to write several blog posts on President Trump’s tax proposal.  The idea of reducing tax rates is a good one – especially if the total plan is revenue neutral and doesn’t increase our $20 Trillion debt.  This means that tax reform that reduces rates must also reduce special tax breaks for politically favored groups and/or reduce spending.  I hope that Congress, which controls all tax legislation, will not “bet on the come” – that is assume future tax revenue will increase due to future growth in the economy.  Our government uses a 10 year look forward to determine the deficit/surplus effect of any change in taxing or spending.  In recent decades, it seems that all tax and spending changes have significant costs up front with the promise of savings toward the end the the 10 year period.  Let’s not keep doing that.

Source: https://www.brookings.edu/research/9-facts-about-pass-through-businesses/

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President Trump right to give notice to Congress that young immigrants must be given permanent legal status.

President Trump made the right decision to give a 6-month notice to Congress that the Deferred Action for Childhood Arrivals (DACA) program will be ending.  These children and young adults, who were illegally brought into the U.S. as children and have lived here for many years, should be given permanent legal status – and not be subjected to the temporary whims of any President.  The vast majority of U.S. citizens agree that these young people should be allowed to stay in the U.S. legally.  Even if Congress cannot come to an agreement on general immigration reform, they should be able to come to an agreement to let these kids stay.  Contact your U.S. Senators and Representative and let them know that you want a permanent solution to let these young people stay in the U.S.

Wellmark right to disclose cost of anonymous patient

The Des Moines Register recently reported that Wellmark Blue Cross Blue Shield has been accused of violating federal HIPAA privacy regulations in the case of a patient with severe hemophilia.  (See link to Register article below.)  As reported, a representative of Wellmark was discussing the high cost of health insurance at a Rotary Club meeting last March.  She gave an example of an extreme case that was costing $1 million per month.  (ACA – Obamacare – prohibits insurance companies from placing any limit on the amount it will pay for patients.)  She did not identify the patient by name, but described him as a 17 year old male with hemophilia.  Maybe she should not have mentioned the age or sex of the patient, but that information alone did not identify who the specific patient was, and should not be considered a violation of federal privacy regulations.

Wellmark and other insurance companies must be able to cite specific high cost cases that are causing health insurance premiums to rise to unaffordable amounts.  How can we openly debate ways to contain health care costs if we don’t know what is causing the high costs?  Can we really afford to require insurance companies to pay out unlimited amounts for any patient?  I recently heard that the last remaining company to offer individual health insurance policies in Iowa may charge more than $30,000 per year next year for a couple who are 55 years old.  Health care wants are unlimited.  Our ability to pay is not.  We need to debate whether or not government should prohibit health insurance policies from having limits on how much they pay out for individual patients.

Link to Register article: http://www.desmoinesregister.com/story/news/health/2017/08/21/wellmark-accused-violating-privacy-iowa-teen-severe-hemophilia-reportedly-costing-1-million-month/586702001/

 

 

Transgendered okay in the military, but sex change surgery should not be paid for by taxpayers.

A transgendered person should be eligible to serve in the military, just like just like every other man or women, and just like every other gay or straight person.  If they are qualified to do the job, then government should not discriminate against them based on their transgendered status.  That does not mean the military or taxpayers should foot the bill for sex change operations.  Just as being transgendered is not a disease, surgery to to change a person’s sex is not a medical necessity.  Transgendered folks will can be completely healthy without a sex change operation.  So, sex change operations should be considered elective, and not be required to be covered by any insurance plan, including that of the military.

Be careful about providing charity to the developing world.

It is true that in many cases, our providing of charity to the developing world undercuts the development of local providers. When we provide food, it undercuts local farmers. When we provide shoes, it undercuts local shoe sellers. When we provide eye glasses, it under cuts local eye glass sellers. We must be very mindful about the unintended consequences of our charity. Yes, we need to provide temporary, life-saving disaster help, but we must be very careful about what we provide beyond that.

Related Register article:

http://www.desmoinesregister.com/story/opinion/readers/2017/07/24/doctor-should-shift-model-charity-health-care-development/492348001/

Church free speech okay – no charitable tax deduction for donors

Churches and their leaders should be free to  speak out for or against candidates for political office.  Our Constitution guarantees freedom of speech for all, and especially for political or religious speech.
What our government should NOT do is allow a charitable tax deduction to donors who contribute money to churches that advocate for or against specific candidates.   If churches want to be treated just like other organizations that advocate for or against specific candidates, donors should be willing to give up their charitable tax deduction for contributions they make to those churches.
If churches are allowed to advocate for or against candidates and donors are given a charitable tax deduction for contributions made to such churches, then it would only be fair to give tax deductions to all donors to political organizations.  Better to not give the charitable deduction to any of them.
Related Register article:

Unlimited cost of care under the ACA health insurance policies?

In The Des Moines Regiser’s report about Wellmark getting out of the health insurance market for individual policies under the Affordable Care Act (ACA), they reported, “Forsythe (CEO of Wellmark) cited a single Wellmark customer who has a rare genetic disease that is costing more than $1 million per month to treat.” One person – A million dollars a month.  (See link to article below.)
One of the fatal provision of the ACA is the requirement that there be no limit in health insurance policies on how much can be paid for any individual’s care. No limit. Should we really expect others (society) to pay a million dollars a month for the care of ourselves or our family members? If you help to pay that much for someone else, then won’t you expect the same to be paid for you if you have the need? How can that be sustainable? Who gets to makes decisions regarding who we pay for and who we don’t? Unfortunate as it may be, it is a reality of life that we cannot afford, even as a society, to pay for everything we want. To the extent that those decisions, including limits on health insurance policies, can be made privately and voluntarily, we will have a more just, civil, and sustainable society.