Comment by ajross | Hacker News Reader

Comment by ajross | Hacker News Reader

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Yes, which is sort of a shame. Frankly if you were serious about simplifying the tax code and reducing unfairness and asymmetry, you'd keep the AMT and throw out the existing income tax.

But whatever: the AMT is an issue for upper middle class taxpayers, and particularly ones (like tech employees, and most particularly startup employees) who see lots of their income in big chunks like stock grants and option exercises. Helping these people is sort of dumb, as they (we) are hardly hurting to begin with. But it won't break the economy either.

Honestly, the Senate plan is... not at all insane (and the House plan only slightly insane). These are relatively modest tax cut bills arriving at a time where the economy is growing and deficits are shrinking, which is exactly where you'd want them. [Edit, hoo boy did this statement the trigger the economics folks. This isn't a growth point, the metric here, which I thought I'd made clear, is "when they are least likely to mess things up". Passing this bill won't break the bank or make progressive reforms in other areas more difficult in the near term.]

After the last year... it's like a breath of fresh air. I still don't think this is Good Policy per se, but the very fact that our government isn't actively trying to make things worse is hopeful.

> These are relatively modest tax cut bills arriving at a time where the economy is growing and deficits are shrinking, which is exactly where you'd want them.

So you want to cut taxes and increase deficits during growth times? This is, of course, not just different but exactly the opposite of Keynesianism. What is it that you plan to do during recessions? Cut spending and increase taxes to close your deficit?

This is insanity.

Deficits are always necessary. The size of the deficit needs to very. Since we are nowhere near full productive capacity, there is no danger in too many dollars chasing too few resources. The deficit needs to be reduced when economy is at full capacity to avoid inflation.

Saying that deficits are always necessary does not absolve the cut taxes and increase deficits during growth times nonsense.

Cutting taxes and increasing deficits during good times is just populist feel goodism. Yes, it's easy to cut taxes and it's easy to increase spending. Heck, trickle down even says this will increase tax revenues (except that we've tried that and it doesn't.) But not to worry because the people who are responsible for the mess will not have to clean up the mess. No, this doesn't work. We've tried it and it doesn't work.

Keynesianism is a quite conservative approach, actually.

Keynesian economics is insanity. Disproven by Milton Friedman and others.

Milton Friedman was a monetarist which is a belief in controlling the supply of money. That's a different instrument but actually quite similar to Keynes: they are both feedback control mechanisms. That said, monetarism is most definitely NOT cut taxes and increase spending in good times. Keynes and Friedman would both call that insanity.

Taxes on fiat currency are away to distribute expenses, not a way to raise funds. A fiat currency government can print money whenever it wants, which is taxation via inflation. (For more, see: Modern Monetsr Theory.)

We've already seen one of Friedman's greatest (in terms of influence) disciples -- Greenspan -- openly question whether his faith in "proven" economics was well-founded. One wonders what Friedman would've thought if he'd lived longer.

(my money is on "he'd have found some way to blame someone else and claim he was still right", but one can hope)

> exactly where you'd want them

Is that so? Counter-cyclic policy is generally the right choice for stability. If we lower taxes now, when the economy is doing fine at current tax levels, we give up an opportunity to simulate the economy through tax reduction later, when the inevitable recession hits.

I enjoy your thorough lack of strong emotions, and I agree that these drafts are special in that they are not obviously intended to harm anyone who isn't WASP.

But the opportunity costs of this futile exercise in trickle-down would seem to make this one of the worse policies from a utilitarian perspective.

$1.5 Trillion dollars (the self-imposed cost limit of the tax plan) divided by $40,000 (what givewell.org estimates to be the marginal cost of saving a life) = 37,000,000 lives.

That's obviously calculation, because those marginal costs would start to rise after the low-hanging fruits are picked, and you may want to think of some other ideas that could be realized with that sum.

But even if I'm off by an order of magnitude...wow.

> the economy is growing and deficits are shrinking, which is exactly where you'd want them.

Would really love to hear your theory on this. Tax cuts are always sold as economy boosters, and the fed is raising rates now to try to be countercyclical. So your idea doesn't match most economic theories I've heard of.

you're right that it would be more fair to keep AMT, but that's only because of the complexity of the tax code with all of its deductions and loopholes.

but i disagree that the tax plan is not designed to be dstructive. the bill is tax gerrymandering at it's finest--designed primarily to boost the republican party, it's cronies, and especcially trump himself, while punishing all others, including the poor and powerless. it saddles the federal government with massive debt while providing tax breaks to those who least need it. there is simply no intent anywhere in this "tax reform" to actually improve our economy through good policy; it's rather designed to achieve purely political aims, destructiveness be damned.

but more to the point, the proposed 409b section is about restricting when we can recognize income for tax purposes. while fictitious corporate "persons" are allowed to shift income and losses at will forward and backward along the timeline to avoid taxes, we humans, i.e. real people, cannot. this is simply the exact opposite of how the system should be designed. we should favor real people over fake people (especially over fake entities designed solely to completely shield already-advantaged owners from their failings and mistakes).

even better, let's entirely remove the ability to move income and loss recognition through time for tax purposes. it's simpler and less prone to gamesmanship (i know that's more complicated than it sounds, but it's surely much less complicated than the current rules).

> let's entirely remove the ability to move income and loss recognition through time for tax purposes

That would be incredibly stupid. It would mean that two companies could pay different amounts of tax over a given period simply based on whether they ran losses some years or booked consistent profits. Loss recognition through time isn't a crazy "loophole"--it's the mathematical byproduct of the fact that you're sampling a continuous variable at discrete intervals.

Likewise for moving income. There is no special loophole that allows you to "move income." It's a byproduct of the fact that the income tax taxes income, and not revenues.

you move revenue and expenses around in time to arrive at the income level you desire for a given time period using a variety of mechanisms: revenue recognition, IP transfer, capitalization, cost accounting, bonuses, transfer pricing, accelerated depreciation, etc. that's the whole point of tax advisors/accountants.

you'll need to explain how it's "incredibly stupid". you allude to one of the potential consequences being differential taxation (which you didn't explain very well; but yes, losses in some taxing periods could mean you pay more in overall tax for the same total income over many tax periods). that's part of the "more complicated than it sounds" caveat in my prior post.

but unlike you, i don't think it's all bad. for one, it would disincentivize excessive risk-taking (which lead to losses). and it would better align incentives between managers, owners and employees: it would be harder for executives to inflate income in one quarter and recognize the losses in another for the purpose of realizing undeserved bonuses for themselves. would that be so bad?

(besides, it's already the norm that companies have variable income and pay different amounts of tax over a given period of time for the same overall income--e.g., the apple imbroglio).

AMT is completely not fair. It was not indexed to inflation which means that it has started to affect middle class taxes. Go look at why it was created. The fact is if you are rich you can work around it. If you are mid to upper middle class you to not have enough money to structure things to work around it. AMT penalizes the middle class in the more expensive states to live as the salaries are higher. It is 100% unfair.

why would you want any tax cut when the economy is growing? what about the massive debt we took on when the economy was shrinking?

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