Thursday, October 26, 2017

There is no pareto efficient reform of taxes

Pareto efficiency or Pareto optimality is a state of allocation of resources from which it is impossible to reallocate so as to make any one individual or preference criterion better off without making at least one individual or preference criterion worse off.
Word of the day.  Tax reform ideas are being shut down as unworkable or too complex.  In this case we have something called a pass through tax break:
I've written before about problems with the provision of the Republican tax framework that President Donald Trump touts as good for small businesses.This tax break would ensure that people who own so-called pass through businesses would be taxed at no more than 25% on income from those businesses, unlike wages, which may currently be taxed at rates up to 39.6%.A major problem with this proposal is most small businesses wouldn’t benefit at all. More than 80% of tax filers with small business income are already taxed at rates of 25% or less, so only the wealthiest business owners, who currently face high tax brackets, would get a tax cut. 
We have to exempt state and local taxes.  Exempt  something called pass thru.   We are stuck with entitlement and Obamacare taxes.  All avenues if reform have already been tried and rejected.

Even worse, we may not be able to afford the adjustment period if there were major reform.  The Swamp is in a 'state' of Illinois.  Better to go with the can kick and revisit these issues in Q2 2018.

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