Republicans Don't Really Care About The Deficit

Discussion in 'Too Hot for Swamp Gas' started by fastsix, Jul 13, 2014.

  1. squigator
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    squigator Premium Member

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    Why would a blue dog that favors fiscal restraint vote for a bill that you libbies believe is not fiscally responsible? Could it be that the yellow dog dems voted against the bill because they incorrectly think it reduces the pool of funny money they get to share with their unionized guvment coworkers?
    Last edited: Jul 16, 2014
  2. Bushmaster
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    Bushmaster Well-Known Member

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    Please provide examples of these tax loopholes available to the robber barons (corporations) that are not available to us peasants. Thank you.
  3. OklahomaGator
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    OklahomaGator Moderator VIP Member

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    This post points out the difference between liberals and conservatives.

    Liberals view taxes as revenue. Revenue needed to run a bigger government. More taxes, more revenue equals more government. More government is better.

    Conservatives view taxes as a necessary expense. It is an expense because the money belongs to the citizens of the country. Taxes are viewed as necessary to keep a strong, safe, and secure nation.

    Liberals=taxes are the government's money.
    Conservatives= taxes are my money the government takes, so don't waste it.
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  4. Bushmaster
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    Bushmaster Well-Known Member

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    100% wrong. You either didn't read the CNN article or didn't understand what you read. Accelerated depreciation speeds up the deduction, it doesn't INCREASE the deduction. The money paid in tax over time is the same.
  5. Bushmaster
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    Bushmaster Well-Known Member

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    Except this tax code we are discussing in this thread doesn't apply to these "robber barons".
  6. GatorBen
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    GatorBen Well-Known Member

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    The bill results in both an immediate and long-term decrease in revenue.

    The CBO says so (explicitly: "Enacting H.R. 4718 would result in revenue losses in each year beginning in 2014."), the Joint Committee on Taxation says so, heck even the Republican staff of the Ways and Means Committee thinks it results in a long-term decrease in revenue. Everyone that has analyzed it says it does. But I should trust Bushmaster who says "no it won't"?

    http://www.cbo.gov/sites/default/files/cbofiles/attachments/hr4718.pdf
    https://www.jct.gov/publications.html?func=startdown&id=4651
    http://www.gpo.gov/fdsys/pkg/CRPT-113hrpt509/pdf/CRPT-113hrpt509.pdf
  7. philobeddoe
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    philobeddoe Well-Known Member

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    So ... on an annual basis, it's going to cost about 7x what the illegal kid invasion is going to cost?

    Actually, what Bushmaster says is correct. The bonus depreciation deduction doesn't increase the total depreciation write off of a depreciable asset over the tax life of that asset as it is always limited to the tax basis of that asset. However, what bonus depreciation does is accelerate the recognition of the depreciation deduction ... just like accelerated depreciation methods do vis-a-vis a straight-line write-off/depreciation of a depreciable assets tax basis.

    Now, if the bonus depreciation law remains in place ad infinitum, the acceleration of depreciation expense recognition resulting therefrom will create an deferral of the "current tax liability savings" that result from the aggregate bonus depreciation deduction taken each year. What would be interesting to know is ... if the CBO took into consideration tax $$s to be collected over the next 10 years that resulted from taxpayers not having a depreciation deduction in tax years 2014 - 2014 because they availed themselves of the bonus depreciation deduction prior to 2014?
  8. nolagator
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    nolagator Active Member

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    The problem is GOP does not always equal Conservative. So we get LIB and LIB Lite!
  9. Bushmaster
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    Bushmaster Well-Known Member

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    You should trust what Bushmaster has to say regarding TWO THINGS on this board. Taxes and the US Army. The CBO, JCT, and GPO have been wrong so many times it hurts my head. Let me take you thru the mechanics of this transaction.

    Company has $100,000 in assets it places in service in 2013. Lets assume it is 7 year property that eligible for 50% bonus depreciation in year 1. I will show the deduction the company will receive in example 1.

    Example 1.

    2013= $50,000 (bonus depreciation) + $7,143 = $57,143
    2014=$12,245
    2015=$8,746
    2016=6,247
    2017=4,463
    2018=4,462
    2019=4,463
    2020=2,231

    Total deduction received is $100,000 at the end of 8 years, which is the cost of the assets. The reason it takes 8 years to depreciate a 7 year property is you get half the deduction in the first year of service, years 2-7 you get the full year, year 8 you get the remainder.

    Here is what it will look like without bonus depreciation.

    2013= $14.286
    2014=$24.490
    2015=$17.493
    2016=12.495
    2017=8.925
    2018=8.924
    2019=8.925
    2020=4.462

    Total deduction received is $100,000 at the end of 8 years.

    In other words, there is NO DIFFERENCE in the amount of deduction a company will get on this $100,000 asset. No a single penny.

    What it DOES DO is speed up the depreciation in the FIRST YEAR resulting in a tax savings in year 1, but if you notice in years 2-8, the depreciation expense is LESS using 50% bonus depreciation in year versus not using 50% bonus depreciation which will result in the company paying a larger tax bill in years 2-8.
  10. persegator
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    The total deduction is the same amount, but deductions now are always better than deductions in the future. There are numerous reasons for this, but two of the big ones are:

    The time value of money. Depreciating a capital asset 50% right off the bat allows you to immediately reinvest the tax savings, whereas you would be waiting around for years to do that with an ordinary depreciation schedule (losing you years worth of returns). Conversely, the government has a lower immediate income with bonus depreciation, requiring it to borrow more money and pay interest on that extra borrowed money while it waits for balancing higher tax payments several years later. This results in a higher total deficit.

    The rules of loss carryforwards/carrybacks. A giant capital depreciation can easily give you an accounting loss that you can apply to gains that have already happened or will happen in the future. If you have an ordinary schedule, this is much less likely to happen and will often times result in a higher total tax liability.
    Last edited: Jul 16, 2014
  11. philobeddoe
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    philobeddoe Well-Known Member

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    I think ol' Ben's given us another good example of (a leftie) taking what is reported at face value without fully understanding the underlying mechanics of the at issue matter. ... and furthermore who is impacted by a tax rule change.

    Now, four of the factors that will ultimately impact the total revenue $$s involved in the timing of accelerated depreciation deductions versus a straight-line write-off are
    1. time value of money
    2. changes in statutory tax rates by law
    3. changes in an entity's marginal tax rates due to fluctuations in revenues and deductions from year to year.
    4. changes in tax accounting rules re revenues and deductions.
  12. tideh8rGator
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    tideh8rGator Well-Known Member

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    WRONG, taxes are used to bribe the lazy sheep and to line the pockets of the rich fatcat politicians.

    This is the fundamental fallacy of liberalism at its worst.

    The money that helps the country is the money that stays in the pockets of those who EARN it, not the money that is "circulated" by force by greedy politicans who always make sure to "circulate" the amount they want right into their own pockets.
  13. Bushmaster
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    Bushmaster Well-Known Member

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    Incorrect. The DEFICIT will be higher ONLY in year 1 (all other things equal) with 50% bonus depreciation.

    ALL OTHER years (2-8) the deficit will be lower as the taxpayers deduction will be greater using standard depreciation.
  14. GatorBen
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    GatorBen Well-Known Member

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    None of which really matters a lick to whether it increases the deficit or not...

    Why do businesses like bonus depreciation? Because it makes depreciation reflect inflation, the time value of money, and actual economic depreciation even less than it already does. Saving all those dollars in 2013 is much, much more favorable to the taxpayer than saving them spread out over time, and getting paid back that amount in non-inflation adjusted dollars in the future is much, much less favorable to the government than getting paid more of them in 2013.

    Since the depreciation schedules aren't inflation adjusted, the total amount of depreciation is going to be a fixed dollar amount at the time of asset purchase no matter what year those dollars get deducted in. Taking an extra $50 deduction now is much better for the taxpayer (and much less favorable for the government) than spreading that $50 out across 7 years. It essentially becomes "I'm going to borrow $50 from the government now, and then pay it back interest free across the next 7 years."

    And the government saying "here's $50 in 2014 dollars, now you need to pay me back $10 in 2015 dollars, $10 in 2016 dollars, $10 in 2017 dollars, $10 in 2018 dollars, and $10 in 2019 dollars" absolutely increases the deficit.

    Why? Because, without a corresponding spending offset (or increasing the revenue somewhere else, neither of which was done by this bill), you're requiring the government to borrow that $50 in year one instead of receiving it as tax revenue, pay interest on the borrowing, then get paid back $50 without interest at some later point.

    What's the end result? Increased deficit for the government. If it wasn't, businesses wouldn't care what their depreciation schedule looked like because eventually they're going to deduct the same amount anyways. As I'm sure you know, that's not how businesses feel at all.
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  15. persegator
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    You're not understanding. When you create an excess deficit in year one, that deficit can only be funded by borrowing money at interest. The cost of those interest payments creates an additional deficit in and of itself. Interest on interest.

    It's basic finance and the reason we don't allow a capital assets to be simply expensed entirely in the year they are purchased.
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  16. GatorBen
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    GatorBen Well-Known Member

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    To be fair to you, Bushmaster, perhaps my household income analogy could use more nuance.

    It's not going to your boss and saying "give me a $500 paycut."

    It's going to your boss and saying "give me a $500 paycut this year, I'll go to the bank and borrow $500 instead, then you can just give me a $100 bonus each of the next 5 years."

    And who would possibly think that's a strategy that's going to put you more in debt. After all, you're still getting paid $500 at some point, right? ;)
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  17. Bushmaster
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    Bushmaster Well-Known Member

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    I understand just fine, I do this for a living. Perhaps you are not understanding that is bull hockey. The TIMING of the deduction creates deficit in year 1. Years 2-8 it creates surplus. At the end of 8 years, we are back to zero.
  18. persegator
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    How is that deficit in year one paid for?
  19. Bushmaster
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    Bushmaster Well-Known Member

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    No, you are working from the premise the money belongs to the federal government to start with.

    I spend $100,000 on a piece of equipment. The company I spend the money with records $100,000 in revenue. They pay tax on that revenue (less the cost of the equipment, which the company they bought it from paid tax on THAT revenue (less THEIR COST, etc., etc.).

    So, I am out $100,000 and I get a deduction totalling $14,286 on 7 year property. In essence, I get taxed on $85,714 that I don't have.

    So, company owner has to borrow money to pay taxes on money he doesn't have.

    Only in liberal think is this a bad deal for the government.

    For the record, I really don't like the 50% bonus as most states I deal with do not allow it. When you have 100 assets with different federal and state basis, it gets cumbersome to keep up with, not to mention when a few of the assets get disposed.
  20. GatorBen
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    GatorBen Well-Known Member

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    But that's a different argument.

    It certainly increases the deficit, just now we've switched to arguing that "the money didn't belong to the government to start with."

    Let's take that to the extreme. We get rid of all taxes because, after all, that money didn't belong to the government to start with. But it unquestionably does increase the deficit. Agreed?
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