The Daily Alpha: Real Talk on the Trump Tax Code

Apr 27 2017 | 2:57pm ET

Today, we discuss Barack Obama’s Fat Cat Fees, David Einhorn's Tesla Bet and Sen. Rand Paul's Calls for Tax Cuts.

Quotes of the Day

“It was a difficult quarter to be short the bubble basket, and TSLA in particular.”

Mayor of Tesla Shortsville David Einhorn had a tough month thanks to Tesla’s math-defying valuation. He wrote a letter to shareholders last week that we are facing a bubble in technology stocks, and that his firm expects it to pop in the future.

Financial Review offers Einhorn’s comparison to the dotcom bubble and where he sees Apple stock, Amazon stock, Facebook stock and Tesla stock heading in the future.

“I see the states, across this big nation.  I see the laws made in Washington D.C. I think of the ones I consider my favorites. I think of the people that are working for me.”

~ Talking Heads, Don’t Worry About the Government

Once again, the White House is dominating the headlines Thursday as the Trump administration pivots away from campaign promises and aims for smaller victories.

Trump said yesterday that the United States should work on renegotiating the North American Free Trade Agreement, while Republicans are floating the idea of a bill to fund the government that will not fund a border wall.

But the bigger question that everyone has focused on today is the proposal to overhaul the U.S. tax code in the most dramatic fashion since the 1980s. At the core, the proposal would eliminate every deduction except for the charitable contribution and mortgage interest deductions. The President plans to offset deduction reform for a significant cut to personal and corporate income tax rates.

Why is the deduction decision so significant? It basically will hammer Blue state residents that pay higher property taxes and higher state taxes. No longer would residents in places like New Jersey and California be able to make those deductions, and the cost could end up higher than their current tax bill when everything else is factored in.

New Jersey media outlets are already warning that the sky will fall if these reforms pass through Congress.

But the media should have been screaming that when local and state government jacked up taxes on those middle class families on the justification that they would be able to deduct them at the federal level.

That sucking sound is the acceleration of capital flight from California, New Jersey and New York to Florida, Texas, and North Carolina.

"Obviously, they are quite enthusiastic and there may be a few fist bumps along the way."

While New Jersey pensioners might be worried about their property tax deductions, Reuters reports that there is one group of Americans already slapping hands in offices from New York to Los Angeles: Hedge fund managers.

Pass through entities could end up saving managers a huge amount of money.

“A manager whose hedge fund earns $50 million a year, for example, would be paying some $19.8 million in taxes, or 39.6 percent, under the current rules,” Svea Herbst-Bayliss and Jennifer Ablan report. That could drop to as little as $7.5 million if the rate were cut to 15 percent.”

That’s a savings of $12.3 million per year…

If anyone is feeling generous, we’ve had our eyes on this house for a new headquarters for a while.

“Real men (as well as pull-no-punches women) cut taxes.”

Senator Rand Paul to the pages of Breitbart to push tax reform. The Senator penned a column that argued that the Republican party has lost its way when it comes to Americans and their taxes.

It argues that Republicans have forgotten that their pledge is to help more Americans keep their money and to reduce wasteful government spending.

Here’s a question... Why an exclusive column with Breitbart.com? Everyone in the audience already agrees with Senator Rand Paul on tax cuts.

Why not push it to at least the Wall Street Journal? Or the New York Times?

Naturally, the other media outlets have paid attention to this column, right?

The answer is No. This call for tax reform doesn't appear to be gaining much attention anywhere outside of the Right Wing Blogosphere.

Wednesday’s Reading List·     

 

Grab the Newsletter 

Signup here for the daily FINalternatives Newsletter, which includes the Daily Alpha.

Follow @FINalternatives

Be sure to check out the award-winning Modern Trader and a very special offer for first-time readers and follow @moderntradermag  

Garrett Baldwin is the voice of the The Daily Alpha, the features editor for Modern Trader magazine, and the author of The Man with The Big Red Balloon.

 

 

 


In Depth

Q&A: Portfolio Advisors' Brian Murphy On The Advantages of A Private Markets Platform

Jan 2 2018 | 11:05am ET

Most private markets firms reference their platforms as a source of competitive...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Steinbrugge: The Top Hedge Fund Industry Trends for 2018

Jan 2 2018 | 12:22pm ET

Each year, Don Steinbrugge’s Agecroft Partners compiles the insights gained...

 

FINalternatives Trending

From the current issue of