Trump Tax Reform and Home Prices

[fortune11]

San Clemente's median home price is  $875,000?
When did that happen? Admittedly I've been asleep the past decade, but that was always a dump. A nice dump to spend the weekend, but not to live unless you like nuclear waste, Camp Pendleton run off and Marines.

Some of it from older white folks with kids in college selling their homes in Irvine , cashing in the $$ and moving there .

 

[Jantoven]

For sure! New homes will suffer, let?s see how Altair and great park will do, including some areas in Portola.

Yeah, we'll see.  I have curiously been watching inventory the last 1-2 weeks, and it does still seem that a lot of new listings are quickly being bought/going to "pending" status.  Although that's moreso for sub-1 mil property, not as much for property beyond that level.

 

[fortune11]

Good news guys, US Treasury Secretary says taxes will only increase for Million dollar earners.  He wouldn't lie to us would he!?https://www.cnbc.com/2017/11/17/onl...higher-taxes-under-gop-plan-mnuchin-says.html

Most of us here are doing pretty well but I aint makin $1M per year.  He better inform all those online tax calculators that their calculations are wrong.

Lol. And Trump also told us he?s going to get ?killed? by this tax plan.

Due to tribalism and the denigration of truth, most of his base will probably believe it.

His base doesn't need to believe anything about taxes.  At this point in time, they are purely driven by hatred of the other side ("if it causes liberal tears to flow, I like it") fed on a regular diet of hannity and tucker Carlson on fox.

Sadly, many people who otherwise know better, were hanging their hats on "at least these guys will cut my taxes" , notwithstanding the pain and stress they were causing to large swaths of underprivileged people and minorities.

Well now we have our answer. These idiots are truly good for nothing - they can't even do the one thing right that people who held their noses and voted for trump expected them to . 

If you are a Blackstone / private  equity / masters of the universe  type cashing in your millions in carried interest, all is well in your world.  for most of us plebians on this board , it is a tragedy .

 

[fortune11]

My bad.  I was reading and posting from iPhone 5s screen.  Yes I still have iPhone 5s!!=) 

btw, where are you getting $1.5 trillion in cuts over 10 years?? I think the total tax cut for C-corporation and Passthrough entity is $2+ trillion for the next 10 years.  The total tax cut is about $6 trillion less $3 to $4 trillion in lower deductions mainly from individuals over 10 years with corporations getting most of the benefits of the tax cut - https://www.nytimes.com/interactive/2017/11/15/us/politics/every-tax-cut-in-the-house-tax-bill.html 

If the total corporate net profits is $1.8 trillion per annum and the top corporate tax rate declines by 15% from 35% to 20%, what is that? Probably effective tax rate is alot lower to start off for corporations.

Say the extra profit is $200 billion to all corporations then x P/E of 18 = $3.6 trillion wealth for distribution to private sector instead of big fat government x wealth effect amplification factor.

Including incremental wealth creation from reinvesting, repatriation, buyback,dividends, money turnover/velocity, etc. then probably >$5 trillion in total wealth creation which is not a chump change.

Let's see how much stock market appreciated since beginning of the year = 17% or since Trump 23% so that equals almost $5 trillion gain which probably includes adjustment for probability of successful tax reform of approximately 70%+.  If the tax reform actually happens then the stock market probably will have another little kick on the upside now that probability adjustment becomes 100%.  But, if it goes the other way and the probability goes down, then the stock will tank. We'll see.

This is junk science.  I have worked in this industry as a consultant and have sometimes repeated these lies to assuage many clients but I know it is not true. 

corporations dont invest more because of lower taxes - they invest where they see opportunities.  Do you think Macys is suddenly going to stop shuttering its stores and start opening new ones just because they got a tax break

also , do you think first thing senior executives think is paying employees more with all the newfound money - nope again

and what will happen to all the affluent consumers in NY / NJ / CA when their take-home pay drops by 15% ?  Will they continue spending at the same pace just because their 401k or stock portfolio went up ?  Have you thought about whether that might cause a mild recession ?  psychologically, people don't spend more because their stocks went up , they spend based on perceptions of permanent income stream -- that is going down not up. 

 

[Goriot]

I am purely talking the fact.  You have to admit and give credit to the fact that atleast half of the gain ($3 trillion of $6 trillion) in equity market gain since Trump election is due to probability of successful tax reform.  I do agree that wealth effect from financial securities has less impact then housing wealth effect, but doesn't hurt. 

U.S. corporate tax code is broken and way out of date.  We have the highest marginal tax rate in the OECD if you include state and local (effective tax rate is lower but still one of the highest)- http://www.businessinsider.com/trump-tax-plan-corporate-tax-rate-oecd-countries-2017-4

The tax code is overly complicated with all the loop holes and deductions and only makes accountants and lawyers happy.  Needs to be simplified.  People hate change, but need to accept and adapt and move on.

btw, how did you get CA/NY/NJ will pay 15% higher taxes?  Did you try using the new tax reform calculator? Also, why should Federal government subsidize heavily taxed Liberal States and over spenders like CA, NJ, and NY.  This is just pure stupidity and unfair for well managed low tax states.

Also, why should federal government subsidize people to borrow more and more money.  Stupid policies to subsidize student loans, corporate debt, and consumer mortgage debt by giving deductions ballooned these debts out of control. 

 

[notTHEoc]

I am purely talking the fact.  You have to admit and give credit to the fact that atleast half of the gain ($3 trillion of $6 trillion) in equity market gain since Trump election is due to probability of successful tax reform.

There is no way you can call that fact. Talking heads on cnbc will say anything and tax reform sounds like the easy explanation but no one can know as fact exactly why.

I think I already demonstrated why these Corp tax cuts aren?t that important to markets.  IMO the main reason is better than expected global growth and less near-term recession risks. There are other reasons, but Corp tax cuts are low on the list.

 

[eyephone]

If your name is Richie Rich this plan works for you.
- if you own a jet plane (get a tax break)
- send your kids to private school (you can use the 529 plan)
Sorry hard working teachers, the education expense deduction will be gone. This is for expenses they pay out of pocket.

 

[fortune11]

If your name is Richie Rich this plan works for you.
- if you own a jet plane (get a tax break)
- send your kids to private school (you can use the 529 plan)
Sorry hard working teachers, the education expense deduction will be gone. This is for expenses they pay out of pocket.

And all this is so transparent that ads for ?out of touch ultra wealthy party of rich? write themselves . This just goes to show how scared the gop is of donors cutting off their funding for 2018. But this will have election consequences , their dumb and rabid base is not enough , despite gerrymandering .

For those spewing heritage foundation talking points about low corporate taxes and growth , the actual data does not bear it out.  If you are one of these so called experts in finance , you have to be twisting into pretzels to explain the stock market growth of Obama years . And what explains recent growth in japan ? And Europe ? And emerging markets ? Is it  all Trump ? I am laughing at this logic .

 

[eyephone]

Is it  all Trump ? I am laughing at this logic .

?President Donald Trump has insisted, for months, that the Republican tax plan he supports won?t benefit him.

?It?s not good for me. Believe me,? he said at a Sept. 27 event in Indiana to sell the plan. ?My plan is for the working people, and my plan is for jobs. I don?t benefit,? he also said that day.

And earlier this month, according to NBC News, Trump told a group of Democratic senators in a phone call, "My accountant called me and said 'you're going to get killed in this bill.??

Trump would save more than $20 million himself, according to the analysis of how the legislation affects his 2005 tax return, and his heirs could potentially save $1.1 billion based on his reported wealth.?
https://www.nbcnews.com/politics/fi...could-save-more-1-billion-under-house-n821491

There is an analysis that supports the article.
http://msnbcmedia.msn.com/i/TODAY/z_Creative/inline-headers/Trump and HR-1 Version 2.pdf

 

[irvine buyer]

When mortgage deduction got capped at $1 million, that did not stop people from getting mortgages in excess of $1 million.  I know several people who did because they wanted and could afford that more expensive home.  The tax implications were secondary in their decision making.  There will be people whom this $500,000 mortgage cap will affect, but not enough IMO to make a meaningful difference in the market.

As for Chapman's forecast, it's hard to argue with people who are supposedly more intelligent than I.  All things aside, I don't see much decrease in value if any in the sub $800,000 and over $4 million ranges.  There's pent up demand below $800,000 and the prices above $4 million are more dependent on how well our economy does.  If this economy continues to grow as a result of the corporate tax rate cut and asset values (stocks and RE) continue to go higher, the new tax implications are only going to affect the amount of loan the wealthy take on, if any.

 

[newPParker]

When mortgage deduction got capped at $1 million, that did not stop people from getting mortgages in excess of $1 million.  I know several people who did because they wanted and could afford that more expensive home.  The tax implications were secondary in their decision making.  There will be people whom this $500,000 mortgage cap will affect, but not enough IMO to make a meaningful difference in the market.

As for Chapman's forecast, it's hard to argue with people who are supposedly more intelligent than I.  All things aside, I don't see much decrease in value if any in the sub $800,000 and over $4 million ranges.  There's pent up demand below $800,000 and the prices above $4 million are more dependent on how well our economy does.  If this economy continues to grow as a result of the corporate tax rate cut and asset values (stocks and RE) continue to go higher, the new tax implications are only going to affect the amount of loan the wealthy take on, if any.

I feel the same way. this new tax plan provisions have been known for a very long time, so its not a surprise shock. We will see who is skinny dipping when the tide goes out, and I think that is what we will see!

 

[woodburyowner]

When mortgage deduction got capped at $1 million, that did not stop people from getting mortgages in excess of $1 million.  I know several people who did because they wanted and could afford that more expensive home.  The tax implications were secondary in their decision making.  There will be people whom this $500,000 mortgage cap will affect, but not enough IMO to make a meaningful difference in the market.

The $1M cap happened in 1987.  In today's dollars that's around $2.2M.  I think anyone who could afford a $2.2M mortgage would be considered in the top .1% of the population.  The value has eroded over time, but I still think you can't compare the cap in 1987 to the proposed cap now.   

 

[fortune11]

When you have lost even Gundlach ... (he has been the among the most pro trump in the financial services industry) ....

below are excerpts from a blog post --



Jeffrey Gundlach, chief investment officer of DoubleLine Capital, said the congressional tax plan would expand the federal deficit and help a small fraction of the U.S. population, including hedge fund managers.

?I?m very disappointed incidentally about the shape of this tax cut that is being proposed,? Gundlach told a gathering of industry participants at the Drake Hotel in Chicago on Wednesday. ?I am just appalled that we are going to continue to have a carried-interest scheme for hedge funds.?

The House bill set to be voted on Thursday keeps the carried-interest tax treatment that benefits private-equity managers, venture capitalists, hedge-fund managers and certain real estate investors. During last year?s campaign, President Donald Trump had vowed to get rid of the loophole. White House top economic adviser Gary Cohn has said Trump is committed to ending the tax break.

?After I saw that tax bill, I lost hope with the drain the swamp concept,? Gundlach said. ?The swamp keeps getting bigger.?

Carried interest is the portion of a fund?s profit ? usually a 20 percent share ? that?s paid to managers. Currently, tax authorities treat that income as capital gains, making it eligible for a rate as low as 20 percent. The top tax rate for ordinary income is 39.6 percent.

He called the tax plan ?a cosmetic tax decrease for the middle class that will go away over time.?

But there?s much more swampiness to be had. For example, there?s the fact that the corporate tax rate cut is permanent, while the individual cut is temporary. From the Los Angeles Times:

A gambit by Senate Republicans to make a large corporate tax cut permanent by having benefits for individuals expire at the end of 2025 created new problems for the legislation Wednesday as lawmakers were still grappling with the controversial decision to add the repeal of a key Obamacare provision.

Moving on, if you?re still in denial that this ?tax reform? was written for oligarchs and mega corps, take a look at the reaction of former Goldman Sachs executive and Trump?s White House Economic Council director, Gary Cohn, when his audience of corporate executives were asked a simple question.

The eagerness to shift incentives away from buybacks to capex is also the basis for much of Trump?s economic policy as designed over the past year by his top economic advisor, former Goldman COO Gary Cohn who is the White House Economic Council director. In fact, the motive behind the administration?s entire push for tax reform (cutting corporate tax rates) and offshore cash repatriation, is to the funds domestically, though not on buybacks and M&A (which also leads to ?synergies? and other headcount reductions), but on reinvesting the funds in growing one?s business and hiring.

Which is why we were amused to observe the following brief interchange yesterday between Gary Cohn and an audience made up of executives, where in the span of a few seconds Gary Cohn realized that his entire economic policy had been a disaster.

During an event for the Wall Street Journal?s CEO Council, an editor at The Wall Street Journal asked the room: ?If the tax reform bill goes through, do you plan to increase investment ? your company?s investment, capital investment?? He asked for a show of hands.

Alas, as the camera revealed, virtually nobody raised their hand.

Responding to this ?unexpected? lack of enthusiasm to invest in growth, Cohn had one question: ?Why aren?t the other hands up?"

Ironically, Cohn?s epiphany took place just as tax reform is approaching the final stretch in Congress and it increasingly appears that at least some form of corporate tax cut will be enacted. We say ironically, because the only thing Trump?s reform will achieve is to dramatically accelerate recently slowing buybacks, which in turn will push stocks to new all time highs as price-indescriminate CFOs and Tresurers tells their favorite VWAP trading desk to just ?wave it in.? Which means that the White House paper suggesting corporate tax cuts will boost household income is correct? if it focuses only on the incomes of the richest 1% of households.

Don?t despair, I promise there?s something in there for the average joe. For instance, after years of repression, owners of private jets will finally get that tax break they desperately need.

 

[irvinebullhousing]

When you have lost even Gundlach ... (he has been the among the most pro trump in the financial services industry) ....

below are excerpts from a blog post --



Jeffrey Gundlach, chief investment officer of DoubleLine Capital, said the congressional tax plan would expand the federal deficit and help a small fraction of the U.S. population, including hedge fund managers.

?I?m very disappointed incidentally about the shape of this tax cut that is being proposed,? Gundlach told a gathering of industry participants at the Drake Hotel in Chicago on Wednesday. ?I am just appalled that we are going to continue to have a carried-interest scheme for hedge funds.?

The House bill set to be voted on Thursday keeps the carried-interest tax treatment that benefits private-equity managers, venture capitalists, hedge-fund managers and certain real estate investors. During last year?s campaign, President Donald Trump had vowed to get rid of the loophole. White House top economic adviser Gary Cohn has said Trump is committed to ending the tax break.

?After I saw that tax bill, I lost hope with the drain the swamp concept,? Gundlach said. ?The swamp keeps getting bigger.?

Carried interest is the portion of a fund?s profit ? usually a 20 percent share ? that?s paid to managers. Currently, tax authorities treat that income as capital gains, making it eligible for a rate as low as 20 percent. The top tax rate for ordinary income is 39.6 percent.

He called the tax plan ?a cosmetic tax decrease for the middle class that will go away over time.?

But there?s much more swampiness to be had. For example, there?s the fact that the corporate tax rate cut is permanent, while the individual cut is temporary. From the Los Angeles Times:

A gambit by Senate Republicans to make a large corporate tax cut permanent by having benefits for individuals expire at the end of 2025 created new problems for the legislation Wednesday as lawmakers were still grappling with the controversial decision to add the repeal of a key Obamacare provision.

Moving on, if you?re still in denial that this ?tax reform? was written for oligarchs and mega corps, take a look at the reaction of former Goldman Sachs executive and Trump?s White House Economic Council director, Gary Cohn, when his audience of corporate executives were asked a simple question.

The eagerness to shift incentives away from buybacks to capex is also the basis for much of Trump?s economic policy as designed over the past year by his top economic advisor, former Goldman COO Gary Cohn who is the White House Economic Council director. In fact, the motive behind the administration?s entire push for tax reform (cutting corporate tax rates) and offshore cash repatriation, is to the funds domestically, though not on buybacks and M&A (which also leads to ?synergies? and other headcount reductions), but on reinvesting the funds in growing one?s business and hiring.

Which is why we were amused to observe the following brief interchange yesterday between Gary Cohn and an audience made up of executives, where in the span of a few seconds Gary Cohn realized that his entire economic policy had been a disaster.

During an event for the Wall Street Journal?s CEO Council, an editor at The Wall Street Journal asked the room: ?If the tax reform bill goes through, do you plan to increase investment ? your company?s investment, capital investment?? He asked for a show of hands.

Alas, as the camera revealed, virtually nobody raised their hand.

Responding to this ?unexpected? lack of enthusiasm to invest in growth, Cohn had one question: ?Why aren?t the other hands up?"

Ironically, Cohn?s epiphany took place just as tax reform is approaching the final stretch in Congress and it increasingly appears that at least some form of corporate tax cut will be enacted. We say ironically, because the only thing Trump?s reform will achieve is to dramatically accelerate recently slowing buybacks, which in turn will push stocks to new all time highs as price-indescriminate CFOs and Tresurers tells their favorite VWAP trading desk to just ?wave it in.? Which means that the White House paper suggesting corporate tax cuts will boost household income is correct? if it focuses only on the incomes of the richest 1% of households.

Don?t despair, I promise there?s something in there for the average joe. For instance, after years of repression, owners of private jets will finally get that tax break they desperately need.

HOLD ON BILLIONAIRES,,,HELPS IS ON THE WAY SO DONT BE DESPAIR.

 

[peppy]

In the 10 years time frame of this plan, 50% of households would see an INCREASE in taxes and the deficit will grow between $1.0tn (Tax Foundation Model) and $1.7tn (Penn-Wharton Model). The conservative leaning Tax Foundation can only attribute about $1tn in revenue growth due to economic activity of these tax cuts (including all their dynamic growth magic) on $2tn reduction in federal revenues.

 

[Hugo Township]

If incomes go down, so does housing affordability. I'm much more concerned about after-tax incomes than the MID.

 

[peppy]

If incomes go down, so does housing affordability. I'm much more concerned about after-tax incomes than the MID.

Here's one unintended benefit from generating the large deficit that comes with it. A strong dollar will make it more expensive for foreigners to buy up houses in the US.

 

[Hugo Township]

That same strong dollar makes it harder for my business to sell to global customers

 

[Liar Loan]

In the 10 years time frame of this plan, 50% of households would see an INCREASE in taxes

This is only if Congress lets the tax cuts expire in 2026.

In a way, your misleading post demonstrates how beneficial this tax plan is for most Americans.

 

[peppy]

In the 10 years time frame of this plan, 50% of households would see an INCREASE in taxes

This is only if Congress lets the tax cuts expire in 2026.

In a way, your misleading post demonstrates how beneficial this tax plan is for most Americans.

I'm sorry you misunderstood. "In the 10 years time frame of this plan" means years 0 through 10. This is before any of the breaks expire (although the corporate tax reduction and elimination of estate tax would be permanent).