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look what happened to woolly mammoths

Kitty Miv, Editor
01 April, 2019

Let's suppose the world's first time machine has been invented, you won the chance to give it a test drive, and the device catapulted you back to 10,000 BC, only to then malfunction. Oh dear. At least the ice age is thawing. But you're in the wilderness, you're cold, hungry. There's no fast food here. Far from it. This calls for drastic measures. You've got no choice but to join the local tribes people and help them to bring down a giant woolly mammoth. Protein aplenty! But that's going to take some time and not inconsiderable effort considering you're armed with little more than sharp sticks and stones. It's doable though. Our distant ancestors managed it. What you must do is track the outsized beast for hours on end, days if necessary, and slowly chip away at it until it keels over and expires.

It's okay, you haven't mistakenly clicked to a blog about Palaeolithic hunting techniques. So please bear with me, because this belaboured metaphor does have some relevance to the world of tax. In fact, we can apply it to the present-day United States. In this scenario, the woolly mammoth is the Tax Cuts and Jobs Act (TCJA), the US tax reform bill, and the hunters are the Democrats in Congress. Since the ice retreated at last year's mid-term elections, they've increased in numbers, become emboldened, and moved into Republican territory, where they intend to stalk the TCJA until it's little more than a pile of bones and tusks on the floor.

But the Democrat tribe isn't quite large enough to achieve that, so chip away they must. With bills such as the No Tax Breaks for Outsourcing Act, introduced in the House of Representatives by Lloyd Doggett (D-TX) and in the Senate by Sheldon Whitehouse (D-RI) on March 13, 2019, which would eliminate the FDII and GILTI deductions introduced by the TCJA, among other measures. Or the numerous bills that would restore the full deduction for state and local taxes. There are also the various proposals to restore the top rate of personal income tax in place prior to the TCJA – or much much higher if Alexandria Ocasio-Cortez gets her way. Meanwhile, a number of her colleagues are also taking aim at the much-reduced corporate tax rate.

Success is by no means guaranteed, though. Indeed, we've been here before. The Republicans stalked the Affordable Care Act. And while they might have succeeded in lopping off a limb or two, such as the much-unloved individual mandate, the beast continues to bestride the landscape. This shows that for a mortal blow to be rendered to the target, the legislative arithmetic has to be very much in favor of the hunter. Unfortunately for the Democrats, these numbers don't stack up at present. As such, their attempts to bring down the TCJA are really little more than politically symbolic potshots at the moment. They are, nevertheless, indicative of a future Democratic administration's tax policies, and elections can change the congressional math quite unexpectedly, as they did in 2018. Taxpayers should therefore bear this in mind. Nothing stands still for very long in the world of taxation. Keep up, or get left behind!

Yes, it's a bit of jungle out there. Governments now compete fiercely for foreign investment, and the reforming of tax codes is arguably the most effective way to achieve results, at least in the short-term. Indeed, the general consensus is now that the TCJA, for all its flaws and quirks, has tilted the competitive landscape towards the US.

And away from Canada? There is a large body of taxpayers, tax advisers, businesses, think tanks and other commentators there who seem to think so, given the increasing frequency of the warnings they are sounding about a growing competitiveness gap either side of the 49th parallel. They are unlikely, then, to have been very inspired by the Canadian Government's 2019 Budget, announced on March 19, which, with anti-avoidance as its central theme, concentrated on tax claw-backs rather than tax giveaways.

Is the Canadian Government therefore unconcerned? Or merely just complacent? It would, naturally, argue neither. It would respond to such accusations by pointing to the generous accelerated expensing measures announced in the Fall Economic Statement in November 2018. It would argue – and has argued – that this is a far more effective reply to the TCJA than a big corporate tax rate cut, because it should influence new investment decisions rather than provide tax relief for past ones.

Maybe Canada has a point. One shouldn't look to the past. That's where the woolly mammoths dwelled, and look what happened to them.


Tags: Government


About the Author


Kitty Miv, Editor

Kitty was born in Argentina in 1960 to a Scottish cattle rancher and his Argentine wife. Educated in Edinburgh and at Princeton, Kitty worked for the World Bank as an economist, where she met and married an emigre Iranian banker. During her time with the Bank, Kitty worked in a number of emerging markets, including a spell in the ex-USSR as a Transition Economies Team Leader. Kitty is now a consultant in Brussels and has free-lance writing relationships with a number of prominent economic publications. kitty@lowtax.net

 

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