Breaking News
LAST CHANCE for Cyber Monday SALE: Up to 54% off InvestingPro! Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Taxes, Politics And Mr. Bannon

By Cumberland Advisors (David Kotok)Market OverviewJul 18, 2017 07:09AM ET,-politics-and-mr.-bannon-200201739
Taxes, Politics And Mr. Bannon
By Cumberland Advisors (David Kotok)   |  Jul 18, 2017 07:09AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

"Since the Great Recession, which is now 8 years old, we've been growing at 1.5 to 2 percent in spite of stupidity and political gridlock, because the American business sector is powerful and strong. What I'm saying is it would be much stronger growth had we made intelligent decisions and were there not gridlock.... It's almost an embarrassment being an American citizen traveling around the world and listening to the stupid s--- we have to deal with in this country." – Jamie Dimon, CEO, JPMorgan Chase (Hat tip Politico)

Behind the scenes at the White House, we are told that Steve Bannon has been arguing for higher taxes on the wealthy and advising President Trump to advance them, in a move more politically strategic and symbolic than substantive in percentage terms. Several other sources have confirmed that such discussions are underway.

So, why is this strategy gaining a hearing and what does it mean?

The early Trump line and Republican euphoria after the election was encapsulated in the tax-cut proposal released by House Ways and Means Committee Chairman, Kevin Brady. We wrote about that proposal at the time: The timeline was this year and a possible attachment to a continuing budget resolution. So much for timelines and political gridlock now raises questions about next year.

All that euphoria has faded into history; and many observers, including us, now see little chance of any tax cuts this year. There still seems to be a consensus or majority view to repeal the alternative minimum tax (AMT). And a repeal of the carried-interest provision has a lot of support. Many would also like to see a large repatriation incentive tied to the funding of a national infrastructure program.

Those elements seem to be heavily supported by both political parties and by the majority of independents who think about policy issues and are inclined to swing in elections.

So maybe the Bannon argument can gain traction? Is that what will move things beyond the gridlock?

Simply put, Democrats cannot blame Republicans for giving breaks to the rich if the top rate goes up. A 40% number is higher than a 30-something number. Also, the healthcare legislative debacle seems to assure that the 3.8% Obamacare tax will remain. And the changes in taxation have already inserted an income threshold (means testing) for Social Security recipients.

The new bottom line for income taxation is a 40-something top federal rate with high-taxation states like New Jersey and California adding enough to drive the top combined marginal rate above 50%. At Cumberland we have such clients and routinely see combined net marginal rates in the low 50s.

This vision also implies that capital gains rates will end up about where they are now, with no breaks coming this year. In high-tax states with restrictive tax codes, the marginal long-term cap gain rate can reach the 30s.

For markets, under the circumstances, those waiting for a lower-cap-gain setting will require a lot of patience unless they decide to forgo thumb twiddling and adjust nimbly to the new reality of no likely tax reform. This outlook makes tax-free munis more desirable since muni investors focus wisely on their net, after-tax investment returns.

And for the majority of Americans who work and earn, this outlook offers no relief, with the present complex tax code eating up the results of labor effort by tagging FICA (Social Security plus Medicare), Obamacare, and state and local taxation onto their federal calculations. For many working Americans, the federal income tax chews through fewer dollars than these other taxes do, taken together.

Meanwhile, our dysfunctional and discredited two-party political system fiddles in Washington in the spirit of an Emperor Nero in a burning Rome. And maybe I should suggest that the new fiddle is a balalaika.

The country wants reparation of a trillion dollars and a rebuilding of our decrepit infrastructure. The politician who understands these national priorities will find resonance in the forthcoming midterm elections. Those who ignore those priorities do so at their peril.

by Cumberland Advisors

Taxes, Politics And Mr. Bannon

Related Articles

Taxes, Politics And Mr. Bannon

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email