Portrait of a “Tax Bomb”

Thankfully, the election is done and over – and in a second a few comments about it.  But, there are bigger fish to fry.  As we predicted Saturday, it looks like the first move post-election will be up (through Friday) as the market fires up this morning. 

More important?  We have been modeling drivers for the next economic downturn.  And this morning we’ll give you a thumbnail of  what’s coming.  A huge effective tax increase for people in high tax burden states.

Even if you aren’t a subscriber, you need to know that under the same “tax cut bill” that brought a lot of offshored capital back home, there is also a nefarious limit on deduction of state and local taxes of $10,000 per year.  After that, no further write-off for state and local taxes as we understand the law.

We ask wryly (or is that cynically?) note this is NOT something that anyone made a “big deal about” before the election.  However, it sure explains to us why the national media haven’t hyped the story and why so many D.C. old-timers decided NOT to run this time around.

We figure they don’t want to be around come the end of this year when the “Tax Bomb” we’re talking about this morning goes off.

Some election results first and coffee to make the ride out to the coming site of the financial trainwreck a little more pleasant…

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13 thoughts on “Portrait of a “Tax Bomb””

      • As a follow up to my comments on your site this morning, Wall Street has responded and life is back to normal again.

        This morning I received three phone calls from buyers interested in buying a home…NOW! All but one stated that they were waiting on the elections and when they checked their stock portfolio this morning and saw a dramatic increase, they felt it was time to get in before another buying frenzy takes place.

        All were young couples looking to get into Townhome’s and condos. Those price points are not as affected by the tax law changes as higher priced single family homes.

        It remains to be seen what will happen with higher priced homes.

  1. Re the dead Nevada candidate winning.

    In a case like this, where there’s no time to stand up a replacement candidate, you vote the dead guy and the governor appoints a live replacement…..from the same party as the winnign dead guy.

    So it actually makes sense from power retention perspective.

  2. To further complicate your tax math, while the SALT was limited, the standard deduction is increased. So people on the lower end of the SALT threshold won’t actually feel the pain because the higher SD will compensate. Only people with significant SALT AND over the new standard deduction will be penalized.

  3. A great win for PT last night. PRESIDENT TRUMP is now the accepted face of the Republican Party. The newly elected DEMS in the house are more middle than crazy radical. Also, the DEMS will now be forced to say & show what they stand for, & based on the new makeup, will be more willing to work with PT. A very good situation, maybe.

    • ECS,

      You can’t say that losing control of the House by a ton is a GOP victory. Who are you kidding? Nobody on the left predicted a Senate victory by the Dems. Everyone on CNN and others from Day 1 said the Senate was a long shot. So it was not a Republican “Victory”…Not even close…In the Senate, it was more of a “Save”.

      And about the House victory…Trump said of Nancy Pelosi in a tweet… just days after he called her evil…

      “In all fairness, Nancy Pelosi deserves to be chosen Speaker of the House by the Democrats. If they give her a hard time, perhaps we will add some Republican votes. She has earned this great honor!”

      Trump…The Great Chameleon.

      • Yeah, probably just Trump being his stupid, evil, lying self you keep calling him and nothing to do with what Warhammer would call a shaping exercise to position him and the Republicans to run in 2020 against a Pelosi-led House.

      • Compare it to the 2 year Obama mid term elections. PT was a resounding success. The stock market confirmed it. This election has made PT more human, likeable, & a political icon. But if it doesn’t work out, he still has Executive Orders like Obama, & has the Senate to confirm judges.

        GOOD advice on ZG, down > $10 TODAY.

      • @ Mark:

        In 1994 Clinton lost 53 House seats and 9 in the Senate.
        In 2010 Obama lost 63 House seats and 6 in the Senate.
        In 2018 Trump lost 27 in the House and will GAIN 3 (or maybe 5) in the Senate.

        I call that a GOP victory.

        Besides, since each state gets two senators, and the entire middle 35 states are solidly conservative, it is more likely than not that Republicans will continue to maintain a majority in the Senate for the foreseeable future.

      • Mark,
        You appear to be unaware of election history in the U.S. In fact, this was a big victory for the Donald to stave off defeat like Obama in 2010 failed to do. Going back a long time, anytime a majority party held all three (WH, House, Senate), this is the best outcome for a sitting President since JFK.

        Reall? Please don’t try to pretend you have any idea what you’re talking about because you clearly don’t. Oh, and the Donald would LOVE to have Nancy Pelosi as House Speaker as she is a great foil/fool for DT. In 2020, we might even see Killary run for Prez again. Haha, hope so!

  4. Methinks I got ‘downsized’ to an early retirment… “Just In Time!” Only spent one year on ObummerCare. Bought a cheap retirement home, prepped and survival capable, and my ‘Senior Homeowner’ taxes are $200/yr. (Got George’s tree farm beat!) I’m SOOoo glad I’m not trying to compete in a high-income (and now High-tax) job market anymore. I’m set to enjoy my declining years and watch it all go by.

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