Tax Reform Shifts to States

To conform or not to conform… that is the question for state legislatures across the country. How they respond could raise tax bills on the state level. “Everyone thought that tax reform was done,” said Nicole Kaeding, an economist at the Tax Foundation in Washington. “All we’ve done is move it from one capital to 50 capitals.”

States incorporate provisions of the federal tax codes into their own codes in varying degrees, notes the Tax Foundation, meaning “that federal tax reform has implications for state revenue beyond any broader economic effects of tax reform.”

The new federal tax law eliminated or reduced many tax breaks thus increasing the tax base. The cuts in federal tax rates, however, more than offset those lost deductions. If states adopt the broader federal income tax base without changing their state’s tax rates, it could mean higher state taxes for many.
In addition, most states will need to take affirmative action if they want to extend some of the specific pro-growth elements of the new federal tax law, such as allowing the immediate expensing of investments in machinery and equipment.

Whether individuals and businesses realize tax reform, or get hit by tax increases, will depend on how their state legislatures pick and choose which parts of the federal tax law they will conform with. No doubt many states will seize this opportunity to increase their tax coffers.
To read the full in-depth story: https://taxfoundation.org/tax-reform.

Goodfriend Short of Good Friends?

The nomination of Carnegie Mellon University economist Marvin Goodfriend to the Federal Reserve’s Board of Governors may be in trouble. The Wall Street Journal is reporting that Senator Rand Paul (R.,KY) said he will vote against the nomination, even though the Senate Banking Committee voted along Republican party lines to advance the nomination.

With no Democrats supporting his nomination, and a very thin Republican majority in the Senate (51-49), he will need every vote. Complicating matters is the medical absence of Senator John McCain (R.,AZ). With the loss of Senator Paul’s vote, Mr. Goodfriend may fall short a couple of friends.

It would be unusual for the Senate to reject a President’s nominee to the Fed board, and President Trump has doubled down saying Goodfriend “is incredibly qualified.” Maybe so, but Sen. Paul is troubled not so much by his qualifications but with his policies – especially Goodfriend’s past support for tracking cash as it moves in and out of banks.

In academic papers, Goodfriend has supported pushing interest rates below zero during recessions and advocated charging a fee to take cash out of banks to make negative rates more effective. He also suggested inserting a magnetic strip on bank notes to track them as they enter circulation.
That’s a lot to swallow for a libertarian leaning Senator from Kentucky.

New IRS Chief Nominated

0President Donald Trump announced that he will nominate California tax attorney Charles Rettig to be the new IRS commissioner. Rettig earned his J.D. degree from Pepperdine University and his LLM in taxation from New York University. He currently practices at Beverly Hills tax law firm Hochman, Salkin, Rettig, Toscher & Perez PC. He has served for 20 years as a member of the Advisory Board of the California Franchise Tax Board, and previously was a member of the Advisory Council for the California State Board of Equalization.

FASB Proposes Improvements to Lease Standard Implementation

The Financial Accounting Standards Board (FASB) issued a proposed Accounting Standards Update (ASU) intended to reduce costs and ease implementation of the Leases Standard for financial statement preparers.
“The proposed ASU is aimed at reducing unnecessary costs around implementation of the new Leases standard without compromising the ultimate quality of information provided to investors,” stated FASB Chairman Russell G. Golden. “It’s part of our ongoing effort to proactively address implementation issues raised by our stakeholders to ensure a successful transition to the new standard.”

The proposed ASU would simplify transition requirements and, for lessors, provide a practical expedient for the separation of non-lease components from lease components. Specifically, the amendments would:

• Add an option for transition to ASU No. 2016-02, Leases (Topic 842), that would permit an organization to apply the transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented in its financial statements.

• Add a practical expedient that would permit lessors to not separate non-lease components from the associated lease components if certain conditions are met. This practical expedient could be elected by a class of underlying assets. If elected, certain disclosures would be required.

The proposed ASU is available on the FASB website.

It’s the real thing… really

Last month Coca-Cola announced its “World Without Waste” initiative and a goal to recycle the equivalent number of bottles that it sells by 2030. They should have gotten a warm environmental embrace, but instead Greenpeace criticized the company for focusing on recycling when they should be decreasing its use of single-serve plastic bottles. Coca-Cola’s CEO responded that if Coke can successfully recycle 100% of its packaging, then “there’s no such thing as a single-use bottle.”

Not to worry, it’s not new news!

Equifax stock took a dive last Friday, trading down as much as 4.5% for the day before recovering somewhat by market close. Its stock is still off for the year.
The stock drop, a least for that one day, was attributed to a first-out Wall Street Journal story which reported that Equifax submitted a document to the Senate Banking Committee which said that cyber thieves exposed more of consumers’ personal information than what Equifax disclosed last year.

You’ll remember last September when Equifax discovered, but waited months before disclosing, that they had been hacked and that cyber thieves made off with the names, addresses, birth dates and Social Security numbers of over 145 million consumers. In this latest disclosure, Equifax said that finer customer details, such as the expiration dates for credit cards or issuing states for driver’s licenses, were also included in the list.

CNBC reported that an Equifax spokeswoman said the information it disclosed in September which “included details affecting the majority of the 145.5 million people, was not an exhaustive list.” She added that the newspaper’s account “was not new information.”

Happy 25th Birthday ETF

The first exchange-traded fund (ETF) was started 25 years ago, allowing investors to buy and sell the S&P 500 Index in a single publicly traded share.
The first ETF was called the Standard & Poor’s Depository Receipts Trust (SPDR), quickly nicknamed “spider.”

There are now over 7 thousand exchange-traded products worldwide representing $4.8 trillion in assets, according to research firm ERFGI.
2017 was a record year for ETFs, growing a net $466 billion – a 61% increase over 2016 inflow according to Morningstar Inc.

The SPDR S&P 500 ETF Trust (Known by its ticker SPY) dominates the market with $283 billion.

With all their growth, ETFs still represent just a fraction of the money invested in mutual funds, according to Morningstar. By the end of 2017, not counting money market funds and fund of funds, there was $14.7 trillion of assets in U.S. mutual funds compared with $3.42 trillion in U.S. ETFs.

Source: Wall Street Journal, Morning Star Inc., ERFGI, S&P

Labor

Early to bed and early to rise probably indicates unskilled labor.
John Ciardi

By working faithfully eight hours a day you may eventually get to be boss and work twelve hours a day.
Robert Frost

There’s an enormous number of managers who have retired on the job.
Peter Drucker

A meeting is an event at which the minutes are kept and the hours are lost.
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