The U.S. Supreme Court has given corporations the status and rights of “persons.”  The U.S. Government was originally established as a “republic” where we elect representatives that work for the people and that adhere to the will of the people; it was set up this way in order to protect the “people” from kings and corporations.  But now corporations are people, just like you and me, except that they are extremely rich and powerful people.  Corporations cannot die so they do not pay estate taxes.  They cannot go to jail so they are fairly immune from any real punishment for crimes.  Their problems with having to protect the environment from their own destruction and pollution is about to be fixed because the protective laws that took so long to put in place are about to go away.  Under the Trump administration, corporations are currently (via CEOs and corporate lobbyists) at the heads of the majority of government departments, agencies and other important positions, including the Presidency itself.  Corporations are about to have their taxes cut in half.  When government deficits begin to run at extremely high levels, and they eventually will since taxes will be cut so drastically at the same time that government spending will significantly increase, then corporations will be given the assets that are now held jointly by “We the People” of the United States.  We will be told that only the corporations can control and manage and own these assets (like our National Forests and water and even bridges, roads, prisons, schools, health-care, etc) and this giveaway will become reality because, as we are told daily, government is “bad and inept.”  The world is going to be a very different place 20 years from now.

Grover Norquist, Americans for Tax Reform:  “We don’t want to abolish the U.S. Government, we just want to reduce it to the size where we can drag it into the bathroom and drown it in the bathtub.”

Corporations are in the early stages of a massive power grab and no one seems to see what is happening because the well-meaning base of voters are being appeased via their individual issues being addressed (the corporations actually do not care about many of these issues) and the voter’s attention is being diverted by repeated talk of terror and “major, major” war and, of course, everything that one hears reported on any major news channel is “fake.”  Divide & conquer.  It is all a classic “bait & switch” being perpetrated on the American people in a country where the average citizen is a hard working and kind and honest person that is desperately searching for someone to just give them a break in what has become a complicated and sometimes difficult world.  Do I hate corporations?  No, of course not.  And at this point let me say that if the reader is a corporation, then I apologize if any of my comments have offended you, as a person.  I’m a corporation.  And guess what?  Now you too can become a corporation.

President Trump just sent his one page tax plan to Congress.  In it he wants to drop the top tax rate from 39.6% down to 35% for the wealthiest Americans.  He wants to lower the taxes paid on investment gains via the elimination of the recently added 3.8% Obamacare tax which had imposed additional taxes to investment profits and this is a good thing.  Importantly, he wants to lower the tax rate on corporations down to 15% and in my opinion, lowering corporate taxes is not a bad idea since corporate tax rates in the United States are some of the highest in the world.  But, and here’s the thing, he also wants to include Limited Liability Companies (LLCs) and S-corporations at the same reduced 15% tax rate.  Congress may fight this but right now this is what our President has sent to Congress.  My guess is that the U.S. follows the recent lead of some other developed countries and does lower corporate taxes, but not all of the way down to the 15% level.

So, who can become an LLC or an S-corp?  Almost anyone can.  You likely can and many, many people likely will become one in an attempt to game the system.  Basically, anyone that is self-employed can become an LLC online for as little as $100.  And any worker at any company could set themselves up as a “consultant” to that company or as an independant contractor and then file to become an LLC or S-corporation and literally cut their income taxes by 50% in exchange for paying a $100 fee and filling out a few simple lines on a secure computer generated form.  Obviously, one would need to monitor events constantly and talk to a tax consultant and to an attorney.

SUMMARY:  We’ll see what becomes of this as this year progresses (or 2018?) but it looks like a massive “game the system” may be in the offing.  It turns out that you just might become a corporation.”

President Trump’s tax plan in a nutshell:

  • A lot has to happen between now and “then.”
  • It would cost the United States $2-Trillion per year.
  • The lower class would see an average $225 yearly gain and the middle class a $2500 gain and the upper class would see a minimum yearly gain of $225,000 but likely much, much more.
  • 50% of the total gains would go to the top 5% of wage earners.
  • 33% of the total gains would go to the top 1% of wage earners.
  • It would be partly paid for by eliminating 94% of “discretionary spending” such as the EPA and public TV & radio and parks, etc.
  • Hopes to boost the annual GDP up to a continual 3.2% would pay for the rest.  [MarketCycle note:  Corporate (stock) earnings can go up without GDP going up, as is happening currently.  GDP may increase by a substantial amount in the near term.  There is a probable economic recession coming sometime during Trump’s term that might drop stock prices somewhere around 33% for a greater than 6 month period.]
  • It would still increase the deficit (debt) of the United States by $1-Trillion additional per year.
  • Plans to inflate the military budget are not included in these calculations.
  • If interest rates rise to higher levels, and they absolutely eventually will, then the increasing interest on this extra debt could reach ‘unpayable’ levels within a couple of decades.
  • And if President Trump is completely unable to pass his proposed tax changes, yet is still able to “repeal and replace” Obamacare, then the tax on investment profits in the U.S. will still drop by 3.8% per year.  This would not only benefit investors, it would further stimulate the stock market.

Thanks to long-time client ‘Diane G.’ for the above cartoon… and, as always, thanks for reading!

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Filed Under: MarketCycle’s Musings

Off the Top of My Head

posted by Stephen Aust, MarketCycle Wealth Management

“This is what our mind should do:  It should hide away all the materials by which it

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