Siberian Volcano Suddenly Erupts


While all eyes have been on the volcano in Bali,  the Siberian Shiveluch Volcano erupted yesterday for over a 20 minutes spewing ash 6 miles (10 kilometers) high into the sky. The 1963 eruption in Bali was one of the largest and most devastating eruptions in Indonesia’s history. Nevertheless, it was still only a VEI5. Ideally, an eruption in Bali was due from a cyclical perspective in 2018.

In the case of the Siberian Shiveluch Volcano, there have been significant eruptions taking place in 1854 and 1956. The most recent eruption began again on August 15, 1999, and have continued periodically when on February 27th, 2015, Shiveluch erupted spewing ash into the atmosphere about 30,000 feet crossing the Bering Sea and into Alaska. From a cyclical perspective, this particular volcano was due to start again in 2017.

If we continue to get several volcanoes erupting into 2018, then this should be an active period and it will contribute to Global Cooling. Our models of food prices appear to be rising after 2018 moving into 2024. This would tend to indicate that we may indeed be looking at a rising in the volcanic activity in many places.

How China will Surpass the West


QUESTION: Marty

I just finished watching “The Forecaster” and I am impressed that you survived what the government did to you. As a former Green Beret from back in the day, I can appreciate what you endured more than most, my hats off to you.

All I can add is I hope to hell that no government including ours every gets your source code; as a former military officer and student of history, I know what our government is capable of.

I do wonder if China will survive the coming collapse in the west, aren’t they too tied to us?

Keep up the good work!

D

ANSWER: They will push you to the edge, hoping you break. There is a fine line and if you cross it you lose all fear of death. Then the table is turned. There is no threat they can make that will change your position. Some ask, “Why did you not just turn over the code?” They assume that they will actually honor what they tell you. They NEVER tell the truth, and if you turn over what they demand, you lose everything for they can kill you and pretend it was some accident, heart attack, or whatever. The press will believe them of course. That’s why they are there. You are dancing with the devil and it becomes a dance to the death. I was released ONLY because I got into the Supreme Court. Once they were taking the case, the New York boys had to release me.

Concerning China, the reason that they will succeed is because they are turning inward by building their economy into a consumer reservoir and eliminating their dependence upon the West. They will decline at first, but they will recover and make new highs when the West fails.

Climate Change – Volcanoes (Part II)


Eruption of volcano Agung in Bali

Over the past few decades, there have been several research papers in the scientific press that submit there is a correlation between cosmic-solar radiations and destructive geological events such as earthquakes and volcanic eruptions. On top of this, there are correlations with climate change that kick in where volcanoes throw up ash into the atmosphere which blocks the sun and that sets in motion the global cooling sending the earth back toward an Ice Age. Therefore, the entire process is extremely complex. Our computer can put out a forecast, but it is looking at everything and the dynamic complexity of all the interactions. This is why I do not put forth X happens because of Y. It is just more complex than such correlations.

Nonetheless, the strongest correlation between volcanoes and earthquakes remains that with the sun. In the last two and half centuries the following major volcanic eruptions occurred during strong solar minimum when the energy is at its greatest: Grimvotn (Iceland) 1783/84 (14 km3), Tambora (Indonesia) 1810 (150 km3), Krakatoa 1883 (5.0 km3), Santa Maria (Guatemala) 1902 (4.8 km3), Novarupta (Alaska) 1912 (3.4 km3). The only major eruption to occur during a solar maximum was Pinatabo (Philippines) 1991 (between 6 and 16 km3).

Additionally, research has concluded that there is an extremely high correlation between global volcanic activity among the largest of classes of eruptions and solar activity lows. Over 80% of these volcanic eruptions greater than VEI 5 and almost 88% of the extreme largest eruptions measuring VEI 6 or greater also taking place with solar minimums. There appears to be a strong correlation of volcanic eruptions coinciding with solar minimum. Pictured above, the Bali, Indonesian Agung volcano has been putting out smoke for several weeks. If this eruption unfolds as a VEI 6+ or VEI 7 as was Tambora back in 1815, this will accelerate the Global Cooling. That is going to be devastating for society and the global economy.

There is a clear relationship between solar magnetic activity and 11 of the most explosive eruptions from silicate-rich volcanoes in Japan over the past 309.6 years. It turns out that nine of these eruptions, in fact, took place during solar minimum, which is the inactive phase of solar activity/sunspots. We may find that volcanoes are also triggered by the by the rise in cosmic radiation.

What I can confirm is that volcanic eruptions play a tremendous part in creating Global Cooling, which is our real threat going into the next decade. Volcanic activity is rising again from Mount Tambora to Yellowstone. Evidence suggests that 1816, known as the year without a summer, was caused predominantly by a volcanic winter event caused by the massive 1815 eruption of Mount Tambora, which was the largest eruption in at least 1,300 years. However, the Year Without a Summer was exacerbated by the 1814 eruption of Mayon in the Philippines. Once again, it appears that there is a correlation of not just one volcanic eruption, but a series. Wheat prices had peaked in 1812 due to war, but they declined in 1815 falling to $19.90. They then rallied sharply into 1817 reaching about $30 posting a 50% advance.

1817-Wheat-Y

In Britain, the farmers tried to prevent the price of wheat from declining. They essentially paid off the politicians to introduce the Corn Laws which were tariffs and restrictions on imported food and grain (“corn”). The Corn Laws were enforced in Great Britain between 1815 and 1846. They were designed to keep grain prices high to favor domestic producers against the American farmers in the aftermath of the War of 1812. The Corn Laws imposed steep import duties and thereby made it too expensive to import grain from America, which set in motion famine conditions when food supplies were short. This attempt by the British government to protect their farmers from competition became a leading cause of the Great Irish Potatoe Famine.

Beginning from 1845 to 1851, the Irish potato famine killed over a million men, women, and children. This is what caused over a million more to flee the country sailing to America where food was plenty. Ireland in the mid-1800s was an agricultural nation, populated by eight million people who were among the poorest people in the Western World. The cause of famine was potato blight, which devastated the crops throughout Europe during the 1840s. However, the impact in Ireland was overwhelming since about one-third of the population was dependent on the potato. The Corn Laws contributed to the disaster by blocking the importation of food. They were abandoned because of the Irish situation in 1846.

 

 

If we look back in time through the historical record, we discover another period where there appears to be a major convergence of volcanic activity which creates Global Cooling and the subsequent famine. There were the great volcanic eruptions that created the extreme weather events of 535–536AD during the reign of the Byzantine Emperor Justinian I (527-565AD). A mysterious cloud appeared over the Mediterranean basin according to the historian Procopius of Caesarea (Procopius Caesarensis; c. 500-560 AD) who wrote: “The sun gave forth its light without brightness, and it seemed exceedingly like the sun in eclipse, for the beams it shed were not clear.” This was a volcanic cloud that blocked the sun. But it was not a volcano in that region. The cloud’s appearance created a climate cooling for more than a decade. Crops failed, and there was widespread famine. This also sets in motion a pandemic known as the Plague of Justinian (541-542), which swept through the Eastern Roman Empire killing 5,000 people per day in Constantinople. The dating of this is extremely close to the famous civil unrest known as the Nika Revolt of 532 AD, which preceded the cloud account of Procopius and the plague.

Scientists had postulated that the Global Cooling set in motion by a giant volcanic winter 535-536AD may have been the result of the eruption of Ilopango in El Salvador, which filled Earth’s atmosphere with ash as did Mount Tambora in 1815. However, as the SMITHSONIAN reported back in 2010, “researchers say there were two eruptions—one in 535 or 536 in the northern hemisphere and another in 539 or 540 in the tropics—that kept temperatures in the north cool until 550.” This has emerged from studying the ice core samples collected in Antarctica and Greenland with data from tree rings. According to the correlation of this data, “nearly all extreme summer cooling events in the northern hemisphere in the past 2,500 years can be traced to volcanoes,” reported the Smithsonian.

There has been a lot recently written about the danger of a Supervolcano at Yellowstone. In fact, scientists discovered a tremendous blob of magma stored beneath Yellowstone, a blob that if released could fill the Grand Canyon 11 times over, the researchers reported on April 23, 2013, in the journal Science. The latest of the trio of Supervolcano eruptions created the park’s huge crater, measuring 30 by 45 miles across (48 by 72 kilometers). Correlating this with our database suggests that there is a more likely alignment with the flipping of the poles every 720,000 years, which we went into in great detail in the Mayan Report – Supernatural Side Roads.

If we assume the 8.6-year cycle applies to this type of event given even the precession of the Equinox is a derivative 25,800 years (3×8.6), then we should see key markers along the way about every 224 years. If we look backward in time, we look to 1705BC, which was followed by the eruption of Thera (Santorini) which destroyed the Minoan Empire. Two cycles back from 535 brings us to 87AD, which was a period that also marked the eruption of Vesuvius in 79 AD is probably the best known volcanic eruption in world history since it buried Pompeii and Herculaneum.

Looking at 224 intervals moving forward in time. there is evidence of unusually high levels of Carbon 14 discovered in tree rings throughout Japan from this period around 759AD, the next target after 535-536AD. The high Carbon 14 trace from this period has suggested that there was at least a gamma-ray burst from the sun. The next target would be about 983AD bringing us to the great Medieval Warm Period (MWP) when the climate turned back up into a warm climate for the North Atlantic region. This lasted into about 1200AD. The next target would be 1207 is perhaps the beginning of the Little Ice Age.

Thereafter, the next target period begins 1431, followed by 1655, 1879, which was followed by the Krakatoa eruption in 1883 (VEI 6). We also have a VEI 3 event at Cotopaxi, Ecuador in 1877. Cotopaxi has begun to erupt in 2015 while the island that once hosted Krakatoa was completely destroyed in the eruption in 1883, new eruptions began in December 1927 which rebuilt the Anak Krakatau (“Child of Krakatau”) cone in the center of the caldera. Anak Krakatau sporadically comes to life, building a new island in the shadow of its parent. The next major target would be 2103 for a massive correlation.

Tambora has also come alive since 2011. Radar Images provided by the International Earthquake and Volcano Prediction Center in Florida, show the hot areas. This volcano is also on the watch list for an eruption once again. There has been a sequence of earthquakes that began shaking the island with increasing frequency since April 2011. Columns of ash have already been venting as high as 4,600 feet.

If we see a series of volcanic eruptions in the VEI 6 category or greater within 2018, expect to see a very sharp turn down in temperature and Global Cooling will take on rapid change going into 2024.

BREXIT in Jeopardy?


The top story in Britain is the collapse of BREXIT negotiations thanks to the stupidity of Northern Ireland. If Northern Ireland wants to remain inside the EU, we already have Scotland saying they would want the same deal and the Mayor of London adds his two-pence to the issue think he will save the City of London financial system.  Of course, none one of these people understands the first thing about economics no less they are surrendering power to Brussels. The Brits have always come in dead last in everything inside the EU. BREXIT was the only thing that would save Britain of it too will be dragged under by the failure of the Euro.

Climate Change – Earthquakes Caused by Complex Cycles (Part I)


Several people have asked why I could not confirm or deny that the cause of earthquakes is the slowing down of the Earth’s rotation. As previously reported, this new theory was published in Geophysical Research Letters earlier this year by Roger Bilham of the University of Colorado and Rebecca Bendick of the University of Montana. The theory notes that Earth actually slowed down in its rotation, which will increase the intensity of earthquakes every 32 years. Their research is based on looking at earthquakes since 1900 that were greater than 7.0, and noticing a cycle that is approximately every 32 years for an uptick in these large quakes. They argue that the only factor that strongly correlates is a slight slowing of the Earth’s rotation in a five-year period before the uptick.

I cannot confirm or deny that the cause of the 32-year cycle is the slowing of the Earth’s rotation because there are other correlations that need to be addressed. I did confirm that my own research agreed that there is a 31.4-year cycle of intensity in earthquakes. Additionally, I do not believe we can attribute the cause of earthquake intensity to the slowing of the Earth’s rotation because you cannot reduce the cause to a single factor.

As far back as 1967, a study was published with the Earth and Planetary Science Letters which found solar activity plays a significant role in triggering earthquakes. Solar activity, as indicated by sunspots, radio noise, and geomagnetic indices play a significant, but by no means exclusive, role in the triggering of earthquakes. (Source: Earth and Planetary Science Letters
Volume 3, 1967–1968, Pages 417-425)

Later, in 1998 a scientist from the Beijing Astronomical Observatory, Chinese Academy of Science, found a correlation between low solar activity and earthquakes. Then in 2007, Yin ZhiQiang, Ma LiHua, and Han YanBen conducted a study which produced results showing that the lengths and amplitudes of the periods have changed with time, and large variations have taken place during some periods. (Source: Chinese Science Bulletin).

Another recent research study carried by The Space and Science Research Center in Florida, US, showed a strong correlation between solar activity and the largest earthquakes and volcanic eruptions within the continental United States and other regions around the world. The study looked at the data of volcanic activity between (1650 – 2009) and seismic (earthquakes) activity between (1700 – 2009) and then the recorded data was compared with the sunspots record (solar activity).

The results of this study exposed a very strong correlation between solar activity and the largest seismic and volcanic events, within the continental US as well as globally. The correlation for volcanic activity was greater than 80% (discuss in a separate post) and for the largest earthquakes was came out with a 100% correlation with the top 7 most powerful quakes versus solar activity lows.

NASA also published a study showing that there can be lesser quakes in the 5.1 range that are shallow ground movements reflecting the strain accumulated on deeper faults, which remain locked and may be capable of producing future earthquakes in the 7.0+ magnitude range in Los Angeles. When we ran our weather models on a correlation with California earthquakes, it revealed a cycle of drought followed by flooding, which then undermines the structure and precedes earthquakes. NASA published a study showing that indeed the drought in California was causing the land to actually sink. They reported that groundwater levels have fallen 100 feet already.

 

In 2008 researchers, NASA announced that their scientists stand on the verge of a major breakthrough in their efforts to forecast earthquakes. They reported that they have found a close link between electrical disturbances on the edge of our atmosphere and impending quakes on the ground below. They observed this correlation days before the recent 8.0 devastating earthquake in China which struct on May 12th, 2008 (2008.361) known as the 2008 Sichuan earthquake. While there were a lot of quakes 309.6 years prior in 1698, there were not 8.0 quakes. There was an 8.0 quake known as the 1679 Sanhe-Pinggu earthquake, which was about 56Km from Beijing. If we look at the 224-year frequency, we again come close to the 1786 Kangding-Luding earthquake, which was a 7.7 quake. The 51.6-year frequency also produced two quakes in 1955 that were 7.1 1955 Kangding earthquake and a 6.8 quake known as the 1955 Yuzha earthquake.

Therefore, we may also have a close link between electrical disturbances on the edge of our atmosphere and impending quakes on the ground below has been found. This finding is in agreement with similar studies carried out by other space research institutes. Satellites have picked up disturbances 100 – 600 km above areas that have later been hit by earthquakes. Apparently, fluctuations in the density of electrons and other electrically-charged particles in the ionosphere have been observed, which may also provide a market for earthquakes.

In Taiwan, similar research has agreed with this theory. The researcher Jann-Yeng Liu also reported the link between earthquake and disturbances in the ionosphere. His work examined over 100 earthquakes with magnitude 5.0 and larger in and around Taiwan over several decades. His analysis showed that nearly every earthquake down to a depth of about 35 Km was preceded by distinct electrical disturbances in the ionosphere. So again, is this the cause or a mere correlation?

The theory put forth by Minoru Freund of the NASA Ames Research Center argued that when rocks are compressed-as when tectonic plates, they act like batteries, producing electric currents. This line of reasoning would imply that the electric disturbances are the result and not the cause since compressing rocks releases electrical charges that then travel upwards into the ionosphere. However, perhaps fluctuations in the cosmic-solar radiations are charging the ionosphere first, which then transfer to the planet disrupting the geomagnetic field generating the current.

The global warming people have totally ignored the sun and its interactions with our planet and the climate. It is a known fact that during solar minimum, which we are now headed in to, is when we get the peak energy in cosmic radiation. During these maximum energy periods, the cosmic radiation can penetrate the greatest depths within the planet. The correlation with the sun also exists whereby the greatest earthquakes swarm during the period of solar minimum.

Nevertheless, the relationship between the lowest-highest solar cycles and earthquakes produces the highest level of correlation. Therefore, the data simply establish an extremely strong correlation between major earthquakes of 8.0 magnitude or more (on Richter scale) and strong solar minimum (grand minimums).

We are in what is being called Solar Cycle 24. This is the 24th solar cycle since 1755 when extensive recording of solar sunspot activity began. It is the current solar cycle which began in December 2008 with a smoothed minimum of 2.2 (SIDC formula). There was only minimal activity until early 2010. It reached its maximum in April 2014 with smoothed sunspot number only 116.4, the lowest in over a century. The 8.0 2008 Sichuan earthquake took place right on schedule.

A simple correlation with the energy output of the sun reveals that all major earthquakes occurred during strong solar minimums. Consequently, there were 7 major earthquakes of 8.0 magnitude moving into the turning point in 2008-2010. Kiril Islands (Russia) twice- 8.1 (November 2006 & January 2007), Peru-8.0 (August 2007), Sumatra-8.5 (September 2007), Sichuan earthquake-8.0 (May 2008)Samoa-8.1 (September 2009), Maule (Chile)-8.8 (February 2010).

The Global Warming people have clearly harmed our investigation into serious correlations with the sun and our planet, which also impact our world economy. The cycles emerging from the various earth data correspo9nd to our Economic Confidence Model and the six waves at the 309.6-year level.

At the grand level of the 1857.6-year time interval we experience major changes and shifts in civilization. This correlates with the global cooling and the solar cycles. It is high time to understand that our planet is permanently linked to the solar energy. The longer the global warming crowd tries to blame humans for everything, the longer we will ignore something that may be far more devastating than global warming — the decline in solar activity which turns weather down and corresponds to a rise in earthquake and volcanic activity (see Part II on Volcanos).

Denmark Central Warns Next Financial Crisis is Coming


The Danish Central Bank has come out to warn that there is another financial crisis ahead. The central bank identified several indicators that point to growing risks from its analysis perspective. It is recommending that the banks in Denmark begin to raise their capital risk buffer.

The primary concern centers on household credit where banks have lent out money to gain interest in the midst of negative interest rates. The drive to create income has led the banks to lend to people with poor credit ratings. They also fear that the banks have lent too much to companies that suffer from the business cycle.

This is the consequence of negative interest rates. The banks lent out money at higher rates to those who have poor credit. As I have warned, every solution sets up the next crisis.

Bitcoin to be Declared a Financial Institution — Beware!


The risk with Bitcoin is that the government could simply change the definition of money. That is what they did to me back in 1980 because I was one of the three main market-makers in gold (perhaps the biggest). It was all a hunt for taxes, not concerning me but my clients. I have explained before why I retired from making markets in gold — the IRS declared me to be a BANK!  When gold was legalized in 1975 and began trading on the COMEX in New York, the New Jersey Senate asked me to write the law on gold to make sure it would not be taxable to buy and sell gold bullion. I worked with Senator Foran and developed the language that “gold was not taxable unless converted to use.”

I was making the market to buy gold scrap from all the stores you see with “WE BUY GOLD” signs. They buy the jewelry and it has to be refined. To do that, you needed a minimum lot of 100 ounces, which was the contract size on COMEX. When gold was $800, that meant one 100 ounce bar was valued at $80,000. The refining period was 6 weeks. Therefore, all of these small operations could not afford the float. If they bought 100 ounces per week, then they would need $560,000 in working capital. That would not work for most of these small shops buying gold.

I made the market. The shops could ship whatever they bought that day and I would buy it at the daily price. I gathered all the gold sold by countless stores. The gold was shipped by armored cars to Englehard for refining (PhiBro or Philipps Brothers who eventually bought Saloman Brothers). I was doing tens of millions per week back then and refined a mountain of gold.

First, the NJ tax authorities walked in and declared me to be a merchant. I said gold was not taxable unless converted to a usable product. They said their “interpretation” was that the “use” was investment.  I refused to pay and opted for a trial. Of course, you do not get a jury, just a judge who rules always for the government. I was not allowed to testify at my own trial for they said whatever the Senate had asked me to write, I may have misinterpreted their intention. Senator Foran was so angry that he demanded to testify at my trial. The government objected and he was allowed to testify ONLY as a private individual citizen. I moved to subpoena the full Senate. The judge denied me, and I lost.

Simultaneously, the Feds walked in and declared me to be a BANK. They then declared that I had to file forms to report when my clients bought or sold more than $10,000. Their interpretation was that gold was NEVER formally declared not to be money in 1971, so I was a BANK. They threatened me saying that the fine was $50,000 up to the full amount of every transaction I failed to report. They said they knew I perhaps did not “realize” I was a BANK and would forego the fines if I would allow them access to audit all my clients. I had no choice. They set up shop in my office. I walked by, noticing that they were pulling out names of those whose transaction were even $5,000, and I asked what was going on. The agent turned to me and said very aggressively, “You have a problem, keep your mouth shut!” The next day in rolled the vans and they took all my business records and began an audit over 3,000 of my clients for the next three years.

That is why I retired. I neither wanted to collect sales taxes on bullion nor be a BANK and report on my clients. Since I was the biggest, they were starting with me. People doing business outside of New Jersey would not have the sales tax problem and the IRS was interested in me because of my size. They would not do the same for small shops. So it was time to get out of the business. Clients wanted the research to continue, so that was spun-off as a new company in 1981.

Now comes Bitcoin. The Judiciary Committee of the United States Senate is currently working on Bill S.1241 that aims to criminalize deliberate concealment of property or the control of a financial account. The bill was submitted in June, and the law would change the definition of “financial account” and “financial institution,” and thus also cover digital currencies and digital exchanges. Who is pushing it? None other than California’s Senator Dianne Feinstein, who maintains that the bill is needed to update existing money laundering laws because of terrorists.

This means that the miners of Bitcoin will become a “bank,” as I was declared. The operators of the trading platform Coinbase were forced by court ruling to notify the IRS of the identity of over 14,000 investors who were trading $20,000 in Bitcoin. Users were affected if their trading volume had exceeded $20,000 at the beginning of 2013 by the end of 2015. So this is NOT a single transaction, but accumulative. The IRS will now “presume” tax evasion. This is what I warned would happen. Been there done that! They can shut down Bitcoin in the blink of an eye by simply defining anyone who is a miner to be a financial institution.

The bill will change the definition of “financial institution” in Section 53412 (a) of Title 31 , United States Code. The text will read:

“An exhibitor, a redeemer or a cashier of prepaid access devices, digital currency or a digital exchanger or a digital currency.”

The regulation will remove the anonymity of Bitcoin and other cryptocurrencies defeating this idea that there is an alternative-financial-universe separate from government.

 

Germany Companies Demand German Tax Cuts


COMMENT: Mr. Armstrong; It is so clear you understand the basic human response that drives the economy. It is amazing why the entire world does not listen to you. Within 24 hours, German companies are demanding tax cuts to compete with the Trump tax cuts. They realize what you have been saying. The USA will suck in all the business with a low corporate tax rate and they cannot compete. As you say, this is not Noble Prize-winning analysis. Perhaps you should get the Noble Prize even if it is so basic an idiot should understand it.

KL from Germany

REPLY: Good point. I suppose what you are really saying is that common sense is actually rare. I am in Europe for the week and requests for meetings have suddenly skyrocketed. Following the approval in the US Senate for the Trump tax reform, alarm bells are blaring from the German economy. The industry association BDI has come out and already warned on Sunday no less that there will be massive disadvantages for European companies. It is fundamental. The more you raise taxes, the higher the unemployment, and the lower the economic growth. But if you are a politician, it puts more money in your pocket. So they act only in self-interest.

Those countries which do not engage in structural reforms in corporate taxation will watch their economies implode over time. It will be a very hard time ahead into 2021.

Why Socialists Prefer to Take Bribes from the Rich than Let the People Get a Tax Break


The tax cut critics are really just morons if not outright evil people who just want to rob anyone who has more than them. Their analysis put the bill’s total price at $1 trillion, contradicting the Republican argument that the measure would essentially pay for itself. They act as if this is somehow different than Obama, who increased spending that went into the pockets of the bankers.

Obama took the budget in his first year from a $459 billion deficit to $1,413 billion and that was OK. His deficits dramatically increased the national debt in his first four years 400% times greater than the Trump tax cut. So why do these people hate tax cuts and constantly point to the rich?

As long as the socialists are taking bribes from the rich and the money goes out the back-door, that is OK because it is not in your face. As soon as we talk about giving the people a DIRECT tax break, then the socialists just cannot stand letting the people actually benefit directly just for once.

The Trump Tax Cut, the Pass-Through, & Multinationals


The Trump Tax Reform is a very major deal. There are seven brackets in today’s individual tax code. The Senate version of the Trump Reform is not a windfall for the rich lowering their bracket from 39.6% to just 38.5%. The seven tax brackets currently are:

10%, 15%, 25%, 28%, 33%, 35%, and 39.6%.

Changes individual income tax brackets will be:

 

– 10% (income up to $9,525 for individuals; up to $19,050 for married couples filing jointly)
– 12% (over $9,525 to $38,700; over $19,050 to $77,400 for couples)
– 22% (over $38,700 to $70,000; over $77,400 to $140,000 for couples)
– 24% (over $70,000 to $160,000; over $140,000 to $320,000 for couples)
– 32% (over $160,000 to $200,000; over $320,000 to $400,000 for couples)
– 35% (over $200,000 to $500,000; over $400,000 to $1 million for couples
– 38.5% (over $500,000; over $1 million for couples)

The House bill, by contrast, only calls for four brackets: 12%, 25%, 35% and 39.6%.

Both the House and Senate bills nearly double the standard deduction. For single filers, the Senate bill increases the standard deduction to $12,000 from $6,350 currently; and it raises it for married couples filing jointly to $24,000 from $12,700. This will be a very big tax benefit for the low end. It will also reduce the number of people who itemize their deductions to get more deductions which complicate matters for most people.

However, currently, you’re allowed to claim a $4,050 personal exemption for yourself, your spouse and each of your dependents. Both the Senate and House bills eliminate that option. Large families with three or more children will probably not benefit from this change. The Average number of people per household in an American family in the United States from 1960 to 2016 consisted of 2.53 people. So for the average household, this will still be a tax cut.

Nevertheless, the Senate bill increases the child tax credit to $2,000 per child, up from $1,000 today, and above the $1,600 proposed in the House bill. This will help ease the pain for bigger families. The age limit will be available for any children under 18, up from today’s under-17 age limit. But it reverts to under 17 again in 2025, a year before the increase is set to expire on the bill. This is crazy since the 17-year old cannot vote and cannot be drafted. Yet, the Senate bill also greatly expanded the eligibility for the credit by raising the ceiling on the income thresholds. Currently, the credit starts to phase out in the higher brackets. For married tax filers, that ceiling was set at $110,000 and the Senate has raised it substantially to $500,000. What does change is the subsidy. If you pay no tax, you get no credit whereas today you get $1,000 even if you pay no taxes. 

For the first time, people taking care of their parents as dependents in old age have not been able to deduct them from the children credits. Now, these people will get a new $500 nonrefundable credit per dependent. Under the House bill, there would be a new $300 per person credit for parents and dependents over 17.

The biggest controversial provision is eliminating the deduction for state income tax. This has been bantered around for decades. It has finally come to reality. I recall in New Jersey when the income tax was put in, the sales promotion was it would cost you nothing because you would be able to deduct it from the federal income tax. This has been a major gripe in Washington for it has unjustly incentified states to spend without limit increasing state income tax at the expense of other states. So this will finally eliminate that deduction and at last, those living in insanely taxed states like New England area and California, will wake up and realize their local government has been squandering the money on themselves. With a rise in population, taxes should decline, but they only keep going up in New York and California without end.

The real estate killer is also here. Up to now, those who itemize deduction have been deducting their property taxes as well as their state and local income or sales taxes. There have been many who called for this to be eliminated for it too is subsidizing reckless local spending with no accountability. Every municipal government has usually all the top management expenses for salaries and pensions. This has driven so many to abuse the legal process transforming their police into revenue agents who no longer protect society, but exploit it for their own salaries with tickets and fines.

While the original Senate bill called for a full repeal of the property tax deduction, it was amended to preserve an itemized deduction for property taxes but only up to $10,000, which is identical to the House measure. Once again, those in big houses or the high taxed states paying more than $10,000 in property taxes will for the first time feel the real cost of their local corruption.

The Senate bill would still let you claim a deduction for the interest you pay on mortgage debt up to $1 million. The House wants to cap the loan limit at $500,000 for new mortgages. Since the House and Senate bills both sharply increase the standard deduction, the percent of filers who claim the mortgage deduction would decline significantly anyway. If this were eliminated along with property taxes, we would see a real estate crash that would make the S&L Crisis look trial run. No doubt, Trump understand that one unlike the Democrats back in the 1980s.

Interestingly, there are some changes that will impact the real estate market and take the froth off the surface. The Senate bill makes two important changes on home-related financing. It disallows interest deductions for home equity loans. And it lengthens the time you must live in a home to get the full tax-free exclusion on your gains when you sell it. Therefore, this will impact the borrow against your home market all over the radio if they tell the consumer the truth that a home equity loan will NOT BE DEDUCTIBLE. Additionally, this will impact the home-flippers as well who have been calling their income capital gains when they are flipping homes as a business.

The Senate kept the Alternative Minimum Tax (AMT), but it raises the amount of income exempt from it. The AMT originally was intended to ensure the richest tax filers pay at least some tax by disallowing many tax breaks at the high end. Now filers making between $200,000 and $1 million today will have to pay the tax. So once again, it is not a windfall for the rich.

The clash between the Senat and the House comes into play really with the death tax. Unlike the House bill, Senate Republicans have not proposed repealing the estate tax. Instead, the Senate proposed to double the exemption levels. Death Taxes have been destructive when it comes to trying to keep a family small business or farm going. The founder has paid taxes their whole life. Then when they die, the government wants to prevent you from saving for your family after you are gone. This has resulted in selling off farmland to pay taxes and the consolidation of farming into the hands of big corporations. Likewise, small businesses are in the same boat.

The other clash between the Senate and the House is medical expenses. Currently, those who itemize their deductions may include their medical and dental expenses that exceed 10% of their adjusted gross income. The House bill eliminates that deduction, while the Senate bill retains it and temporarily lowers that 10% threshold to 7.5% for tax years 2017 and 2018.

Obamacare mandate to buy health insurance is included as a repeal to reduce the taxes on the youth. It is estimated to save money since fewer people who qualify for subsidies if they actually bought insurance. Currently, they pay the Obamacare Tax and are subsidized.

 

The big issue will be with business. The Senate bill, like the House bill, cuts the corporate tax rate to 20% from 35% today. But the 20% rate would not take effect until 2019 under the Senate proposal. The delay would reduce the cost of the measure in the first 10 years. But this will also reduce the likelihood of an economic boom short-term. The Senate Republicans did make it possible for businesses to immediately and entirely expense new equipment for five years. This the morons think will be beneficial to the economy. Not everyone is into heavy equipment. Reducing the corporate tax rate will allow companies to expand and hire more high-end staff rather than buy equipment. They are obviously living still in the old world of heavy manufacture.

Most U.S. businesses are set up as pass-throughs, and not corporations. That means their profits are passed through to the owners, shareholders, and partners, who pay tax on them on their personal returns under ordinary income tax rates. Both the Senate and House bills lower taxes on the business portion of a filer’s pass-through income. The House bill dropped the top income tax rate to 25% from 39.6%, while prohibiting anyone providing professional services, which will include lawyers and accountants. The professional services groups will not be allowed to take advantage of the lower rate. It also phases in a lower rate of 9% for businesses that earn less than $75,000.

The Senate bill lowers taxes on filers who pass-through their business earnings by letting them deduct 23% of their income, up from 17.4% originally. The 23% deduction would be prohibited for anyone in a service business — except those with taxable incomes under $500,000 if married ($250,000 if single). There is a carve-out. Should the owner or partner of a pass-through operation also draws a salary from the business, that money would be subject to ordinary income tax rates.

In order to curb people from recharacterizing their wage income as business profits to get the benefit of the pass-through deduction, the Senate bill would automatically limit the deduction to half of the W-2 wages of the pass-through entity or its share to the individual taxpayer. The W-2 rule would not apply, however, if the filer’s taxable income is under $500,000 if married, $250,000 if single.

The big change will be how the US-based multinational corporations will be taxed. Currently, U.S. companies pay taxes on all their profits, regardless of where the income is earned. They’re allowed to defer paying U.S. tax on their foreign profits until they bring the money home. This is why there is such a vast hoard of about $3 trillion overseas.

Without question, the “worldwide” tax system puts American businesses and citizens at a huge disadvantage when other nations (except Japan) tax income earned in the place you are domiciled. The theory is fair. Taxes are supposed to be for your “fair share” of services provided by the government. If you are not living there, then what is your fair share of services that you do not use? ZERO! Foreign competitors come from countries that do not tax worldwide income and they can compete to get projects to build dams in China and beat American firms every time. I testified before that very issue in front of the House Ways and Means Committee back in the 1990s.

The Supreme Court in 2015 held that the Maryland income tax was unconstitutional because it did not allow a resident or corporation to deduct taxes paid to other territories on its income derived out of the state (See: COMPTROLLER OF THE TREASURY OF MARYLAND v. WYNNE ET UX., 575 US _ (2015)). The Supreme Court previously held in  Central Greyhound Lines, Inc. v. Mealey, 334 US 653, 662 (1948), which invalidated state tax schemes that might lead to double taxation of out-of-state income in violation of the Commerce Clause.

The entire problem stems from the fact that Congress never defined “income” in the legislation. That left the door open for the Supreme Court to determine what was and what was not income. As a result, the Court decided in Eisner v. Macomber 252 US 189 (1920) to address that question. The starting point was their reference to the dictionary. “Income may be defined as the gain derived from capital, from labor, or from both combined, provided it be understood to include profit gained through a sale or conversion of capital assets.” The Court then went into a lengthy explanation as to how this definition applies to a stock dividend which the case was all about. In the end, the Court decided that the stock dividend was not taxable because it was merely a book adjustment and was not “severable” from the underlying stock. In other words, income would not be realized until the stock itself was sold.

After the Eisner decision, what emerged was a new question. The next challenge reached a climax in 1924 when the Supreme Court ruled in COOK v. TAIT, 265 U.S. 47 (1924) brought by a U.S. citizen living in Mexico that taxing non-resident citizens on their global income was indeed constitutional. This is the paragraph that has severely ignored the foundation of territorial jurisdiction recognized by the entire world.

“The contention was rejected that a citizen’s property without the limits of the United States derives no benefit from the United States. The contention, it was said, came from the confusion of thought in ‘mistaking the scope and extent of the sovereign power of the United States as a nation and its relations to its citizens and their relation to it.’ And that power in its scope and extent, it was decided, is based on the presumption that government by its very nature benefits the citizen and his property wherever found, and that opposition to it holds on to citizenship while it ‘belittles and destroys its advantages and blessings by denying the possession by government of an essential power required to make citizenship completely beneficial.’ In other words, the principle was declared that the government, by its very nature, benefits the citizen and his property wherever found, and therefore has the power to make the benefit complete. Or, to express it another way, the basis of the power to tax was not and cannot be made dependent upon the situs of the property in all cases, it being in or out of the United States, nor was not and cannot be made dependent upon the domicile of the citizen, that being in or out of the United States, but upon his relation as citizen to the United States and the relation of the latter to him as citizen. The consequence of the relations is that the native citizen who is taxed may have domicile, and the property from which his income is derived may have situs, in a foreign country and the tax be legal-the government having power to impose the tax.”

This holding that a citizen of the United States is forever an indentured servant of the country and can never escape taxes even if they left the country permanently. This defies every principle of the Constitution and the American Revolution for previously, if you were British and killed someone in Paris, the French could not prosecute you because you were the “property” of the king. They sent you back in chains and told the English king what you did and beg his vengeance. The ruling in Cook goes against territorial jurisdiction and is inconsistent with every other ruling on jurisdiction since inception. But once it is concerning taxes, the Supreme Court reverted to you are the property of the state.

With that Eisner definition of income, was any income not clearly covered by its terms deemed to be nontaxable? In Helvering vBruun, 309 U.S. 461 (1940), the Court addressed the question of whether or not a lessor recognizes income from the receipt of a leasehold improvement made by a lessee during the lease when the improvement reverts to the lessor at the end of the lease. The Court ruled that the value of the improvement was taxable, noting that NOT every gain need be realized in cash to be taxable. There was a clear increase in the taxpayer’s wealth, and this increase did not have to be severed to recognize such increase as income for federal income tax purposes. This ruling could wipe out profits in BitCoin since it is marketed as a currency and that means it would be taxable even if you did not cash-in BitCoin. Then in Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955), the Court severely qualified Eisner ruling that punitive damages recovered under a violation of anti-trust laws were included in gross income.

The Senate bill proposes changes to move the U.S. to a territorial system. which is long overdue. Congress NEVER authorized worldwide income taxes. That was the Supreme Court which simply ruled that they never said no. It also includes a number of anti-abuse provisions to prevent corporations with foreign profits from gaming the system. Companies will be required to pay a one-time low tax rate on their existing overseas profits — 14.5% on cash assets and 7.5% on non-cash assets such as equipment abroad in which profits were invested. This is slightly higher than the 14% and 7% rates in the House bill.

 

While the Trump Tax Reform will certainly not benefit the rich, the critics who simply argue the national debt will rise are just arguing nonsense. The national debt will continually rise because there is NEVER a balanced budget and there is NEVER any intent to ever pay off the debt. Up to now, the benefits go to the rich who donate big bucks to both parties and never to small business who do not lobby or to the average person. This is a much fairer way of dealing with the issues and of course, the Democrats will vote against it simply because they like the high taxes and handout tax exceptions behind the curtain for donations and law revisions like Hillary promising the bankers the moon.