Poll

Are you in favor of the standard deduction increasing to $24,000?

Yes
No
Maybe.  I own a home and donate a decent amount and now there is little tax incentive to do so.

Author Topic: Proposed increase of standard deduction to $24,000 - your thoughts?  (Read 3830 times)

J Boogie

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Hey team,

Does anyone feel strongly about this?  I like to pay less in taxes and don't like to do admin work, so I'm for it.  I think it levels the playing field a bit between those who have sophisticated tax avoidance strategies and those who do not, so it's good in that respect.  I am wary of totally lowering taxes everywhere though as I am concerned about the financial well being of the US gov. 

Also, I think the homeowner's interest deduction shouldn't exist in the first place.  We are not allowed to deduct countless other basic living expenses, and plenty of people live and pay interest on houses that go far beyond what could be considered a basic living expense.

Anyone have any hot takes on this one?




solon

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #1 on: September 28, 2017, 02:49:00 PM »
The doubling of the standard deduction is just one item in a giant tax plan. It's tough to estimate the value of the new standard deduction without also estimating the value of the rest of the tax plan. Unfortunately, the tax plan didn't give very many details, just a lot of promises that it would be really good. :( I'm opposed to the tax plan as it has been revealed so far.

Ocinfo

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #2 on: September 28, 2017, 02:56:30 PM »
I think it is far less of a big deal since they also get rid of the personal exemptions.

I also think people making under $100k are going to see a modest tax cut unless they have several kids. Those making $100k to $300k are going to be the sacrificial lambs. And those $300k+ will get a big cut.


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scantee

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #3 on: September 28, 2017, 03:26:43 PM »
I think it is far less of a big deal since they also get rid of the personal exemptions.

I also think people making under $100k are going to see a modest tax cut unless they have several kids. Those making $100k to $300k are going to be the sacrificial lambs. And those $300k+ will get a big cut.


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This plan won't pass as is so I'm not going to get too worked up about it at this point. From everything I'v read so far, this is the correct take. Since I'm in that $100-300K group, as I suspect many here are, it sure looks like I'll be paying more in taxes under this plan. I would be fine with that, if it meant my taxes were going to support those in need or to pay for some new universal benefit. Instead, it sure seems like that increase will be used almost exclusively to decrease the tax burden of the already rich.

 

SoundFuture

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #4 on: September 28, 2017, 03:46:04 PM »
I'm a fan of an increased standard of deduction as a standalone item. It means almost nothing to the richest people, but would be a huge boon to middle and subsistence level people. Anything that sets up a reverse tax type policy for the poor and lowest earners is a good thing and inline with good economic theory.

In terms of the broader tax plan, the fourth bracket in the footnotes of the plan that "could" be implemented is the only way to salvage it by getting rid of the 1% tax cut (how about we add that bracket and round the existing 39.6% up to somewhere between 40% and 45%).

I just really wish it had a VAT to offset the reduced corporate tax so we could be more competitive with manufacturing. Yeah VAT's are regressive, but they're effective. The 20% is too low to pay for itself with both growth and getting rid of deductions.

A Definite Beta Guy

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #5 on: September 28, 2017, 03:59:58 PM »
I'm about 90% confident this increases my tax burden, so I'm definitely in opposition, lol.

I'm double-checking my returns to be sure, but I'm pretty confident my tax returns under this new plan would be around $27k last year, and I think my tax burden last year was closer to $20k.

Financial.Velociraptor

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #6 on: September 28, 2017, 04:06:04 PM »
Back of the napkin, I get a small tax cut from this.  It is trivial though.  Healthcare policy is far more important to my future financial wellbeing.
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BlueMR2

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #7 on: September 28, 2017, 04:11:19 PM »
It'd be a bonus to me.  I've never even been close to being worthwhile to itemize before, so I always take the standard deduction.

However, in the long run I have to agree with others.  It's not terribly important either way when compared to the massive expenses of healthcare/medical insurance...

v8rx7guy

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #8 on: September 28, 2017, 04:35:03 PM »
It's a good idea, but it's not all that great if it's in lieu of exemptions.

sokoloff

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #9 on: September 28, 2017, 08:02:33 PM »
Also, I think the homeowner's interest deduction shouldn't exist in the first place.  We are not allowed to deduct countless other basic living expenses, and plenty of people live and pay interest on houses that go far beyond what could be considered a basic living expense.
The mortgage interest deduction (MID) serves to put the purchase of owner-occupied housing on a more equal playing field with commercial landlord owned housing. How so? When a landlord buys a house to let, the interest on the loan is deductible as it's in service of an income generating business activity. If a landlord's interest is deductible, but an owner-occupant's interest is not, the tax code favors buy-to-let.

When you hear people arguing that more people should own, it's a good way to build equity (or at least a forced savings vehicle), that some of the reasons for the household wealth disparity across various groups is home ownership rates, etc, the elimination of the MID probably works directly against increasing home ownership.

I think there are valid public policy reasons to support home ownership at least to the extent of putting such purchases on a level playing field with landlords who might be interested in bidding on the same property.

JLee

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #10 on: September 28, 2017, 10:55:08 PM »
I think it is far less of a big deal since they also get rid of the personal exemptions.

I also think people making under $100k are going to see a modest tax cut unless they have several kids. Those making $100k to $300k are going to be the sacrificial lambs. And those $300k+ will get a big cut.


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This plan won't pass as is so I'm not going to get too worked up about it at this point. From everything I'v read so far, this is the correct take. Since I'm in that $100-300K group, as I suspect many here are, it sure looks like I'll be paying more in taxes under this plan. I would be fine with that, if it meant my taxes were going to support those in need or to pay for some new universal benefit. Instead, it sure seems like that increase will be used almost exclusively to decrease the tax burden of the already rich.

The lower income red states would be happy because their taxes go down...the ultra-high income and political donors would be happy because their taxes go down...and everybody else gets screwed!  Sounds about right.

J Boogie

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #11 on: September 29, 2017, 08:37:16 AM »
Also, I think the homeowner's interest deduction shouldn't exist in the first place.  We are not allowed to deduct countless other basic living expenses, and plenty of people live and pay interest on houses that go far beyond what could be considered a basic living expense.
The mortgage interest deduction (MID) serves to put the purchase of owner-occupied housing on a more equal playing field with commercial landlord owned housing. How so? When a landlord buys a house to let, the interest on the loan is deductible as it's in service of an income generating business activity. If a landlord's interest is deductible, but an owner-occupant's interest is not, the tax code favors buy-to-let.

When you hear people arguing that more people should own, it's a good way to build equity (or at least a forced savings vehicle), that some of the reasons for the household wealth disparity across various groups is home ownership rates, etc, the elimination of the MID probably works directly against increasing home ownership.

I think there are valid public policy reasons to support home ownership at least to the extent of putting such purchases on a level playing field with landlords who might be interested in bidding on the same property.

Sounds like we've got two different angles you're taking here to argue in favor of the deduction, so I'll address them separately.

1 - Giving homeowners parity with landlords and real estate holding companies.

As well all know businesses deduct all expenses from their revenue to arrive at their net income, which is what gets taxed.  We don't get to deduct other basic expenses from our income, even necessities like food and clothing.  I believe offering households $24,000 as a standard deduction levels that playing field quite well (it's actually quite close to the MMM budget which we can generally be thought of as standard base living expenses).  The only families who would be better off deducting their interest would be ones who have a mortgage on a luxury property - and there's no good reason to give them tax incentives to live in luxury.


Or is there?

2 - Encouraging/incentivizing homeownership is good for the economy and society.

I would agree that homeownership is good for the economy and society.  I just don't think the tax deduction factors into the decision to buy as much as other factors (family growth, desire to build equity, school districts, dissatisfied with renting, interest rates, increased job security, etc).

I don't have a big problem with incentivizing it, except that I find it unfair to renters - who are often disadvantaged economically in the first place.  Business are able to deduct their rent (if they don't own real estate) or their interest (if they do), but homeowners are only able to deduct their interest if they own.  When I used to rent, I remember getting a letter from my landlord that allowed me to deduct a couple hundred off my taxes.  Woo hoo.  I think it should have been 100% of the rent I paid, or nothing (if we had been using a $24,000 standard deduction.)





sol

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #12 on: September 29, 2017, 08:44:44 AM »
I'm far more concerned with the hypothetical (and currently still vague) changes to the child tax credit.

At $1k each, three kids are worth as much as $30k in additional standard deduction (because they erase the first $3k of your tax liability in the 10% bracket).  Doubling the child tax credit, as some have proposed, would essentially mean that any mustachian family with kids would no longer pay any federal income tax.
« Last Edit: September 29, 2017, 10:14:54 AM by sol »

sokoloff

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #13 on: September 29, 2017, 08:56:14 AM »
I believe offering households $24,000 as a standard deduction levels that playing field quite well (it's actually quite close to the MMM budget which we can generally be thought of as standard base living expenses).  The only families who would be better off deducting their interest would be ones who have a mortgage on a luxury property - and there's no good reason to give them tax incentives to live in luxury.
I agree with most of what you saiid in your post, but I don't agree that anyone who would have more than the standard deduction is necessarily living in luxury. I pay more than the current standard deduction in state taxes before the first dollar of MID.

Even without that, $24K in interest represents about $600K in mortgage balance at 4%. There are places in the country where that is well below "luxury property". You could be into $1MM for a non-luxury condo in Cambridge, MA and into $1.5-2MM for a non-luxury condo in Silicon Valley. That's where the rent vs buy difference in taxes shows up.

Edit: I also pay $12K in real estate taxes which "fills up" the standard deduction as well. Most of the non-luxury places will be $8K or more in property taxes.
« Last Edit: September 29, 2017, 09:00:29 AM by sokoloff »

Timodeus

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #14 on: September 29, 2017, 09:19:04 AM »
Looking at this one piece (standard deduction to 24,000, no personal exemptions), it raises my family's taxes a small margin. Our current standard deduction is 12,700 plus 3 personal exemptions (12,150) equals a current deduction of $24,850, $850 more than the new "middle class tax cut" is promising. I'll pass.

ZiziPB

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #15 on: September 29, 2017, 09:24:48 AM »
I live in high income tax and high RE tax state but never benefited from being able to deduct them since AMT disallows these deductions.  Yet I still itemized because the mortgage interest and charitable donations were allowed to be deducted under the AMT.  The proposal gets rid of AMT...  So I'm really not sure how this current proposal would affect me.  From my perspective, I'd be happy to get rid of AMT because of how complex it is.  If the system can be simplified, I'm all for it, even if it results in slightly higher taxes for me.  I'm sick and tired of the guessing game I have to play every year with ensuring that I'm withholding at the right level (still not there....).  I'm also sick and tired of how ridiculously complicated and long my tax return is.  I only have income from normal wages and some capital gains and dividends - it shouldn't be that difficult!



v8rx7guy

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #16 on: September 29, 2017, 12:09:28 PM »
Looking at this one piece (standard deduction to 24,000, no personal exemptions), it raises my family's taxes a small margin. Our current standard deduction is 12,700 plus 3 personal exemptions (12,150) equals a current deduction of $24,850, $850 more than the new "middle class tax cut" is promising. I'll pass.

Just to be clear, your taxes owed  would not go up by $850, you would just owe taxes on $850 additional dollars.  Also, it sounds like something is also in store for improving the Child Tax Credit, so you may actually still find yourself better off, depending on what that "something" is (probably raising the phaseout level).  And finally, you also don't know where the brackets will land.  For instance, if they made the 12% bracket go from $0 to $75,000 , vs. 10% on the first $18,550 and 15% on the next $56,450, the average person would owe about $1,322 less on their first $75K.  If I am doing my math correctly.  For an average mustachian that can get their AGI down to $75K, they may benefit nicely.  What I am trying to say is that you seem to be dismissing this tax cut without knowing the full details.
« Last Edit: September 29, 2017, 12:52:55 PM by v8rx7guy »

Michael in ABQ

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #17 on: September 29, 2017, 02:21:49 PM »
I'm far more concerned with the hypothetical (and currently still vague) changes to the child tax credit.

At $1k each, three kids are worth as much as $30k in additional standard deduction (because they erase the first $3k of your tax liability in the 10% bracket).  Doubling the child tax credit, as some have proposed, would essentially mean that any mustachian family with kids would no longer pay any federal income tax.

Five kids here and I pay essentially no income taxes despite a household income well above the median for the country.

A big part of that is the extra exemptions and child tax credits. I've always used the standard deduction as we don't have a mortgage and our itemized deductions wouldn't come close to the standard deduction. Going from $12.7k to $24k would help me, but not if they also phased out exemptions. Seven exemptions at $4,050 each is $28,350. Add in the standard deduction of $12,700 and that's $41,050 of tax-free income (well, income tax free at least as there's still FICA). For a household of 3 it's basically a wash as their current standard deduction and exemptions would total $24,850.

sol

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #18 on: September 29, 2017, 03:44:34 PM »

Five kids here and I pay essentially no income taxes despite a household income well above the median for the country.

A big part of that is the extra exemptions and child tax credits. I've always used the standard deduction as we don't have a mortgage and our itemized deductions wouldn't come close to the standard deduction. Going from $12.7k to $24k would help me, but not if they also phased out exemptions. Seven exemptions at $4,050 each is $28,350. Add in the standard deduction of $12,700 and that's $41,050 of tax-free income (well, income tax free at least as there's still FICA). For a household of 3 it's basically a wash as their current standard deduction and exemptions would total $24,850.

That's the meat of Trump's tax proposal.  For the poorest families they receive no benefit because they already pay zero.  For low-middle incomes, small families will pay a bit less and large families will pay a bit more.  For high-middle income families, everyone pays more.  For high income families, everyone pays less.

It's the same republican tax plan we've seen twenty times before; a tax cut for the very rich paid for by raising taxes on the middle to upper middle class (and usually cutting welfare benefits to the poor; watch the EITC under the new plan). 

Notice the exact parallel with their health care proposals.  Tax cuts for the rich, funded by making the lower brackets pay more, is the same thing as repealing the ACA surtax and reducing ACA subsidies for low income people.  They just changed the dollar thresholds of who pays for whose benefits so that more middle class people pay for tax breaks for even wealthier people.  The ACA surtax looks down right egalitarian by comparison.

But what choice do they really have?  If you want to fund tax breaks on the very wealthiest citizens, that money has to come from somewhere and there just aren't enough pennies in poor people's pockets to pay for them.  They HAVE to tax the middle class more in order to cut the upper brackets like this.
« Last Edit: September 29, 2017, 03:51:04 PM by sol »

JLee

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #19 on: September 29, 2017, 03:48:52 PM »
Looking at this one piece (standard deduction to 24,000, no personal exemptions), it raises my family's taxes a small margin. Our current standard deduction is 12,700 plus 3 personal exemptions (12,150) equals a current deduction of $24,850, $850 more than the new "middle class tax cut" is promising. I'll pass.

Just to be clear, your taxes owed  would not go up by $850, you would just owe taxes on $850 additional dollars.  Also, it sounds like something is also in store for improving the Child Tax Credit, so you may actually still find yourself better off, depending on what that "something" is (probably raising the phaseout level).  And finally, you also don't know where the brackets will land.  For instance, if they made the 12% bracket go from $0 to $75,000 , vs. 10% on the first $18,550 and 15% on the next $56,450, the average person would owe about $1,322 less on their first $75K.  If I am doing my math correctly.  For an average mustachian that can get their AGI down to $75K, they may benefit nicely.  What I am trying to say is that you seem to be dismissing this tax cut without knowing the full details.

http://www.taxpolicycenter.org/publications/preliminary-analysis-unified-framework

Quote
ABSTRACT

The Tax Policy Center has produced preliminary estimates of the potential impact proposals included in the “Unified Framework for Fixing our Broken Tax Code.” We find they would reduce federal revenue by $2.4 trillion over ten years and $3.2 trillion over the second decade (not including any dynamic feedback). In 2018, all income groups would see their average taxes fall, but some taxpayers in each group would face tax increases. Those with the very highest incomes would receive the biggest tax cuts. The tax cuts are smaller as a percentage of income in 2027, and taxpayers in the 80th to 95th income percentiles would, on average, experience a tax increase.

We'll see.  If I was in the top 0.1% I'd probably see a six figure tax cut. Alas, I am not...just like 99.9% of everyone else.

Michael in ABQ

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #20 on: September 29, 2017, 05:33:21 PM »
I think raising the standard deduction and eliminating the mortgage interest deduction would go a long way towards simplifying the tax code for the majority of people. It's basically a subsidy for HCOL areas and perhaps it might actually causes home prices to drop such that they become slightly more affordable in those areas.

I predict that nothing much will happen. Meaningful change to the tax code occurs maybe once a generation and even then it's simply tinkering around the edges. The underlying structure and maze of deductions and credits and carve outs for special interests and social engineering will probably not disappear in my lifetime. I can wish for a simple flat tax or something with a single standard deduction and little or no other deductions or credits but there are literally hundreds of thousands of people whose livelihood rests on having the tax code as complicated as it is and that's a tough thing to overcome. Plus, how else would Congress spend their time if not fiddling with the tax code to earn bribes, I mean campaign contributions, from lobbyists and special interests.

secondcor521

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #21 on: September 29, 2017, 05:41:19 PM »
I'm far more concerned with the hypothetical (and currently still vague) changes to the child tax credit.

At $1k each, three kids are worth as much as $30k in additional standard deduction (because they erase the first $3k of your tax liability in the 10% bracket).  Doubling the child tax credit, as some have proposed, would essentially mean that any mustachian family with kids would no longer pay any federal income tax.

The only statements I have seen that I consider reliable about the child tax credit is that it will remain in place as is or there may be an increase of $500 to $1500 per child.  Sorry, I don't have any cites on that at the moment.
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teen persuasion

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #22 on: September 30, 2017, 07:49:59 AM »

Five kids here and I pay essentially no income taxes despite a household income well above the median for the country.

A big part of that is the extra exemptions and child tax credits. I've always used the standard deduction as we don't have a mortgage and our itemized deductions wouldn't come close to the standard deduction. Going from $12.7k to $24k would help me, but not if they also phased out exemptions. Seven exemptions at $4,050 each is $28,350. Add in the standard deduction of $12,700 and that's $41,050 of tax-free income (well, income tax free at least as there's still FICA). For a household of 3 it's basically a wash as their current standard deduction and exemptions would total $24,850.

That's the meat of Trump's tax proposal.  For the poorest families they receive no benefit because they already pay zero.  For low-middle incomes, small families will pay a bit less and large families will pay a bit more.  For high-middle income families, everyone pays more.  For high income families, everyone pays less.

It's the same republican tax plan we've seen twenty times before; a tax cut for the very rich paid for by raising taxes on the middle to upper middle class (and usually cutting welfare benefits to the poor; watch the EITC under the new plan).

Notice the exact parallel with their health care proposals.  Tax cuts for the rich, funded by making the lower brackets pay more, is the same thing as repealing the ACA surtax and reducing ACA subsidies for low income people.  They just changed the dollar thresholds of who pays for whose benefits so that more middle class people pay for tax breaks for even wealthier people.  The ACA surtax looks down right egalitarian by comparison.

But what choice do they really have?  If you want to fund tax breaks on the very wealthiest citizens, that money has to come from somewhere and there just aren't enough pennies in poor people's pockets to pay for them.  They HAVE to tax the middle class more in order to cut the upper brackets like this.

I am watching EITC; I'm not sure whether no mention of it is good (not under consideration), or bad (hiding the true targets).   Changing EITC would be a huge effective tax increase for us - I've used it for years to pay down our mortgage, and more recently to fund Roth IRAs for us.

Milizard

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #23 on: September 30, 2017, 08:44:48 AM »
I don't know why there is additional commentary after the "Maybe" option. 

IMO, there is not enough information to make an informed decision here.  I agree with simplifying the tax code.  However, there were millions of chicken littles running around about the deficit just a year ago.  This is almost certain to increase the deficit, so where have all the chicken littles gone?  IMO, increasing the deficit in order to give the wealthy a tax cut is insanity.  It would be followed with small increases everywhere else for lesser well-to-do people, and probably large cuts in services.

DeanHedlund

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #24 on: October 01, 2017, 03:29:53 PM »
The proposal of the new standard deduction for single individual is$12,000? That is a far cry to my current itemized deduction. This is also an unfair punishment to the unmarried.

Paul der Krake

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #25 on: October 01, 2017, 03:52:05 PM »
In general, I'm in favor of larger standard deductions, in no small part because I'm in a high-income household that doesn't itemize.

Threads like these are excellent examples of why tax reform is damn near impossible. Everybody has their own interests to defend, and some will get shafted. Mnuchin is getting trounced in the press for saying he can't promise nobody's taxes will go up- but that's the truth. This is why any attempt at reform always ends up being nibbling at the edges.


gerardc

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #26 on: October 01, 2017, 04:39:10 PM »
Threads like these are excellent examples of why tax reform is damn near impossible. Everybody has their own interests to defend, and some will get shafted.

A tax reform is not impossible, it's just that looking at special interests in isolation is useless. You need data to look at the big picture and optimize a single global objective for the whole population.

Paul der Krake

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #27 on: October 01, 2017, 04:46:32 PM »
Threads like these are excellent examples of why tax reform is damn near impossible. Everybody has their own interests to defend, and some will get shafted.

A tax reform is not impossible, it's just that looking at special interests in isolation is useless. You need data to look at the big picture and optimize a single global objective for the whole population.
Sure, but then there the whole political system that's set up to reward opponents who attack lawmakers for raising taxes on <insert group here>.

Blonde Lawyer

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #28 on: October 01, 2017, 05:04:34 PM »
Just from a policy perspective, if we are questioning the home interest deduction, what about the child tax credit? Why exactly do we have the child tax credit? Is it because people with children have less discretionary income? Is it to promote more people having children? Are those children going to be a burden (using tax payer funded resources?) or a boon (not using and instead contributing as tax paying citizens)?

ender

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #29 on: October 01, 2017, 06:37:34 PM »
I think this would cause our taxes to go up because we are normally itemized around $20k/year.


Michael in ABQ

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #30 on: October 01, 2017, 09:33:44 PM »
Just from a policy perspective, if we are questioning the home interest deduction, what about the child tax credit? Why exactly do we have the child tax credit? Is it because people with children have less discretionary income? Is it to promote more people having children? Are those children going to be a burden (using tax payer funded resources?) or a boon (not using and instead contributing as tax paying citizens)?

Some countries are starting to pay citizens to have children as their population growth is below the 2.1 children per couple just needed to maintain a stable population. If everybody started having just one child, or none, Social Security and the rest of the intergenerational wealth transfers would explode much faster.

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #31 on: October 02, 2017, 12:06:08 AM »
As a single file w/ standard deduction on about 200k it will be a bit of a tax cut to me, a big surprise because the pre-election version actually increased my tax by 4k.

I support it as I feel it levels the field with most in my bracket getting huge deductions.

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A Definite Beta Guy

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #32 on: October 02, 2017, 08:13:36 AM »
Just from a policy perspective, if we are questioning the home interest deduction, what about the child tax credit? Why exactly do we have the child tax credit? Is it because people with children have less discretionary income? Is it to promote more people having children? Are those children going to be a burden (using tax payer funded resources?) or a boon (not using and instead contributing as tax paying citizens)?
Well, we have the child tax credit because it's politically acceptable welfare spending. Not everyone is on board with it. See Rand Paul in the primaries attacking Rubio over his support of an expanded child tax credit.

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #33 on: October 02, 2017, 08:19:47 AM »
I'm in favor of any kind of tax cut.

That said, I'm more in favor of
1) ending convoluted tax schemes as 'incentives' to do what big Brother has decided is good for you (pretty sick when you think about it) 
2) ending incoming tax, because it is a tax on creation/productivity (again, sick and bass-ackwards)
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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #34 on: October 02, 2017, 09:35:36 AM »
I voted no based upon everything related to the increase in the proposal.  Married with 2 kids so the proposal would lose me $4,800 in deductions (2016 numbers) right away because of the elimination of the exemptions. I don't itemize so the eliminations of those wouldn't effect me.

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #35 on: October 02, 2017, 09:50:48 AM »
Generally, I like this plan. But the elimination of the state tax deduction bothers me. It's not just that I live in California where the state tax is highest (I'm pretty sure... top 3 at least). It just seems a little weird to be taxed on my taxes essentially. I can see how it bothers people in no income state states that this deduction exists. I mean it's a little like not pulling our weight for federal taxes, but being taxed on tax feels like crap. So win some lose some?
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ixtap

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #36 on: October 02, 2017, 09:56:48 AM »
Generally, I like this plan. But the elimination of the state tax deduction bothers me. It's not just that I live in California where the state tax is highest (I'm pretty sure... top 3 at least). It just seems a little weird to be taxed on my taxes essentially. I can see how it bothers people in no income state states that this deduction exists. I mean it's a little like not pulling our weight for federal taxes, but being taxed on tax feels like crap. So win some lose some?

Even with the deduction, CA sends more to the federal government than it gets back.

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #37 on: October 02, 2017, 09:57:28 AM »
Generally, I like this plan. But the elimination of the state tax deduction bothers me. It's not just that I live in California where the state tax is highest (I'm pretty sure... top 3 at least). It just seems a little weird to be taxed on my taxes essentially. I can see how it bothers people in no income state states that this deduction exists. I mean it's a little like not pulling our weight for federal taxes, but being taxed on tax feels like crap. So win some lose some?

But those people can deduct sales tax.  It's one or the other.

My biggest issue is that they seem to keep pushing that this is horrible for the rich. Which is absolute BS. Why does anyone buy that?
I think I'm right in that upper middle who it is going to cost more for.  And you know what, I think, in theory, I'm rich. So maybe I'm the rich it is horrible for. But certainly not for the upper-echelon rich. The millionaires and billionaires are going to be banking on this new tax structure. Trump can say all he wants it doesn't benefit him. Why anyone believes it, I do not understand.

I also don't understand how our country can afford this- but running the country into the group seems to be the goal of the administration, so it is just another step.

Edit: For the record, I'm fine with my taxes going up. I'm not fine with them going up so that people with 10x or 100x more income and/or wealth than me can get a break.
« Last Edit: October 02, 2017, 10:02:55 AM by iowajes »

RidetheRain

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #38 on: October 02, 2017, 09:58:52 AM »
Generally, I like this plan. But the elimination of the state tax deduction bothers me. It's not just that I live in California where the state tax is highest (I'm pretty sure... top 3 at least). It just seems a little weird to be taxed on my taxes essentially. I can see how it bothers people in no income state states that this deduction exists. I mean it's a little like not pulling our weight for federal taxes, but being taxed on tax feels like crap. So win some lose some?

But those people can deduct sales tax.  It's one or the other.
Well... I can deduct sales tax too. It's pretty high around me too. Maybe it evens out. It's hard to say.
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GuitarStv

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #39 on: October 02, 2017, 09:59:14 AM »
I'm in favor of any kind of tax cut.

That said, I'm more in favor of
1) ending convoluted tax schemes as 'incentives' to do what big Brother has decided is good for you (pretty sick when you think about it) 
2) ending incoming tax, because it is a tax on creation/productivity (again, sick and bass-ackwards)

You believe that a consumption tax would be better?

RidetheRain

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #40 on: October 02, 2017, 10:07:29 AM »
I'm in favor of any kind of tax cut.

That said, I'm more in favor of
1) ending convoluted tax schemes as 'incentives' to do what big Brother has decided is good for you (pretty sick when you think about it) 
2) ending incoming tax, because it is a tax on creation/productivity (again, sick and bass-ackwards)

You believe that a consumption tax would be better?

The problem with consumption taxes is that there needs to be a good distinction between needs and luxuries. It can get a little messy for the poor if you start doing that without reasonable distinctions. Right now those differences are a bit arbitrary.
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Laura33

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #41 on: October 02, 2017, 10:10:30 AM »
Definitely against.  I would benefit. 

I am particularly annoyed at how it is being sold.  I turned on Fox this AM (the only one advertising "news" instead of morning shows) looking for info on the Las Vegas shooting, and stumbled into their description of the tax plan.  The two things that were mentioned were raising the standard deduction and reducing the number of brackets; they didn't even mention eliminating the exemptions.  But, hey, great way to build support for the plan among the very people whom the plan is going to screw over.

But I'm not spending much time thinking about it, because from all I've heard it's DOA.
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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #42 on: October 02, 2017, 10:17:38 AM »
I also don't understand how the "reduce the brackets to 3" is being sold as the most brilliant thing to ever happen.
Who cares how many brackets there are? That is like the least difficult part of the process. 

But it seems to sell well among the "I don't want a raise because then I get bumped into the next tax bracket and lose money" crowd.

I'm learning again and again that the Republican base seems to be remarkably good at voting against their own self-interest.

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #43 on: October 02, 2017, 10:21:55 AM »
I'm learning again and again that the Republican base seems to be remarkably good at voting against their own self-interest.

I don't want to take away from this discussion, but I think you might benefit from something someone once told me. Oddly it was an explanation of a Dem position, but it's still valid:

"I don't vote for the benefit of myself. I vote for what is right and what is fair."

There are certainly plenty of Republicans that this is fair or right even if it's against their own interests. Whether you agree or not and whether they are right or not it's a laudable trait.
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iowajes

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #44 on: October 02, 2017, 10:29:18 AM »
I'm learning again and again that the Republican base seems to be remarkably good at voting against their own self-interest.

I don't want to take away from this discussion, but I think you might benefit from something someone once told me. Oddly it was an explanation of a Dem position, but it's still valid:

"I don't vote for the benefit of myself. I vote for what is right and what is fair."

There are certainly plenty of Republicans that this is fair or right even if it's against their own interests. Whether you agree or not and whether they are right or not it's a laudable trait.

If that is what they think they are doing, that's fabulous.  But that isn't my experience with friends and family members. Most think they are voting in their own self-interest. They want "fiscal responsibility", and so they vote Republican. (And a couple other points that take this thread much to political, and away from tax discussion.)

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #45 on: October 02, 2017, 04:06:41 PM »
I'm in favor of any kind of tax cut.

That said, I'm more in favor of
1) ending convoluted tax schemes as 'incentives' to do what big Brother has decided is good for you (pretty sick when you think about it) 
2) ending incoming tax, because it is a tax on creation/productivity (again, sick and bass-ackwards)

You believe that a consumption tax would be better?

The problem with consumption taxes is that there needs to be a good distinction between needs and luxuries. It can get a little messy for the poor if you start doing that without reasonable distinctions. Right now those differences are a bit arbitrary.

I haven't looked at the Fair Tax in a while but I recall they had a rebate that basically made the first $20-30k of spending tax free. Essentially enough to cover the essentials for most people, especially anyone living at or near the poverty line.

I would be in favor of anything that was more simple and less prone to manipulation than the current system. The sheer amount spent on compliance and gaming the system is just another deadweight cost on the economy. Fair Tax or flat tax are fine with me. Taxes are theft but if the government is going to steal our money they could at least do it in a way that focuses on revenue generation instead of social engineering.

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #46 on: October 02, 2017, 04:15:13 PM »
Yes.  I paid off my mortgage and don't itemize.  It could also put some downward pressure on housing prices since it will decrease the incentive for massive mortgages.  Will also put pressure on politicians to do something about burgeoning property taxes.

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #47 on: October 02, 2017, 04:16:29 PM »
Generally, I like this plan. But the elimination of the state tax deduction bothers me. It's not just that I live in California where the state tax is highest (I'm pretty sure... top 3 at least). It just seems a little weird to be taxed on my taxes essentially. I can see how it bothers people in no income state states that this deduction exists. I mean it's a little like not pulling our weight for federal taxes, but being taxed on tax feels like crap. So win some lose some?
The argument for eliminating the state tax deduction is this: it (ignoring other elements of the tax code) effectively subsidizes states with higher tax rates, by lessening the financial impact on the people who pay those taxes.  If state taxes were not deductible, it would increase the CoL in higher-tax states, making it harder for those states to attract businesses and people.  In other words, the point of getting rid of the deduction is to force states to compete more with each other.  You could say the same goes for the property tax deduction.

I haven't looked at the Fair Tax in a while but I recall they had a rebate that basically made the first $20-30k of spending tax free. Essentially enough to cover the essentials for most people, especially anyone living at or near the poverty line.
Count me among those in favor of the idea of Fair Tax, for lots of reasons:
1) it's a lot more transparent--instead of a big portion of your taxes being hidden in the cost of things you buy, you see every penny
2) it's simple--compliance costs *are* a big deal
3) it focuses on consumption rather than production.  No more worrying about tax deferral or traditional vs Roth IRA or all that.

The problem is in the implementation.  I suppose you could ramp it up over 10 years while ramping down the income tax at the same speed.  Each year, the VAT-equivalent goes up by 2% and everyone pays 10% less income tax, until you hit 20% and 0% respectively?

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #48 on: October 02, 2017, 04:41:28 PM »
Generally, I like this plan. But the elimination of the state tax deduction bothers me. It's not just that I live in California where the state tax is highest (I'm pretty sure... top 3 at least). It just seems a little weird to be taxed on my taxes essentially. I can see how it bothers people in no income state states that this deduction exists. I mean it's a little like not pulling our weight for federal taxes, but being taxed on tax feels like crap. So win some lose some?
The argument for eliminating the state tax deduction is this: it (ignoring other elements of the tax code) effectively subsidizes states with higher tax rates, by lessening the financial impact on the people who pay those taxes.  If state taxes were not deductible, it would increase the CoL in higher-tax states, making it harder for those states to attract businesses and people.  In other words, the point of getting rid of the deduction is to force states to compete more with each other.  You could say the same goes for the property tax deduction.

I haven't looked at the Fair Tax in a while but I recall they had a rebate that basically made the first $20-30k of spending tax free. Essentially enough to cover the essentials for most people, especially anyone living at or near the poverty line.
Count me among those in favor of the idea of Fair Tax, for lots of reasons:
1) it's a lot more transparent--instead of a big portion of your taxes being hidden in the cost of things you buy, you see every penny
2) it's simple--compliance costs *are* a big deal
3) it focuses on consumption rather than production.  No more worrying about tax deferral or traditional vs Roth IRA or all that.

The problem is in the implementation.  I suppose you could ramp it up over 10 years while ramping down the income tax at the same speed.  Each year, the VAT-equivalent goes up by 2% and everyone pays 10% less income tax, until you hit 20% and 0% respectively?

Generally speaking, the high COL states are already subsidizing the rest.

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Re: Proposed increase of standard deduction to $24,000 - your thoughts?
« Reply #49 on: October 02, 2017, 06:10:58 PM »
Generally speaking, the high COL states are already subsidizing the rest.

Let's not do this. The HCOL states have far more of the very rich, which disproportionately pay more in Federal income tax. In a system where 0.1% of the population pays more than the bottom 80% in raw numbers of course any state with a higher relative population of high income earners is going to pay more taxes than others!

A drawn out flawed analysis that ignores everything from low and high services states, Federal lands (which pay no state taxes and Federal money spent there is considered "welfare" in this "study"), the military, Native American reservations, the elderly (the "study" counted Social Security as welfare), Federal pensioners (the "study" counted Federal pensions as "welfare"), to how many miles of interstate vary per person from high to low population states (Montana is SOL in this one), and many many other over-sites for the sake of what is blatant political pandering is really not needed to state what is glaringly the obvious.