Author Topic: Republican Tax Plan 2017  (Read 174256 times)

Jrr85

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Re: Republican Tax Plan 2017
« Reply #1550 on: December 21, 2017, 02:08:46 PM »
I just learned that the medical expense deduction, which was "saved" in the new tax law, wasn't saved at all.  It disappears in two years.  It didn't even get the same five year phase out that the individual tax cuts got, it was singled out for more rapid elimination.  This is going to seriously harm seniors in assisted living facilities.  The AARP went on record as supporting the preservation of this deduction, despite opposing the rest of the bill, but I don't think they realized it was for only two years.

The press has reported on the tax bill much differently than they reported on the health care bill.  In that case, when the republican bill cut people from Medicaid they reported it as people being cut, with a delayed phase-in of the cuts.  With the tax bill they are instead just saying the harm was avoided, and ignoring the future phase-in.  I'm baffled.

Similarly with the child tax credi, everyone is thrilled it is being "expanded" even though eligibility is being restricted so that fewer people will get it.  How is it an expansion of benefits when the government is saving money on it?  That's a tax increase, not a tax cut!

How did we let them get away with this?

How is eligibility for the child tax credit being restricted?  Everything I've seen shows the amount that is refundable is going up and the income limits being raised.  is it some interplay with the earned income tax credit or something?

Undecided

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Re: Republican Tax Plan 2017
« Reply #1551 on: December 21, 2017, 02:10:55 PM »
[snip]
1) Not only do I not think that federal tax payments are the only way a person, place or population contributes to the national well-being, but I don't think I've even heard someone imply that before.

2) Looking at only the states as states loses the granularity of considering the state effects on individuals, regardless of the overall tax levels within the state. Take California, which likely has the biggest number of state and federal "high" taxpayers, regardless of what the overall per capita amounts may be.

3) Yes, I'm optimistic about the benefits of decreasing barriers to people moving to where they can be most productive.

The federal system is a great lab for different approaches, but they developed over a long time within a particular framework; I think changing the framework for political purposes, while masquerading as a move to fairness that rests on a narrow focus on aspects of the framework in isolation even while they run counter to the big picture, is disingenuous and dangerous. If the rules change, people will make different decisions than they would have made under the status quo. I wonder, as one example, with the increasing ease of telecommuting, if a policy change that exacerbates the financial differences between locations will cause more people to opt out of being at headquarters, and whether that will suppress the benefits of network effects. Or will it put upward pressure on salaries in areas that are already HCOL, beyond the equilibrium that had existed between those places and the rest of the country? I don't know what the potential effects will be, of course, but I suspect that the motives for the changes were not to "help the country" and were instead to achieve some political ends.
« Last Edit: December 21, 2017, 02:22:49 PM by Undecided »

mtnman125

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Re: Republican Tax Plan 2017
« Reply #1552 on: December 21, 2017, 02:18:51 PM »
I just learned that the medical expense deduction, which was "saved" in the new tax law, wasn't saved at all.  It disappears in two years.  It didn't even get the same five year phase out that the individual tax cuts got, it was singled out for more rapid elimination.  This is going to seriously harm seniors in assisted living facilities.  The AARP went on record as supporting the preservation of this deduction, despite opposing the rest of the bill, but I don't think they realized it was for only two years.

The press has reported on the tax bill much differently than they reported on the health care bill.  In that case, when the republican bill cut people from Medicaid they reported it as people being cut, with a delayed phase-in of the cuts.  With the tax bill they are instead just saying the harm was avoided, and ignoring the future phase-in.  I'm baffled.

Similarly with the child tax credi, everyone is thrilled it is being "expanded" even though eligibility is being restricted so that fewer people will get it.  How is it an expansion of benefits when the government is saving money on it?  That's a tax increase, not a tax cut!

How did we let them get away with this?

How is eligibility for the child tax credit being restricted?  Everything I've seen shows the amount that is refundable is going up and the income limits being raised.  is it some interplay with the earned income tax credit or something?

He's likely talking about the $2000 Child Tax Credit ends at 17, so dependents that are college age (17-24) will only get $500 credit.  Not a great deal if you have a couple kids in school at the same time (and compared to current $4050 exemptions).

MDM

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Re: Republican Tax Plan 2017
« Reply #1553 on: December 21, 2017, 02:22:19 PM »
I just learned that the medical expense deduction, which was "saved" in the new tax law, wasn't saved at all.  It disappears in two years.
...
How did we let them get away with this?
Because it doesn't disappear in two years.

The medical expense deduction threshold is lowered to 7.5 percent for [2017 and] 2018, and reverts to [the current law's] 10 percent thereafter.

ETA: See Sec. 11027 in TCJA_Conference_Report.pdf.
« Last Edit: December 21, 2017, 02:23:55 PM by MDM »

Jrr85

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Re: Republican Tax Plan 2017
« Reply #1554 on: December 21, 2017, 02:31:00 PM »
would have seemed more internally coherent to me (considered against business treatment) to eliminate property and sales tax deductions, eliminate the mortgage interest deduction, but keep state and local income tax deductions.

Here I am in complete agreement with you. When it comes to both SALT tax deductions and interest charge deductions, the treatment should be the same for individuals and businesses, whether that is providing a deduction or not providing a deduction.

What is your argument for this?  I can get arguing that businesses shouldn't get to deduct SALT just to completely separate federal and state taxing decisions.  But I don't get why individual and business salt should be treated the same.  There are lots of business expenses that individuals also pay that you are going to have to allow to be deducted for business but not individuals if you aren't going to move to a revenue based tax. 

sol

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Re: Republican Tax Plan 2017
« Reply #1555 on: December 21, 2017, 02:33:49 PM »
I just learned that the medical expense deduction, which was "saved" in the new tax law, wasn't saved at all.  It disappears in two years.
...
How did we let them get away with this?
Because it doesn't disappear in two years.

The medical expense deduction threshold is lowered to 7.5 percent for [2017 and] 2018, and reverts to [the current law's] 10 percent thereafter.

ETA: See Sec. 11027 in TCJA_Conference_Report.pdf.

That is not what I was reading, but it looks like you're right.  It's still a new bill, I expect I'll continue to find bad information for at least a few more weeks until we all get a chance to chew on the details.

For clarification, the medical expense deduction looks like it stays in, under the new bill

robartsd

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Re: Republican Tax Plan 2017
« Reply #1556 on: December 21, 2017, 02:35:12 PM »
I feel similarly about funding abortion as Sol does about funding churches. A parallel to Sol's position on churches would be to exclude medical expenses related to abortion from being tax deductible. While I do not support tax funding of abortion and feel that consumers should have the option to choose medical plans that do not fund abortion, I think those that choose plans that support abortion should still get the full benefit of medical tax deductions for those plans and services. The parallel is allowing education based tax breaks to be used with schools that include religious education as we do now.

AnEDO

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Re: Republican Tax Plan 2017
« Reply #1557 on: December 21, 2017, 02:38:52 PM »
Any of you smart people know:

If I sell a home that I have lived in for at least 2 of the last 5 years, which is currently a rental home, can I still exclude the capital gains that occurred over the years it was my primary residence?  Or does it now need to be my current primary residence when I sell it? 

maizeman

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Re: Republican Tax Plan 2017
« Reply #1558 on: December 21, 2017, 02:39:55 PM »
I don't know what the potential effects will be, of course, but I suspect that the motives for the changes were not to "help the country" and were instead to achieve some political ends.

Again I don't disagree with you here. It's pretty clear the motivation for capping salt deductions in this particular bill was to find a way to raise taxes on individuals (without calling it a tax increase) to partially offset the cost of the big cut to the corporate tax rate. I don't think raising taxes on individuals to pay for taxes on companies is a good idea regardless of the mechanism you use to do it.

Quote
1) Not only do I not think that federal tax payments are the only way a person, place or population contributes to the national well-being, but I don't think I've even heard someone imply that before.

And I'm not saying that's the only way a person place or population contributions to the national well-being. But so far, unless I've missed something, it's the only example you've put forward of people in Massachusetts, Connecticut, New Jersey, and New York doing more than their fair share.

If we put aside federal tax payments per capita, are there other specific ways that you feel like people in Massachusetts, Connecticut, New Jersey, and New York contribute more than their fair share to national well being?

Quote
2) Looking at only the states as states loses the granularity of considering the state effects on individuals, regardless of the overall tax levels within the state. Take California, which likely has the biggest number of state and federal "high" taxpayers, regardless of what the overall per capita amounts may be.

Indeed California likely does have the most high income taxpayers as it has the most people of any state in the union. But if your argument is just that "high" tax payers currently pay too much tax regardless of state, then we could just cut the top marginal federal income tax rate, and this would provide an equal benefit to "high" taxpayers whether they live in New York, California, or Mississippi.

Having said that, personally I think our tax code needs to be MORE progressive, not less progressive so I would not be in favor of cutting the top marginal tax rate, and I wish the current tax bill hadn't done so.

Quote
3) Yes, I'm optimistic about the benefits of decreasing barriers to people moving to where they can be most productive.

I agree with this statement. However, it's not clear to me 1) that there is evidence that when new people move specifically to high tax states they become more productive. Completely arbitrarily, a computer programmer in Mississippi (low SALT taxes per capita) can probably increase they productivity a lot more by moving to California (about average SALT taxes per capita) than to Connecticut (some of the highest SALT taxes per capita) and 2) that differences in state tax rates are a significant barrier to migration with or without the ability to deduct those taxes on your federal taxes. 

Quote
f the rules change, people will make different decisions than they would have made under the status quo. I wonder, as one example, with the increasing ease of telecommuting, if a policy change that exacerbates the financial differences between locations will cause more people to opt out of being at headquarters, and whether that will suppress the benefits of network effects. Or will it put upward pressure on salaries in areas that are already HCOL, beyond the equilibrium that had existed between those places and the rest of the country?

Alternatively, if we see an increase in telecommuting across state lines it could allow people to earn the same salaries in lower cost of living locations giving them more disposable income and creating more economic activity than when they live in locations where more of their total income goes to rent. More people telecommuting would also put downward pressure on real estate prices and rents in high cost of living locations, which would again free up more disposable income which might be either saved (good for the individual) or spent on things which stimulate more economic activity (good for the economy as a whole).

As a rule of thumb (although there are plenty of exceptions), the fewer economic distortions you can introduce with a tax code that raises the same total amount of revenue, the better society and individuals end up being in the end.

maizeman

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Re: Republican Tax Plan 2017
« Reply #1559 on: December 21, 2017, 02:48:00 PM »
When it comes to both SALT tax deductions and interest charge deductions, the treatment should be the same for individuals and businesses, whether that is providing a deduction or not providing a deduction.

What is your argument for this?  I can get arguing that businesses shouldn't get to deduct SALT just to completely separate federal and state taxing decisions.  But I don't get why individual and business salt should be treated the same.  There are lots of business expenses that individuals also pay that you are going to have to allow to be deducted for business but not individuals if you aren't going to move to a revenue based tax.

Because it removes the incentive to shift money between business income and personal income that you get if there are different rules for what is and isn't deductible depending on, for example, whether the money is salary your S corp pays you, or dividends your S corp pays you.

The argument for consistent treatment of interest changes is the same as above, plus unequal treatment either a distorting incentive for people to buy homes when it would otherwise make economic sense for them to rent, or a distorting advantage that gives professional landlords an unfair advantage relative to individual home buyers in home much they can afford to pay to buy the same homes.

robartsd

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Re: Republican Tax Plan 2017
« Reply #1560 on: December 21, 2017, 02:54:47 PM »
Any of you smart people know:

If I sell a home that I have lived in for at least 2 of the last 5 years, which is currently a rental home, can I still exclude the capital gains that occurred over the years it was my primary residence?  Or does it now need to be my current primary residence when I sell it?
I'm not sure if this was changed in the tax bill that was passed, but under the old rules the home did not need to be your primary residence when sold. Any cumulative - not even required to be consective - 24 months as your primary residence in the past 5 years qualifies as long as you did not claim this on annother house in the lookback period.

FIREchiefsr

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Re: Republican Tax Plan 2017
« Reply #1561 on: December 21, 2017, 03:33:24 PM »
Looks like this made it in the final bill.

Jesus saves, bitches.

Please do not use that name disrespectfully.

And I would like religion to not influence law or politics, but we can't have everything we want.
I don't expect anything. I am bound to speak up for the One I love, who also loves me. So I did.

Thank you for this.  Well put.  God bless you brother.

Sigh, since this thread has turned towards religion in several ways...

As a fellow Christian, I have to speak out against this. You control your own behavior, you do not control the behavior of those around you. Christianity is supposed to be attractive (a "shining city on a hill"), not prescriptive ("do what I say regardless of your beliefs"). The people Jesus hated (if that's the right word) most in the world were the Pharisees who were shoving their religious laws down other people's throats. This behavior is not helpful, at best.

Now hopefully we can get back to the actual topic at hand.

What exactly are you against here?  The brother who politely asked "Please do not use that name disrespectfully?"  Or are you against my response saying "thank you?"  I don't believe that either of those come close to shoving anything down anybody's throat.

sol

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Re: Republican Tax Plan 2017
« Reply #1562 on: December 21, 2017, 03:54:22 PM »
What exactly are you against here?  The brother who politely asked

Even "politely asking" someone to censor their own free speech to respect a religion they do not share, especially when done in such a condescending self-aggrandizing manner, is usually considered rude.  I certainly don't think it's very Christian, either, but then again I'm the wrong person to ask about that issue.

On this forum we generally encourage all viewpoints to partake in the discussion, especially ones we don't normally share.  It's bad form to tell people to shut up.

GuitarStv

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Re: Republican Tax Plan 2017
« Reply #1563 on: December 21, 2017, 04:05:41 PM »
Looks like this made it in the final bill.

Jesus saves, bitches.

Please do not use that name disrespectfully.

And I would like religion to not influence law or politics, but we can't have everything we want.
I don't expect anything. I am bound to speak up for the One I love, who also loves me. So I did.

Thank you for this.  Well put.  God bless you brother.

Sigh, since this thread has turned towards religion in several ways...

As a fellow Christian, I have to speak out against this. You control your own behavior, you do not control the behavior of those around you. Christianity is supposed to be attractive (a "shining city on a hill"), not prescriptive ("do what I say regardless of your beliefs"). The people Jesus hated (if that's the right word) most in the world were the Pharisees who were shoving their religious laws down other people's throats. This behavior is not helpful, at best.

Now hopefully we can get back to the actual topic at hand.

What exactly are you against here?  The brother who politely asked "Please do not use that name disrespectfully?"  Or are you against my response saying "thank you?"  I don't believe that either of those come close to shoving anything down anybody's throat.

Did Paul der Krake use the name of Jesus disrespectfully?  'Bitches' was the only offensive term he wrote, and it wasn't directed towards Jesus.  In that context, responding "Please do not use that name disrespectfully" effectively is an attempt to control behavior.  It's not really any different from getting upset about someone depicting of Muhammed in an attempt to prevent what you see as unorthodox use of 'your' religious icon.

I suspect that sherr is against extreme sensitivity regarding religion and the attempt to control the behaviour of others that this engenders.

TexasRunner

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Re: Republican Tax Plan 2017
« Reply #1564 on: December 21, 2017, 04:14:27 PM »
Looks like this made it in the final bill.

Jesus saves, bitches.

Please do not use that name disrespectfully.

And I would like religion to not influence law or politics, but we can't have everything we want.
I don't expect anything. I am bound to speak up for the One I love, who also loves me. So I did.

Thank you for this.  Well put.  God bless you brother.

Sigh, since this thread has turned towards religion in several ways...

As a fellow Christian, I have to speak out against this. You control your own behavior, you do not control the behavior of those around you. Christianity is supposed to be attractive (a "shining city on a hill"), not prescriptive ("do what I say regardless of your beliefs"). The people Jesus hated (if that's the right word) most in the world were the Pharisees who were shoving their religious laws down other people's throats. This behavior is not helpful, at best.

Now hopefully we can get back to the actual topic at hand.

What exactly are you against here?  The brother who politely asked "Please do not use that name disrespectfully?"  Or are you against my response saying "thank you?"  I don't believe that either of those come close to shoving anything down anybody's throat.

I'm gonna have to side with Sherr here....   We cannot condemn the behaviors of non-Christians and cannot judge 'outsiders' and should judge ourselves.

Quote
I wrote to you in my letter not to associate with "sinners"not at all meaning the "sinners" of this world, or the greedy and swindlers, or idolaters, since then you would need to go out of the world. But now I am writing to you not to associate with anyone who bears the name of brother if he is guilty of sexual immorality or greed, or is an idolater, reviler, drunkard, or swindler—not even to eat with such a one. For what have I to do with judging outsiders? Is it not those inside the church whom you are to judge? God judges those outside. “Purge the evil person from among you.”

-1 Corinthians 5:9-13

Please note, I have bolded the text relevant for what I believe is Sherr's view.

Also note, edits in italics are mine for common understanding.  Don't whine to me about 'changing the text' cause I'll post the greek if you prefer.

Telling non-Christians "not to sin" doesn't help them in this context, and is detracting from the discussion, though I do respect your desire to not see God's name used in vain and winced when I read that post as well.

Edits for clarity
« Last Edit: December 21, 2017, 04:16:49 PM by TexasRunner »

Glenstache

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Re: Republican Tax Plan 2017
« Reply #1565 on: December 21, 2017, 04:57:22 PM »
According to the NYTimes estimator, 2018 will see me get an approximate $2790 tax cut. Not sure what that will look like 5 or 10 years out. Given that the tax bill impacts are also likely to be used as political leverage to slash medicare and social security, I'm not sure this is worth it in the long run. I am not going to spend more as a result of this cut and won't really help the economy as a whole much as a result.

Undecided

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Re: Republican Tax Plan 2017
« Reply #1566 on: December 21, 2017, 05:08:20 PM »
As a rule of thumb (although there are plenty of exceptions), the fewer economic distortions you can introduce with a tax code that raises the same total amount of revenue, the better society and individuals end up being in the end.

I think you are conflating fewer distortions with less distortion, and trying to apply a narrow economic argument to what is a broader political system without considering the bigger picture. I don't think eliminating the SALT deductions decreases distortion.

If we conducted an omnibus tax and spending reform, I wouldn't want to put forth anything like our present systems and would agree with much of what you've said. But we have a system of negotiated compromises, with many distortions all around, in both revenue and spending. While ever-shifting, they are some sort of balance. To pretend that eliminating one element from a system of competing distortions makes the overall system less distorted make no sense to me---it changes the shape of the distortion, but likely makes it more extreme. The irrefutable bigger-picture context is that as the current system of compromises evolved, those high-tax states' residents became (generally and collectively speaking here) net givers, while the lowest-tax states were (again, same qualifiers) net takers. Disregarding that, claiming that the elimination reduces distortion, pretending that it's something that can be evaluated in isolation and seen as other than a political move to further shift the burden onto residents of states that have supported the wrong political party---those are irrelevancies.

maizeman

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Re: Republican Tax Plan 2017
« Reply #1567 on: December 21, 2017, 05:43:01 PM »
@Undecided Over the course of this discussion, it seems like your justification for your position has shifted from one line of reasoning to another.

A) You started with a hypothetical which postulated that higher taxes directly result in more economic growth (post #1523). B) You then conceded that you were unaware of such a link (post #1539), but shifted to the argument that there were other non-financial benefits people in low tax states received as a result of people in high tax states decided in impose higher taxes (post #1544). C) You then switched to the argument that the inability to deduct high state taxes on federal returns would act as a barrier to people moving from states where they would be less economically productive to states where they might be more economically productive (post #1547). D) Then you switched to the argument that changes to the tax code will likely change people's behavior, and some of those changes will likely have negative consequences (which I agree with, I just don't think there is any reason to believe the negative changes will outweigh the positive) in post #1551. E) Now in post #1566 we've come full circle and you're back to the argument that high tax states are more economically productive than low tax states.

It's been my observation that when people keep switching arguments but continuously defend the same position, it's generally because they have some other motivation for that position. In your case, it sounds like your own taxes are likely to go up significantly, and you're also worried about what the changes in the tax code will mean for both your community and local real estate values. So I just wanted to say I'm sorry, and I realize that really sucks. Right now I think I'm only going to come out of this "tax reform" a thousand or two worse off than I was before, but for a while it looked like my tax bill at my day job was going to be closer to $10,000 higher (and I make five figures at that job, not six). It felt terrible to feel singled out what seemed like special punishment when I knew I was already doing my share if not more than my share to support the society we all live in.

So anyway, this is a long winded way of saying I'll drop the SALT stuff. And for what it's worth, this is a really REALLY crappy tax bill. I think we can all agree on that.

Undecided

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Re: Republican Tax Plan 2017
« Reply #1568 on: December 21, 2017, 06:43:15 PM »
@Undecided Over the course of this discussion, it seems like your justification for your position has shifted from one line of reasoning to another.

A) You started with a hypothetical which postulated that higher taxes directly result in more economic growth (post #1523). B) You then conceded that you were unaware of such a link (post #1539), but shifted to the argument that there were other non-financial benefits people in low tax states received as a result of people in high tax states decided in impose higher taxes (post #1544). C) You then switched to the argument that the inability to deduct high state taxes on federal returns would act as a barrier to people moving from states where they would be less economically productive to states where they might be more economically productive (post #1547). D) Then you switched to the argument that changes to the tax code will likely change people's behavior, and some of those changes will likely have negative consequences (which I agree with, I just don't think there is any reason to believe the negative changes will outweigh the positive) in post #1551. E) Now in post #1566 we've come full circle and you're back to the argument that high tax states are more economically productive than low tax states.

It's been my observation that when people keep switching arguments but continuously defend the same position, it's generally because they have some other motivation for that position. In your case, it sounds like your own taxes are likely to go up significantly, and you're also worried about what the changes in the tax code will mean for both your community and local real estate values. So I just wanted to say I'm sorry, and I realize that really sucks. Right now I think I'm only going to come out of this "tax reform" a thousand or two worse off than I was before, but for a while it looked like my tax bill at my day job was going to be closer to $10,000 higher (and I make five figures at that job, not six). It felt terrible to feel singled out what seemed like special punishment when I knew I was already doing my share if not more than my share to support the society we all live in.

So anyway, this is a long winded way of saying I'll drop the SALT stuff. And for what it's worth, this is a really REALLY crappy tax bill. I think we can all agree on that.

Well, no, my taxes are going down somewhere in the low five figures, but we agree that it's a crappy tax bill.

I just raised different alternative but consistent arguments as you raised new points, but, presuming that neither of us is going to get the magic power to singularly make US tax policy, I guess we don't need to convince the other!

secondcor521

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Re: Republican Tax Plan 2017
« Reply #1569 on: December 21, 2017, 06:46:56 PM »
[Edited for brevity - secondcor521]

Similarly with the child tax credit, everyone is thrilled it is being "expanded" even though eligibility is being restricted so that fewer people will get it.  How is it an expansion of benefits when the government is saving money on it?  That's a tax increase, not a tax cut!

How did we let them get away with this?

How is eligibility for the child tax credit being restricted?  Everything I've seen shows the amount that is refundable is going up and the income limits being raised.  is it some interplay with the earned income tax credit or something?

He's likely talking about the $2000 Child Tax Credit ends at 17, so dependents that are college age (17-24) will only get $500 credit.  Not a great deal if you have a couple kids in school at the same time (and compared to current $4050 exemptions).

The Child Tax Credit has always ended at 17; the new tax bill does nothing to change that.(*)

The new tax bill increases the Child Tax Credit from $1,000 to $2,000.  The bill also raised - I believe quite significantly but I don't have the figures and don't feel like looking them up - the phaseout limits for the Child Tax Credit.

The new tax bill adds the new $500 dependent credit.

So the first sentence of sol's post that I left quoted above isn't accurate as far as I can tell in the sense that the Child Tax Credit itself has clearly been expanded under the new tax bill.

At the same time, it is also true that the new tax bill quite famously has eliminated all personal exemptions.  For people with kids who qualify for it, the expansion in the Child Tax Credit makes up for the loss of the personal exemption for those with a (roughly) 25% tax bracket or lower.  For those in a higher tax bracket, it may not make up for it; then again, those in a higher-than-25% tax bracket probably would not have been able to take the Child Tax Credit before (due to the current income phaseouts).

For parents of kids who are 17 and older who are still dependent, the new $500 credit makes up for the loss of the personal exemption for those with a (roughly) 12% tax bracket or lower.  For those in a higher tax bracket, the new $500 credit is not as good as the personal exemption that they lose.

So in summary, the only people who lose are those with dependent kids who are 17 or older and who are in a higher than 12% tax bracket.  Everyone else is the same or better off.

(*) There were discussions about changing the age limit, but those did not end up in the final bill.  What sol in fact may be referring to is that there were discussions of raising it to 18, but then they decided to stick with 17, which is lower than what they discussed but, as noted, is exactly equal to the status quo.

dragoncar

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Re: Republican Tax Plan 2017
« Reply #1570 on: December 21, 2017, 09:22:43 PM »
I feel similarly about funding abortion as Sol does about funding churches. A parallel to Sol's position on churches would be to exclude medical expenses related to abortion from being tax deductible. While I do not support tax funding of abortion and feel that consumers should have the option to choose medical plans that do not fund abortion, I think those that choose plans that support abortion should still get the full benefit of medical tax deductions for those plans and services. The parallel is allowing education based tax breaks to be used with schools that include religious education as we do now.

And I’m against funding the military. I’d prefer miniature American flags for all.

pegleglolita

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Re: Republican Tax Plan 2017
« Reply #1571 on: December 22, 2017, 06:24:35 AM »
I feel similarly about funding abortion as Sol does about funding churches. A parallel to Sol's position on churches would be to exclude medical expenses related to abortion from being tax deductible. While I do not support tax funding of abortion and feel that consumers should have the option to choose medical plans that do not fund abortion, I think those that choose plans that support abortion should still get the full benefit of medical tax deductions for those plans and services. The parallel is allowing education based tax breaks to be used with schools that include religious education as we do now.

And I’m against funding the military. I’d prefer miniature American flags for all.

Yes, while we're at it, here are some things I don't want my tax dollars used for:

-drone strikes on targets full of women and children
-killing prisoners
-tax breaks for billionaires with private jets
-the President's constant golfing
-the FLOTUS' New York penthouse so she doesn't have to live with her repulsive husband
-subsidies for farmers who raise animals in appalling conditions and then murder them by the millions

...but that's not how a pluralistic society works.  We all have to make compromises because we are never going to agree on everything. 

OurTown

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Re: Republican Tax Plan 2017
« Reply #1572 on: December 22, 2017, 10:04:24 AM »
Legit question here:  if you have both a 403(b) and a 457, can you still contribute the max (18.5) to both under the new tax law?

maizeman

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Re: Republican Tax Plan 2017
« Reply #1573 on: December 22, 2017, 10:17:11 AM »
Yup, that change was taken out in conference.

GettingClose

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Re: Republican Tax Plan 2017
« Reply #1574 on: December 22, 2017, 10:59:39 AM »
Quote
Given that the tax bill impacts are also likely to be used as political leverage to slash medicare and social security, I'm not sure this is worth it in the long run. I am not going to spend more as a result of this cut and won't really help the economy as a whole much as a result.

This.  I've looked at a number of the proposals already floating around to cut Medicare (phrased as increasing "choice" and "freedom"), and people, our parents and grandparents, are going to be hurt.  Literally. 


robartsd

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Re: Republican Tax Plan 2017
« Reply #1575 on: December 22, 2017, 11:00:38 AM »
I feel similarly about funding abortion as Sol does about funding churches. A parallel to Sol's position on churches would be to exclude medical expenses related to abortion from being tax deductible. While I do not support tax funding of abortion and feel that consumers should have the option to choose medical plans that do not fund abortion, I think those that choose plans that support abortion should still get the full benefit of medical tax deductions for those plans and services. The parallel is allowing education based tax breaks to be used with schools that include religious education as we do now.

And I’m against funding the military. I’d prefer miniature American flags for all.

Yes, while we're at it, here are some things I don't want my tax dollars used for:

-drone strikes on targets full of women and children
-killing prisoners
-tax breaks for billionaires with private jets
-the President's constant golfing
-the FLOTUS' New York penthouse so she doesn't have to live with her repulsive husband
-subsidies for farmers who raise animals in appalling conditions and then murder them by the millions

...but that's not how a pluralistic society works.  We all have to make compromises because we are never going to agree on everything.
I don't like spending on most of these things too. I'm not against all military spending, but it is probably 2-3 times as much as we need to protect our boarders and contribute our part to protecting international trade. Of this list only the tax breaks for billionaires is of the same nature as Sol's opposition to 529 funds being used for religious schools - a reduction in taxes based on a particular behavior rather than a spending of government funds.

Teachstache

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Re: Republican Tax Plan 2017
« Reply #1576 on: December 23, 2017, 04:28:34 AM »
Yup, that change was taken out in conference.

Really? Nice! I have been looking all over for this information and couldn't find it before this thread. Spouse has access to a 457 & 403b. I only have a 403b plus a state pension contribution of 10%.

So, it looks like our pre-tax retirement withholdings will still remain:

$18.5 403b spouse
$18.5 457 spouse
$18.5 403b me
$6,400 pension contribution me (max allowed)

Am I correct in this thinking?

Any info if they kept the $5k childcare & 2,550 medical flex spending allowances in the new tax law?

Mariposa

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Re: Republican Tax Plan 2017
« Reply #1577 on: December 23, 2017, 10:52:57 AM »
Any info if they kept the $5k childcare & 2,550 medical flex spending allowances in the new tax law?

This is my burning question as well. Looks like the $5K dependent care FSA survived:

http://www.coredocuments.com/gop-tax-plan-eliminates-tax-savings-on-dependent-care-tuition-adoption/

I don't know that the $2550 medical FSA was ever threatened. Please correct me if I'm wrong, or if someone has a better reference.

maizeman

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Re: Republican Tax Plan 2017
« Reply #1578 on: December 23, 2017, 10:57:20 AM »
Yup, that change was taken out in conference.

Really? Nice! I have been looking all over for this information and couldn't find it before this thread. Spouse has access to a 457 & 403b. I only have a 403b plus a state pension contribution of 10%.

There was much more discussion/commiseration on the 403/457 issue with regards to the republican tax plan over on this thread (although the title only mentioned 401ks).

https://forum.mrmoneymustache.com/taxes/senate-sneaks-401(k)-contribution-limits-into-tax-cuts-bill/50/

Babybalrog

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Re: Republican Tax Plan 2017
« Reply #1579 on: December 24, 2017, 07:04:00 PM »
Yup, that change was taken out in conference.

Really? Nice! I have been looking all over for this information and couldn't find it before this thread. Spouse has access to a 457 & 403b. I only have a 403b plus a state pension contribution of 10%.

So, it looks like our pre-tax retirement withholdings will still remain:
F
$18.5 403b spouse
$18.5 457 spouse
$18.5 403b me
$6,400 pension contribution me (max allowed)

Am I correct in this thinking?

Any info if they kept the $5k childcare & 2,550 medical flex spending allowances in the new tax law?
Don't forget IRA !!

EnjoyIt

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Re: Republican Tax Plan 2017
« Reply #1580 on: December 26, 2017, 08:58:06 AM »
If corporations pay less taxes then what they don't pay they get to keep as profit. Since profit will increase it would in effect lower PE ratios. Increased profit should end up in higher stock prices and all of us reaching FIRE sooner.

Some may say this tax cut is already priced into the current gains we saw this year.  I think that may be partially true. I don't think the market as a whole really knew what to expect regarding the tax code other then a likely tax reduction on corporations. I believe and hope there are still significant gains to be had in 2018.

sol

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Re: Republican Tax Plan 2017
« Reply #1581 on: December 26, 2017, 09:53:06 AM »
I believe and hope there are still significant gains to be had in 2018.

You can hope all you want.  The key is to stay invested, whether the market goes up or down.

We're riding the waves here, while waiting for the tide.  Playing the long game, betting on the success of the world economy, not trying to profit from changing whims of the stock market. 

The key to financial independence is easy: devote all of your spare income to acquiring revenue-generating assets, until they generate more revenue than you spend in expenses.  Notice that the current status of the stock market does not appear in any part of that strategy.  Ignore it.  Just buy assets whenever you can, every day, until you've paid for your lifestyle.

But I can't sell a weekly investment newsletter that just says "This week, I recommend buying shares of profit-generating corporations, with a smaller allocation to intermediate term bonds" because it would get really boring printing that same sentence, week after week, year after year, through bulls and bears.  That's the real advice for everyone, of course, but real advice doesn't sell so nobody else repeats it.
« Last Edit: December 26, 2017, 08:31:55 PM by sol »

EnjoyIt

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Re: Republican Tax Plan 2017
« Reply #1582 on: December 27, 2017, 12:27:26 AM »
I believe and hope there are still significant gains to be had in 2018.

You can hope all you want.  The key is to stay invested, whether the market goes up or down.

We're riding the waves here, while waiting for the tide.  Playing the long game, betting on the success of the world economy, not trying to profit from changing whims of the stock market. 

The key to financial independence is easy: devote all of your spare income to acquiring revenue-generating assets, until they generate more revenue than you spend in expenses.  Notice that the current status of the stock market does not appear in any part of that strategy.  Ignore it.  Just buy assets whenever you can, every day, until you've paid for your lifestyle.

But I can't sell a weekly investment newsletter that just says "This week, I recommend buying shares of profit-generating corporations, with a smaller allocation to intermediate term bonds" because it would get really boring printing that same sentence, week after week, year after year, through bulls and bears.  That's the real advice for everyone, of course, but real advice doesn't sell so nobody else repeats it.

Great advice Sol.  Everyone should stick to their asset allocation.  I have been 70/30 for many years now.  With every dollar gained 30% is being siphoned off into bonds. Being 70/30 seams like the right place for me.  When the market corrects itself I will use those bonds to rebalance back into equities.  And, everyone knows at some point there will likely be a correction. No one knows when or by how much, but it is inevitable.

With the above disclaimer, this thread is here to discuss the Republican Tax plan and I would like to discuss how it may affect corporations.  If all else stays the same next year other than taxes then corporations should have increased profit due to lower tax expenses.  If that is indeed the case then current PE ratios will in affect be lower if stock prices stay the same.  I find this very interesting because current valuations are considered high by most experts including Jack Bogle (inventor of index funds and Vanguard). Lowering taxes should correct that unless equity prices rise equivalently or profits decrease through lower sales or through increased expenditures. 

protostache

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Re: Republican Tax Plan 2017
« Reply #1583 on: December 27, 2017, 06:00:15 AM »
GAAP profits will likely be lower than normal next year, actually. Many companies have very large “deferred tax” assets on their books and the value of those deferred taxes dropped by at least a third the moment the president signed the tax bill. These corporations will be recognizing an accounting adjustment to those assets this next quarter which will affect quarterly reported earnings.

MDM

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Re: Republican Tax Plan 2017
« Reply #1584 on: December 27, 2017, 10:41:23 AM »
A 2018 version of the case study spreadsheet is available.

Does not do pass-through calculations, but does address many common credits and situations.

FiveSigmas

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Re: Republican Tax Plan 2017
« Reply #1585 on: December 27, 2017, 11:06:21 AM »
A 2018 version of the case study spreadsheet is available.

Does not do pass-through calculations, but does address many common credits and situations.

Many thanks, MDM!

EnjoyIt

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Re: Republican Tax Plan 2017
« Reply #1586 on: December 27, 2017, 01:24:54 PM »
GAAP profits will likely be lower than normal next year, actually. Many companies have very large “deferred tax” assets on their books and the value of those deferred taxes dropped by at least a third the moment the president signed the tax bill. These corporations will be recognizing an accounting adjustment to those assets this next quarter which will affect quarterly reported earnings.

Thanks for the comment and interesting analysis.  Why do you think many companies have overpaid their taxes and have a large deferred tax sitting on the books?  You may be right, I just don't know where or how to find that information.  Also if you are correct then those companies will reap the benefits of the new tax plan in 2019 instead of 2018. 

protostache

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Re: Republican Tax Plan 2017
« Reply #1587 on: December 27, 2017, 07:11:57 PM »
GAAP profits will likely be lower than normal next year, actually. Many companies have very large “deferred tax” assets on their books and the value of those deferred taxes dropped by at least a third the moment the president signed the tax bill. These corporations will be recognizing an accounting adjustment to those assets this next quarter which will affect quarterly reported earnings.

Thanks for the comment and interesting analysis.  Why do you think many companies have overpaid their taxes and have a large deferred tax sitting on the books?  You may be right, I just don't know where or how to find that information.  Also if you are correct then those companies will reap the benefits of the new tax plan in 2019 instead of 2018.

(Disclaimer: not a tax or accounting expert at all, this is just from what I’ve read online) Companies have deferred tax assets for lots of reasons but usually it boils down to a timing difference between when revenue and things like warranties are recognized. Apparently this also hits banks but I’m not sure why. There are also deferred tax liabilities (taxes that haven’t been paid yet). BRK takes huge advantage of these and will see quite a bit slashed from their taxes due, which will raise their book value.

Joel

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Re: Republican Tax Plan 2017
« Reply #1588 on: December 27, 2017, 11:42:23 PM »
GAAP profits will likely be lower than normal next year, actually. Many companies have very large “deferred tax” assets on their books and the value of those deferred taxes dropped by at least a third the moment the president signed the tax bill. These corporations will be recognizing an accounting adjustment to those assets this next quarter which will affect quarterly reported earnings.

Thanks for the comment and interesting analysis.  Why do you think many companies have overpaid their taxes and have a large deferred tax sitting on the books?  You may be right, I just don't know where or how to find that information.  Also if you are correct then those companies will reap the benefits of the new tax plan in 2019 instead of 2018. 

Many companies also have deferred tax assets due to prior net operating losses.

Abe

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Re: Republican Tax Plan 2017
« Reply #1589 on: December 30, 2017, 01:06:19 PM »
It's nuts how many people are flipping out over here in California and saying they won't be able to afford their houses anymore. I went through the calculations for the following assumptions to compare the federal taxes from 2017 vs 2018:

$300,000 to 800,000 income
Married filing jointly
4 exemptions
8% state tax deducted
max out two 401k
mortgage interest and property tax deductions of $50k

Comparing that to the maxing out two 401ks and taking the standard $24k deduction with loss of exemptions, the overall tax increase is never more than 1.5% (and less than 1% for those over $400k). Annoying, but won't break the bank. People with lower incomes are less likely to have an itemized deduction that would be higher than the new standard deduction, so even though I didn't calculate those, by default their taxes should be lower.

I'll post the spreadsheet to Google drive once I figure out how to import it from excel.

« Last Edit: December 30, 2017, 01:08:10 PM by Abe »

kingxiaodi

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Re: Republican Tax Plan 2017
« Reply #1590 on: December 30, 2017, 01:54:18 PM »
I'll post the spreadsheet to Google drive once I figure out how to import it from excel.

If you open up your Google Drive page in your browser, and the folder containing the file in Windows Explorer or equivalent, you should be able to drag and drop. You could also click the "New" button, bringing up the drop-down menu, and select upload file from there (see attached).

MDM

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Re: Republican Tax Plan 2017
« Reply #1591 on: December 30, 2017, 02:34:01 PM »
It's nuts how many people are flipping out over here in California and saying they won't be able to afford their houses anymore. I went through the calculations for the following assumptions to compare the federal taxes from 2017 vs 2018:

$300,000 to 800,000 income
Married filing jointly
4 exemptions
8% state tax deducted
max out two 401k
mortgage interest and property tax deductions of $50k

Comparing that to the maxing out two 401ks and taking the standard $24k deduction with loss of exemptions, the overall tax increase is never more than 1.5% (and less than 1% for those over $400k). Annoying, but won't break the bank. People with lower incomes are less likely to have an itemized deduction that would be higher than the new standard deduction, so even though I didn't calculate those, by default their taxes should be lower.

I'll post the spreadsheet to Google drive once I figure out how to import it from excel.
Might even be $20K less in 2018 for $400K gross income, due to no AMT adder (for the situation described) in 2018...?

marty998

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Re: Republican Tax Plan 2017
« Reply #1592 on: December 30, 2017, 05:22:53 PM »
Deferred tax assets arise in part, from accounting for discretionary bonuses. You will note Goldman Sachs is going to take a whack on this one.

Discretionary bonus payments are not deductible for tax purposes until they are paid. So while an employee may earn a bonus for their performance in the 2017 year, and the company will accrue an expense for it for accounting, the company will not recognise the tax deduction until the following year.

Consequently the company has higher taxable income in the current year, and a deferred tax asset (representing future deductions) on its balance sheet.

The value of those future deductions has been slashed, because your tax benefit has gone from 35%(?) to 21%(?).

The last time this happened in Australia was in the late 90's when the rate went from 36 to 30% (It's 27.5% now for small businesses).

Car Jack

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Re: Republican Tax Plan 2017
« Reply #1593 on: December 31, 2017, 09:50:25 PM »
GAAP profits will likely be lower than normal next year, actually. Many companies have very large “deferred tax” assets on their books and the value of those deferred taxes dropped by at least a third the moment the president signed the tax bill. These corporations will be recognizing an accounting adjustment to those assets this next quarter which will affect quarterly reported earnings.

Thanks for the comment and interesting analysis.  Why do you think many companies have overpaid their taxes and have a large deferred tax sitting on the books?  You may be right, I just don't know where or how to find that information.  Also if you are correct then those companies will reap the benefits of the new tax plan in 2019 instead of 2018. 

Many companies also have deferred tax assets due to prior net operating losses.


The company I work for paid -35% in taxes last year (negative 35%) because of accounting shenanigans.  We've bought a number of companies, using loans in the US (we have the money offshore but don't want to bring it back here).  I don't know how the accounting goes, we've been profitable every quarter for over 25 years.  I have no idea if we're bringing money back here with the new tax bill or not.

Inaya

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Re: Republican Tax Plan 2017
« Reply #1594 on: January 02, 2018, 09:28:29 AM »
Well I guess some companies are passing their tax savings on to employees, after all. Got a nice surprise this morning when I opened my email and found an announcement that all employees (~15,000) are getting a $1000 bonus this month as a direct result of the corporate tax cuts. (In addition to our annual raise and bonus, which happens in March.) It's chump change for the company, but I appreciate the sentiment.


Question: Do corporations still get tax benefits from donations?
« Last Edit: January 02, 2018, 09:31:57 AM by Inaya »

Abe

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Re: Republican Tax Plan 2017
« Reply #1595 on: January 02, 2018, 01:23:29 PM »
It's nuts how many people are flipping out over here in California and saying they won't be able to afford their houses anymore. I went through the calculations for the following assumptions to compare the federal taxes from 2017 vs 2018:

$300,000 to 800,000 income
Married filing jointly
4 exemptions
8% state tax deducted
max out two 401k
mortgage interest and property tax deductions of $50k

Comparing that to the maxing out two 401ks and taking the standard $24k deduction with loss of exemptions, the overall tax increase is never more than 1.5% (and less than 1% for those over $400k). Annoying, but won't break the bank. People with lower incomes are less likely to have an itemized deduction that would be higher than the new standard deduction, so even though I didn't calculate those, by default their taxes should be lower.

I'll post the spreadsheet to Google drive once I figure out how to import it from excel.
Might even be $20K less in 2018 for $400K gross income, due to no AMT adder (for the situation described) in 2018...?

You're right, there's probably a benefit to the higher AMT exclusion threshold in 2018. I didn't include it because it's so complicated to calculate. In that case, it may end up being a wash vs. lower rates in 2018 for all income groups.

Regarding the mess that'll happen when the tax brackets are supposed to revert back: my guess is neither political party will allow that to happen to avoid looking like the "pro-taxing" party. I think we can safely assume these bracket changes are permanent.

RangerOne

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Re: Republican Tax Plan 2017
« Reply #1596 on: January 02, 2018, 01:28:14 PM »
It's nuts how many people are flipping out over here in California and saying they won't be able to afford their houses anymore. I went through the calculations for the following assumptions to compare the federal taxes from 2017 vs 2018:

$300,000 to 800,000 income
Married filing jointly
4 exemptions
8% state tax deducted
max out two 401k
mortgage interest and property tax deductions of $50k

Comparing that to the maxing out two 401ks and taking the standard $24k deduction with loss of exemptions, the overall tax increase is never more than 1.5% (and less than 1% for those over $400k). Annoying, but won't break the bank. People with lower incomes are less likely to have an itemized deduction that would be higher than the new standard deduction, so even though I didn't calculate those, by default their taxes should be lower.

I'll post the spreadsheet to Google drive once I figure out how to import it from excel.

I understand the flipping out because you need to run the numbers to see that most of the changes are mitgagted by the bracket cuts...

If you were no imitizing you are getting a cut. If you were barely itimizing you will probably still get a cut. Those with very expensive homes as you note may see a slight tax hike.

Buy certainly not enough for anyone to move if they own a home... People citing young people and high earners leaving cali, that is still because people can't afford homes. Which these tax changes only harm marginally.

ixtap

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Re: Republican Tax Plan 2017
« Reply #1597 on: January 02, 2018, 01:41:21 PM »
I also think people believe that their tax bill will go up by the amount of local tax they pay, rather than 25-33% (or whatever) of their local tax.