Author Topic: Republican Tax Plan 2017  (Read 72146 times)

maizeman

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Re: Republican Tax Plan 2017
« Reply #200 on: November 05, 2017, 07:40:09 AM »
Do the alimony settlements actually allow for recalculating alimony if the tax treatment changes? If not this could be a bit of a gift to lower earning already divorced spouses. (And a counterbalancing pain point for already divorced higher earning spouses.)

Edit: found the answer in the Kitces piece linked above.

Quote
Notably, this change in the treatment of alimony would only apply to new alimony agreements entered into after 2017; existing alimony agreements and payments would not be altered, unless the couple expressly modified an existing divorce decree or separation agreement to change the treatment.

« Last Edit: November 05, 2017, 09:48:42 AM by maizeman »
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Paul der Krake

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Re: Republican Tax Plan 2017
« Reply #202 on: November 05, 2017, 09:00:18 AM »
Nice article by Kitces: Individual Tax Reforms Of House GOP Tax Cuts And Jobs Act.
Fantastic "summary" (that took me a good hour to read through), thanks for posting.

NorthernBlitz

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Re: Republican Tax Plan 2017
« Reply #203 on: November 05, 2017, 10:25:19 AM »
I think the only reasonable interpretation of "simpler tax code" means "fewer resources used in tax planning and filing."  I'm not sure how that the proposal reduces the ongoing amount of effort needed to file taxes at all.  Moreover, it will necessitate a high immediate expenditure of resources while tax software companies rewrite their rules, people change all their "set it and forget it" financial plans, and so on.

I think it would also be reasonable to define a simpler tax code as one that requires fewer audits / government oversight. If everyone takes the standard deduction and doesn't itemize, then the only thing the IRS needs to check is that their income is correct.
« Last Edit: November 05, 2017, 10:28:54 AM by NorthernBlitz »

MDM

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Re: Republican Tax Plan 2017
« Reply #204 on: November 05, 2017, 10:49:59 AM »

Qualified dividends, however (I think), will no longer be treated the same as LTCG, but rather included in taxable income at 1/2 the dividend amount and taxed from there.

"The bill makes no changes to long-term capital gains tax rates, which also apply to qualified dividends. These rates are currently 0% for taxpayers in the two lowest tax brackets, 15% for the next four brackets, and 20% for taxpayers in the highest tax bracket. This proposal keeps the same income thresholds in place that apply to these rates now."
https://www.fool.com/investing/2017/11/03/ask-a-fool-how-could-the-tax-reform-bill-affect-in.aspx
"Above all, it's important to point out that the tax reform effort is still a very fluid situation, and a final bill is likely to look significantly different than the one that was just released."

 I'm very close to living off my stache, Dividends and Capital Gains tax right will matter to me.
Great, thanks!

I was looking at one of the various "postcards" that had "add 1/2 investment income" or similar.

But given the answer above, one can indeed find in 26 U.S. Code § 1 - Tax imposed | US Law | LII / Legal Information Institute:
Section 1(h)(3):
Quote
(3) Adjusted net capital gain
For purposes of this subsection, the term “adjusted net capital gain” means the sum of—
(A) net capital gain (determined without regard to paragraph (11)) reduced (but not below zero) by the sum of—
(i) unrecaptured section 1250 gain, and
(ii) 28-percent rate gain, plus
(B) qualified dividend income (as defined in paragraph (11)).

The new bill (at least, last I checked) makes no change to Section 1(h)(3).  So far so good....

ncornilsen

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Re: Republican Tax Plan 2017
« Reply #205 on: November 05, 2017, 12:56:28 PM »
corporations, which are currently taxed at 35% on marginal profits. In the future, they'll be taxed at 20%. But, they'll lose some undetermined loopholes.

Ooooooh right, they raised income taxes on middle-class individual consumers.  Well, that makes me feel much better now.  Tax people more so that you can tax businesses less, but blow up the deficit while you're at it?  Is that what Republicans are selling these days?

A very solid case can be made that all taxes on businesses are ultimately paid by shareholders or consumers anyway, a large portion of which are middle class. Therefore, in the scheme of things, the effective tax burden hasn't really changed, it's just less disguised... and some businesses now become viable, and employ people, who end up paying taxes.

This is obviously not a universally agreed on idea, but if you subscribe to it, the increase on the middle class, if there even is one, is more than made up for in improved employment and lower prices of goods.

sol

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Re: Republican Tax Plan 2017
« Reply #206 on: November 05, 2017, 01:20:48 PM »
Therefore, in the scheme of things, the effective tax burden hasn't really changed, it's just less disguised... and some businesses now become viable, and employ people, who end up paying taxes.

This is obviously not a universally agreed on idea, but if you subscribe to it, the increase on the middle class, if there even is one, is more than made up for in improved employment and lower prices of goods.

Your argument has a variety of obvious holes, the most obvious one of which is that the proposed individual tax increases would not apply to rich people.

If they raised everyone's taxes, or raised them in a progressive fashion, you could maybe start to discuss the idea you've pitched.  As it is, they've just given a huge tax cut to (corporations and) wealthy people, a slight tax increase to upper-middle class people, nothing at all to poor people, and blew a gigantic hole in the national debt.

If they genuinely wanted to promote fiscal responsibility, they would have raised taxes or lowered spending.  They did the opposite.
If they genuinely wanted to help the middle class, they could have offered them a tax break instead of giving virtually all of the cuts to billionaires.

jleo

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Re: Republican Tax Plan 2017
« Reply #207 on: November 05, 2017, 02:13:41 PM »
This may be a dumb question but when will this be effective will any be effective for 2017 tax return or will it all be for 2018 return?

Paul der Krake

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Re: Republican Tax Plan 2017
« Reply #208 on: November 05, 2017, 02:23:15 PM »
This may be a dumb question but when will this be effective will any be effective for 2017 tax return or will it all be for 2018 return?
Right now it's all vaporware. If it passes, it will be for 2018.

jleo

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Re: Republican Tax Plan 2017
« Reply #209 on: November 05, 2017, 03:15:11 PM »
This may be a dumb question but when will this be effective will any be effective for 2017 tax return or will it all be for 2018 return?
Right now it's all vaporware. If it passes, it will be for 2018.


Ok thats what I was thinking but thanks for clarifying.

dandarc

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Re: Republican Tax Plan 2017
« Reply #210 on: November 06, 2017, 05:49:25 AM »
This may be a dumb question but when will this be effective will any be effective for 2017 tax return or will it all be for 2018 return?
Right now it's all vaporware. If it passes, it will be for 2018.
And if I've learned anything from my career so far, it is that you should never buy vaporware.

boarder42

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Re: Republican Tax Plan 2017
« Reply #211 on: November 06, 2017, 06:48:29 AM »
Word is some big changes are supposed to be published today.
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dandarc

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Re: Republican Tax Plan 2017
« Reply #212 on: November 06, 2017, 06:55:12 AM »
Word is some big changes are supposed to be published today.
150% tax rate on anyone making under $100K.  0% over.  Also abandoning the usual idea of "tax brackets".  Make $99,999?  $149,999 in taxes.  $100K?  0.

SaucyAussie

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Re: Republican Tax Plan 2017
« Reply #213 on: November 06, 2017, 07:15:11 AM »
The Senate is due to release their own plan this week so all this could be thrown on its head.

oldmannickels

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Re: Republican Tax Plan 2017
« Reply #214 on: November 06, 2017, 07:23:23 AM »
Was thinking this morning that the elimination on the estate tax would have a big impact on the gift tax. Currently if you make a gift greater than the $14k limit it goes against the lifetime exemption, but that would no longer exist under the new plan.

djadziadax

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Re: Republican Tax Plan 2017
« Reply #215 on: November 06, 2017, 11:27:18 AM »
Well, I think Harvard can spare 1.5% of its profits on the 20B in endowment they have. They have room for that.

+1 with this. I would think a progressive tax here would be a good idea so that places with massive endowments would pay > 1.5%. The endowments at some of these places are just enormous.

+ 1 (or I guess +19 Trillion (and counting!))
[/quote]

Harvard endowment - 36 billion. Assume 4% SWR  (which they actually use!) = 1.5B withdrawal a year for various uses, which would then be taxed at 1.5%, or 22MM.
Highlights:
Harvard (selected) income: Tuition + Grants -1.6 Billion.
Harvard (selected) Cost     :Salaries + benefits - 2.2 billion.
Harvard operating budget is 4.5B (all sources) on a 20,000 student body and 16000 staff and faculty.

(Tax bill proposes the tax to apply only on endowments that are higher than number of students*$100,000. So a college with 5000 students would have to have an endowment of 500 million to start seeing the tax. )

Who thinks they cannot afford a 22MM in tax?

Attached, Harvard Financial Atatement FY 15...
« Last Edit: November 06, 2017, 11:30:04 AM by djadziadax »

dragoncar

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Re: Republican Tax Plan 2017
« Reply #216 on: November 06, 2017, 11:28:57 AM »
I think the only reasonable interpretation of "simpler tax code" means "fewer resources used in tax planning and filing."  I'm not sure how that the proposal reduces the ongoing amount of effort needed to file taxes at all.  Moreover, it will necessitate a high immediate expenditure of resources while tax software companies rewrite their rules, people change all their "set it and forget it" financial plans, and so on.

I think it would also be reasonable to define a simpler tax code as one that requires fewer audits / government oversight. If everyone takes the standard deduction and doesn't itemize, then the only thing the IRS needs to check is that their income is correct.

I'm a fan of the "IRS sends everybody a bill/refund" idea where the vast majority of people have forms that are electronically reported to the IRS and they can calculate everything for you.  You only need to file if you have additional special circumstances.

dragoncar

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Re: Republican Tax Plan 2017
« Reply #217 on: November 06, 2017, 11:30:48 AM »
Well, I think Harvard can spare 1.5% of its profits on the 20B in endowment they have. They have room for that.

+1 with this. I would think a progressive tax here would be a good idea so that places with massive endowments would pay > 1.5%. The endowments at some of these places are just enormous.

+ 1 (or I guess +19 Trillion (and counting!))

Harvard endowment - 36 billion. Assume 4% SWR  (which they actually use!) = 1.5B withdrawal a year for various uses, which would then be taxed at 1.5%, or 22MM.
Highlights:
Harvard (selected) income: Tuition + Grants -1.6 Billion.
Harvard (selected) Cost     :Salaries + benefits - 2.2 billion.
Harvard operating budget is 4.5B (all sources) on a 20,000 student body and 16000 staff and faculty.

(Tax bill proposes the tax to apply only on endowments that are higher than number of students*$100,000. So a college with 5000 students would have to have an endowment of 500 million to start seeing the tax. )

Who thinks they cannot afford a 22MM in tax?
[/quote]

Come on guys.  Anyone who saves a dollar can "afford" to pay that dollar in taxes.  Affordability is a necessary precondition, but not a sufficient justification for tax increases.

djadziadax

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Re: Republican Tax Plan 2017
« Reply #218 on: November 06, 2017, 11:46:23 AM »
Well, I think Harvard can spare 1.5% of its profits on the 20B in endowment they have. They have room for that.

+1 with this. I would think a progressive tax here would be a good idea so that places with massive endowments would pay > 1.5%. The endowments at some of these places are just enormous.

+ 1 (or I guess +19 Trillion (and counting!))

Harvard endowment - 36 billion. Assume 4% SWR  (which they actually use!) = 1.5B withdrawal a year for various uses, which would then be taxed at 1.5%, or 22MM.
Highlights:
Harvard (selected) income: Tuition + Grants -1.6 Billion.
Harvard (selected) Cost     :Salaries + benefits - 2.2 billion.
Harvard operating budget is 4.5B (all sources) on a 20,000 student body and 16000 staff and faculty.

(Tax bill proposes the tax to apply only on endowments that are higher than number of students*$100,000. So a college with 5000 students would have to have an endowment of 500 million to start seeing the tax. )

Who thinks they cannot afford a 22MM in tax?

Come on guys.  Anyone who saves a dollar can "afford" to pay that dollar in taxes.  Affordability is a necessary precondition, but not a sufficient justification for tax increases.
[/quote]

You are correct - "afford" was the wrong word. They do not "deserve" to be taxed. Just like Warren Buffet deserves to pay lower tax rate than his secretary.


FIREchiefsr

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Re: Republican Tax Plan 2017
« Reply #219 on: November 06, 2017, 11:57:40 AM »
The Senate is due to release their own plan this week so all this could be thrown on its head.

This, plus the house taking it up on the floor.  That said, I wouldn't expect very significant changes.  As we all know, much in Washington is agreed upon behind closed doors, and with the Republicans leading all house of congress, plus the White house, I imagine that the overall framework has all been agreed upon.  Off the top of my head, here are the things that I could see changing:

a) the $1M threshold for the 39.6% bracket being lowered to $600K to $800K.
b) a capped itemized deduction for state and local taxes being added back in (maybe $10,000 like the property taxes, or maybe a non-inflation adjusted pool of $20K for all SALT including property taxes)
c) further tweaks to the bracket thresholds (possibly raising the top of the 12% bracket)
d) phase in of the corporate cuts over six years (possibly immediate cut to 30% with further 2% reduction each of the following five years)
e) increase in the new Standard Deduction (already published IRS tables for 2018 indicate a MFJ standard deduction of $13,000; only in Washington and with our idiot media can we be talking for days about $24,400 being a doubling of $13,000 without anybody blinking an eye)

I think the following are pretty well set:

a) four brackets at 12, 25, 35 and 39.6
b) the doubling of the standard deduction and elimination of personal exemptions
c) elimination of all itemized deductions other than mortgage, charitable, and capped SALT

I am interested to hear what other forum members think might be tweaked.
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maizeman

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Re: Republican Tax Plan 2017
« Reply #220 on: November 06, 2017, 12:29:01 PM »
Well, I think Harvard can spare 1.5% of its profits on the 20B in endowment they have. They have room for that.

+1 with this. I would think a progressive tax here would be a good idea so that places with massive endowments would pay > 1.5%. The endowments at some of these places are just enormous.

+ 1 (or I guess +19 Trillion (and counting!))

Harvard endowment - 36 billion. Assume 4% SWR  (which they actually use!) = 1.5B withdrawal a year for various uses, which would then be taxed at 1.5%, or 22MM.
Highlights:
Harvard (selected) income: Tuition + Grants -1.6 Billion.
Harvard (selected) Cost     :Salaries + benefits - 2.2 billion.
Harvard operating budget is 4.5B (all sources) on a 20,000 student body and 16000 staff and faculty.

(Tax bill proposes the tax to apply only on endowments that are higher than number of students*$100,000. So a college with 5000 students would have to have an endowment of 500 million to start seeing the tax. )

Who thinks they cannot afford a 22MM in tax?

Come on guys.  Anyone who saves a dollar can "afford" to pay that dollar in taxes.  Affordability is a necessary precondition, but not a sufficient justification for tax increases.

You are correct - "afford" was the wrong word. They do not "deserve" to be taxed. Just like Warren Buffet deserves to pay lower tax rate than his secretary.


I agree with dragoncar here. Everyone on this forum is saving some amount of money and hence could afford to pay more tax.

When it comes to deciding whether or not to impose taxes, there are essentially two reasons to do it: 1) to bring in revenue 2) to change behavior.

The personal income tax is an example of the first reason. Cigarette taxes or soda taxes are examples of the second.

The endowment tax isn't going to raise a lot of revenue ($3B over 10 years was the estimate I read) and will add significant new compliance costs for both the university foundation side and the government auditing side so it's not a great tax from the point of view of raising revenue.

Now if we want to change behavior and encourage universities to not accumulate large endowments, maybe this will have some effect there. Is that a goal we have as a society?
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Re: Republican Tax Plan 2017
« Reply #221 on: November 06, 2017, 01:02:01 PM »
It would be nice if income taxes were done away with in general.

The US government takes in about $3.7 trillion in taxes per year. The household networth of the US citizens is about $85 trillion.

$3.7T is 4.4% of $85T so just tax everyone 4.4% of their total networth every year and be done with it. It is perfectly progressive and taxes a billionair more than a millionair.   

OurTown

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Re: Republican Tax Plan 2017
« Reply #222 on: November 06, 2017, 01:06:49 PM »
It would be nice if income taxes were done away with in general.

The US government takes in about $3.7 trillion in taxes per year. The household networth of the US citizens is about $85 trillion.

$3.7T is 4.4% of $85T so just tax everyone 4.4% of their total networth every year and be done with it. It is perfectly progressive and taxes a billionair more than a millionair.

I don't like this idea.  I would, however, go for some sort of consumption tax if it was combined with a universal basic income.  In fact, I suspect that is the way of the future after the robots take all our jobs and nobody has any income to be taxed.

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Re: Republican Tax Plan 2017
« Reply #223 on: November 06, 2017, 01:15:34 PM »
It would be nice if income taxes were done away with in general.

The US government takes in about $3.7 trillion in taxes per year. The household networth of the US citizens is about $85 trillion.

$3.7T is 4.4% of $85T so just tax everyone 4.4% of their total networth every year and be done with it. It is perfectly progressive and taxes a billionair more than a millionair.

I don't like this idea.  I would, however, go for some sort of consumption tax if it was combined with a universal basic income.  In fact, I suspect that is the way of the future after the robots take all our jobs and nobody has any income to be taxed.

A consumption tax penalizes people for spending money. A wealth tax incentivises people to spend money. The latter is far better for the economy and is perfectly progressive where the other is regressive. I realize a wealth tax is not going to be nearly as popular on a forum where people are obsessed with increasing their net worth and reducing spending.

OurTown

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Re: Republican Tax Plan 2017
« Reply #224 on: November 06, 2017, 01:26:12 PM »
Well, it's less regressive if combined with a universal basic income.

sokoloff

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Re: Republican Tax Plan 2017
« Reply #225 on: November 06, 2017, 01:27:38 PM »
Wealth taxation (at a much lower level than 1% per year) is probably a good idea in principle. The practice is where it gets sticky. People have all kinds of illiquid or hard-to-value assets and requiring an accounting of them every year is a wasteful, pain-in-the-ass activity.

It also incents the creation of impaired assets so as to reduce their value. "My house is only worth 75% of what a comparable house is worth because I've sold off the rights to rent it out on AirBnB from Christmas to New Years to another party." "My business is worth to someone else a fraction of its true value to me, because all of the know-how is embodied in my head."

FIREchiefsr

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Re: Republican Tax Plan 2017
« Reply #226 on: November 06, 2017, 02:44:04 PM »
It would be nice if income taxes were done away with in general.

The US government takes in about $3.7 trillion in taxes per year. The household networth of the US citizens is about $85 trillion.

$3.7T is 4.4% of $85T so just tax everyone 4.4% of their total networth every year and be done with it. It is perfectly progressive and taxes a billionair more than a millionair.

If I Roth convert everything before you implement your plan, am I then free of taxes for life?  (i.e. same as today - assuming estate tax is gone)
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Glenstache

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Re: Republican Tax Plan 2017
« Reply #227 on: November 06, 2017, 03:26:29 PM »
This goes back to the big view rather than the specific, but I thought this review of the Tax Policy Center's analysis was interesting:
https://www.vox.com/policy-and-politics/2017/11/6/16614540/house-republican-tax-plan-paul-ryan-tax-policy-center

I'd love to hear people's thoughts on how phase-ins over time would play out (see the difference between 2018 and 2027 projections).

JayhawkRacer

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Re: Republican Tax Plan 2017
« Reply #228 on: November 06, 2017, 03:55:55 PM »
It would be nice if income taxes were done away with in general.

The US government takes in about $3.7 trillion in taxes per year. The household networth of the US citizens is about $85 trillion.

$3.7T is 4.4% of $85T so just tax everyone 4.4% of their total networth every year and be done with it. It is perfectly progressive and taxes a billionair more than a millionair.

If I Roth convert everything before you implement your plan, am I then free of taxes for life?  (i.e. same as today - assuming estate tax is gone)

I would be just slightly upset if my Roth accounts were suddenly going to be taxed (again).

Jrr85

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Re: Republican Tax Plan 2017
« Reply #229 on: November 06, 2017, 04:18:16 PM »
It would be nice if income taxes were done away with in general.

The US government takes in about $3.7 trillion in taxes per year. The household networth of the US citizens is about $85 trillion.

$3.7T is 4.4% of $85T so just tax everyone 4.4% of their total networth every year and be done with it. It is perfectly progressive and taxes a billionair more than a millionair.

I don't like this idea.  I would, however, go for some sort of consumption tax if it was combined with a universal basic income.  In fact, I suspect that is the way of the future after the robots take all our jobs and nobody has any income to be taxed.

A consumption tax penalizes people for spending money. A wealth tax incentivises people to spend money. The latter is far better for the economy and is perfectly progressive where the other is regressive. I realize a wealth tax is not going to be nearly as popular on a forum where people are obsessed with increasing their net worth and reducing spending.

Holy snikes.  No.  Just...no.  Really....No.  Even you buy the animal spirits type argument, that's a bastardization too far. 






aneel

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Re: Republican Tax Plan 2017
« Reply #230 on: November 06, 2017, 05:05:11 PM »
That said, I don't need a tax cut.  And certainly not a deficit financed one so that services can be cut later.

I completely agree with these sentiments, but unfortunately we aren't getting a tax cut and it won't help our future. We're just lining pockets of businesses.

JLee

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Re: Republican Tax Plan 2017
« Reply #231 on: November 06, 2017, 05:10:28 PM »
That said, I don't need a tax cut.  And certainly not a deficit financed one so that services can be cut later.

I completely agree with these sentiments, but unfortunately we aren't getting a tax cut and it won't help our future. We're just lining pockets of businesses.

I don't need a tax cut - I will, however, be extremely displeased if my taxes to go up in an effort to widen the wealth gap even farther.

w@nker

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Re: Republican Tax Plan 2017
« Reply #232 on: November 06, 2017, 08:32:58 PM »
Looks like this tax plan, in its current draft, is going to hit me pretty hard.  While it is very favorable for business owners, hedge fund managers (so much for that campaign promise of eliminating carried interest), and others; it is not favorable at all to corporate executives.  Two big provisions will put a dent in my FIRE plans:

1.  Elimination of deferred compensation plans, effectively.  Because of 401k contribution inequity in my company, high earners are capped at less than half the federal contribution limit, so I defer the excess to a deferred com plan that allows me to get my full company match.  That will disappear.  And, I am actually deferring about half of my salary right now, so I will lose the tax advantages of those tax deferred investments as well.  Most bruising is the fact that I won't be able to stagger a sweet income ladder for my first five years of FIRE as initially planned - which would have allowed me to defer current comp into smaller annual payments in those years, meaning those funds would have been taxed at a much lower marginal tax bracket in FIRE.  This sucks big time.

2. The new code includes stock options in the definition of non qualified deferred comp, meaning that I will have to pay taxes on the fair value of options when they vest, rather than when exercised.  This is a huge blow, as I could end up paying taxes on options that ultimately have no value if the company's shares don't perform.


Ugh.  First class problems, I guess...but it is annoying to see these provisions when totally regressive items like the elimination of the inheritance tax are benefiting the mega rich enormously.  In all, this tax plan could cost me hundreds of thousands of dollars.
« Last Edit: November 06, 2017, 08:35:58 PM by w@nker »

sol

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Re: Republican Tax Plan 2017
« Reply #233 on: November 06, 2017, 08:54:32 PM »
In all, this tax plan could cost me hundreds of thousands of dollars.

That's kind of the point of the plan.  Tax the upper middle class more in order to give tax breaks to the super rich, while ignoring the poor. 

They're making America great again, one billionaire at a time.

w@nker

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Re: Republican Tax Plan 2017
« Reply #234 on: November 06, 2017, 09:21:25 PM »
In all, this tax plan could cost me hundreds of thousands of dollars.

That's kind of the point of the plan.  Tax the upper middle class more in order to give tax breaks to the super rich, while ignoring the poor. 

They're making America great again, one billionaire at a time.

Yep.

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Re: Republican Tax Plan 2017
« Reply #235 on: November 07, 2017, 03:11:56 AM »
In all, this tax plan could cost me hundreds of thousands of dollars.

That's kind of the point of the plan.  Tax the upper middle class more in order to give tax breaks to the super rich, while ignoring the poor. 

They're making America great again, one billionaire at a time.

I don't know that a corporate executive is really just upper middle class. I'd say if this tax plan is costing you hundreds of thousands you're in the upper 1% or higher of earners.  And around this site could have or should have FIREd already from the sounds of it. At which point this tax plan would be beneficial.
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w@nker

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Re: Republican Tax Plan 2017
« Reply #236 on: November 07, 2017, 04:37:38 AM »
In all, this tax plan could cost me hundreds of thousands of dollars.

That's kind of the point of the plan.  Tax the upper middle class more in order to give tax breaks to the super rich, while ignoring the poor. 

They're making America great again, one billionaire at a time.

I don't know that a corporate executive is really just upper middle class. I'd say if this tax plan is costing you hundreds of thousands you're in the upper 1% or higher of earners.  And around this site could have or should have FIREd already from the sounds of it. At which point this tax plan would be beneficial.

Hundreds of thousands in future value...not per year.  That clarification is important, I guess.

As for the rest of your comment, context is important.  A) I am young and haven't been an executive forever.  B) While I could technically walk away right now, there are some major medical conditions in my family for which I must build a large investment reserve, given the uncertainty around healtchcare in this country.  C) Outside of that, I am still saving more than a 3 percent withdrawal rate would demand because I have meaningful philanthropic interests that I'd like to pursue/support in FIRE.

Let's not get judgy.  I didn't realize there was a rule against 1% earners adopting and embracing mustachianism.
« Last Edit: November 07, 2017, 04:39:54 AM by w@nker »

Rural

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Re: Republican Tax Plan 2017
« Reply #237 on: November 07, 2017, 04:47:44 AM »
Well, this would devastate us, as husband's tuition remission would become taxable (and is far higher than his stipend, which is already taxable). I think it'll hit graduate programs all over the country hard, frankly.

boarder42

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Re: Republican Tax Plan 2017
« Reply #238 on: November 07, 2017, 05:12:05 AM »
In all, this tax plan could cost me hundreds of thousands of dollars.

That's kind of the point of the plan.  Tax the upper middle class more in order to give tax breaks to the super rich, while ignoring the poor. 

They're making America great again, one billionaire at a time.

I don't know that a corporate executive is really just upper middle class. I'd say if this tax plan is costing you hundreds of thousands you're in the upper 1% or higher of earners.  And around this site could have or should have FIREd already from the sounds of it. At which point this tax plan would be beneficial.

Hundreds of thousands in future value...not per year.  That clarification is important, I guess.

As for the rest of your comment, context is important.  A) I am young and haven't been an executive forever.  B) While I could technically walk away right now, there are some major medical conditions in my family for which I must build a large investment reserve, given the uncertainty around healtchcare in this country.  C) Outside of that, I am still saving more than a 3 percent withdrawal rate would demand because I have meaningful philanthropic interests that I'd like to pursue/support in FIRE.

Let's not get judgy.  I didn't realize there was a rule against 1% earners adopting and embracing mustachianism.

my point was youre wealthy and have a large income with large income benefits.  So the tax negatively effecting you isnt necessarily a bad thing for society as a whole. 
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w@nker

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Re: Republican Tax Plan 2017
« Reply #239 on: November 07, 2017, 05:46:06 AM »
In all, this tax plan could cost me hundreds of thousands of dollars.

That's kind of the point of the plan.  Tax the upper middle class more in order to give tax breaks to the super rich, while ignoring the poor. 

They're making America great again, one billionaire at a time.

I don't know that a corporate executive is really just upper middle class. I'd say if this tax plan is costing you hundreds of thousands you're in the upper 1% or higher of earners.  And around this site could have or should have FIREd already from the sounds of it. At which point this tax plan would be beneficial.

Hundreds of thousands in future value...not per year.  That clarification is important, I guess.

As for the rest of your comment, context is important.  A) I am young and haven't been an executive forever.  B) While I could technically walk away right now, there are some major medical conditions in my family for which I must build a large investment reserve, given the uncertainty around healtchcare in this country.  C) Outside of that, I am still saving more than a 3 percent withdrawal rate would demand because I have meaningful philanthropic interests that I'd like to pursue/support in FIRE.

Let's not get judgy.  I didn't realize there was a rule against 1% earners adopting and embracing mustachianism.

my point was youre wealthy and have a large income with large income benefits.  So the tax negatively effecting you isnt necessarily a bad thing for society as a whole.

I never said it was.  I actually agree with you.  The point of this thread, however, was to discuss how the tax plan impacts us personally, not how it impacts society.   But, what does bother me is that these incremental taxes to me are not going to pay for incremental services that benefit society. Instead, it is simply a redistribution of wealth from my pocket to someone whose pockets are much deeper already.
« Last Edit: November 07, 2017, 06:15:05 AM by w@nker »

boarder42

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Re: Republican Tax Plan 2017
« Reply #240 on: November 07, 2017, 06:44:35 AM »
In all, this tax plan could cost me hundreds of thousands of dollars.

That's kind of the point of the plan.  Tax the upper middle class more in order to give tax breaks to the super rich, while ignoring the poor. 

They're making America great again, one billionaire at a time.

I don't know that a corporate executive is really just upper middle class. I'd say if this tax plan is costing you hundreds of thousands you're in the upper 1% or higher of earners.  And around this site could have or should have FIREd already from the sounds of it. At which point this tax plan would be beneficial.

Hundreds of thousands in future value...not per year.  That clarification is important, I guess.

As for the rest of your comment, context is important.  A) I am young and haven't been an executive forever.  B) While I could technically walk away right now, there are some major medical conditions in my family for which I must build a large investment reserve, given the uncertainty around healtchcare in this country.  C) Outside of that, I am still saving more than a 3 percent withdrawal rate would demand because I have meaningful philanthropic interests that I'd like to pursue/support in FIRE.

Let's not get judgy.  I didn't realize there was a rule against 1% earners adopting and embracing mustachianism.

my point was youre wealthy and have a large income with large income benefits.  So the tax negatively effecting you isnt necessarily a bad thing for society as a whole.

I never said it was.  I actually agree with you.  The point of this thread, however, was to discuss how the tax plan impacts us personally, not how it impacts society.   But, what does bother me is that these incremental taxes to me are not going to pay for incremental services that benefit society. Instead, it is simply a redistribution of wealth from my pocket to someone whose pockets are much deeper already.

yes i'll agree the money is flowing the wrong direction. 
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djadziadax

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Re: Republican Tax Plan 2017
« Reply #241 on: November 07, 2017, 07:14:51 AM »
Well, this would devastate us, as husband's tuition remission would become taxable (and is far higher than his stipend, which is already taxable). I think it'll hit graduate programs all over the country hard, frankly.

I always thought tuition remission not being taxable is quite unfair for university staff that does not have kids, or, already has advance degrees, or, cannot get an advanced degree due to their schedule not permitting it. I have personal knowledge of folks who send 3-4 kids to college through tuition remission, which amounts to 80K a year to 120K a year in that case tax free. While childless coworkers have to work exactly the same schedule, at exactly the same pay, and not have an opportunity for that benefit.

It seems unfair that it is touted as a benefit, but it only applies to selected folks. I don't know of any other company benefit that is selective, and although technically available to all staff, in practice advantages only select few, and is of that magnitude. I myself thought of actually working in higher ed when the child is old enough, just to take advantage of that benefit, realizing how 'special' it is!

Making it taxable is fair - it is income. Person still get a huge benefit, but instead of 47K a year tax free income, they will pay 12K a year for the education their kid is getting. Still a pretty big deal but seems more logical.
« Last Edit: November 07, 2017, 07:20:32 AM by djadziadax »

djadziadax

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Re: Republican Tax Plan 2017
« Reply #242 on: November 07, 2017, 07:23:08 AM »
On another note, does anyone know if the plan keeps health insurance premiums for employer based insurance pre-tax? Will those also be taxed, or will they still be tax advantaged?  I could not find a discussion on this. My premiums are about 5K a year, plus 5K in HSA   if those become taxable, my taxes will go up.

radram

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Re: Republican Tax Plan 2017
« Reply #243 on: November 07, 2017, 07:50:25 AM »
I would be just slightly upset if my Roth accounts were suddenly going to be taxed (again).
I completely agree with you.

At the same time, When the Roth program began, I never thought for a minute it would stay tax free for my lifetime, and be allowed to grow without mandatory withdrawals. There is just no way this much money can stay untouchable forever. We contributed believing full well there will be a way to separate me from my money in the future. Tax deferred growth is still well worth it to me.

I do not believe this round of tax "reform" will touch Roth money, but by no means do I believe this will be the last tax reform I will see. I look at it as "if I am wrong, I just get to keep more money". Meh.

My opinion on simplification: You have a hard time convincing me you can make taxes "simpler" with a 500+ page document. Just changing the list of winners and losers. As always, me and many on this site will understand whatever the new rules are, and modify behavior to "be a winner".

If they really wanted "simpler", all income would be treated the same. Why should $90,000 of dividends pay $0 in taxes, while a checking account paying .06%(my current rate) be taxed at up to 39%. Not simple, just different winners and losers.

Why is a $100 gift card from your boss at Christmas taxable income, but $15,000 of health care premiums are not?

Why can I buy $10,000 of stock for my newborn and his children can receive millions in cash(soon to be trillions) upon my child's death with a tax bill of $0. Ok, that one really does sound simple; just don't tax. Fair? different post:)

JayhawkRacer

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Re: Republican Tax Plan 2017
« Reply #244 on: November 07, 2017, 07:56:21 AM »
I think the only reasonable interpretation of "simpler tax code" means "fewer resources used in tax planning and filing."  I'm not sure how that the proposal reduces the ongoing amount of effort needed to file taxes at all.  Moreover, it will necessitate a high immediate expenditure of resources while tax software companies rewrite their rules, people change all their "set it and forget it" financial plans, and so on.
I think it would also be reasonable to define a simpler tax code as one that requires fewer audits / government oversight. If everyone takes the standard deduction and doesn't itemize, then the only thing the IRS needs to check is that their income is correct.
I'm a fan of the "IRS sends everybody a bill/refund" idea where the vast majority of people have forms that are electronically reported to the IRS and they can calculate everything for you.  You only need to file if you have additional special circumstances.

This was offered by the IRS years ago, but H+R Block and Intuit lobbied hard against it and won. Even with our "complicated" tax code, the IRS could just tally up everything automatically and send you a completed tax return to verify. Tax prep companies make their money by being middle-men. They don't want to be cut out.

RangerOne

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Re: Republican Tax Plan 2017
« Reply #245 on: November 07, 2017, 07:57:17 AM »
Looks like this tax plan, in its current draft, is going to hit me pretty hard.  While it is very favorable for business owners, hedge fund managers (so much for that campaign promise of eliminating carried interest), and others; it is not favorable at all to corporate executives.  Two big provisions will put a dent in my FIRE plans:

1.  Elimination of deferred compensation plans, effectively.  Because of 401k contribution inequity in my company, high earners are capped at less than half the federal contribution limit, so I defer the excess to a deferred com plan that allows me to get my full company match.  That will disappear.  And, I am actually deferring about half of my salary right now, so I will lose the tax advantages of those tax deferred investments as well.  Most bruising is the fact that I won't be able to stagger a sweet income ladder for my first five years of FIRE as initially planned - which would have allowed me to defer current comp into smaller annual payments in those years, meaning those funds would have been taxed at a much lower marginal tax bracket in FIRE.  This sucks big time.

2. The new code includes stock options in the definition of non qualified deferred comp, meaning that I will have to pay taxes on the fair value of options when they vest, rather than when exercised.  This is a huge blow, as I could end up paying taxes on options that ultimately have no value if the company's shares don't perform.


Ugh.  First class problems, I guess...but it is annoying to see these provisions when totally regressive items like the elimination of the inheritance tax are benefiting the mega rich enormously.  In all, this tax plan could cost me hundreds of thousands of dollars.

Do you get any relief from the elimination of AMT? My father in law is in your position, so I am curious how this effects people with very high compensation, but who are clearly not "rich".

Undecided

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Re: Republican Tax Plan 2017
« Reply #246 on: November 07, 2017, 08:00:10 AM »
In all, this tax plan could cost me hundreds of thousands of dollars.

That's kind of the point of the plan.  Tax the upper middle class more in order to give tax breaks to the super rich, while ignoring the poor. 

They're making America great again, one billionaire at a time.

I don't know that a corporate executive is really just upper middle class. I'd say if this tax plan is costing you hundreds of thousands you're in the upper 1% or higher of earners.  And around this site could have or should have FIREd already from the sounds of it. At which point this tax plan would be beneficial.

Hundreds of thousands in future value...not per year.  That clarification is important, I guess.

As for the rest of your comment, context is important.  A) I am young and haven't been an executive forever.  B) While I could technically walk away right now, there are some major medical conditions in my family for which I must build a large investment reserve, given the uncertainty around healtchcare in this country.  C) Outside of that, I am still saving more than a 3 percent withdrawal rate would demand because I have meaningful philanthropic interests that I'd like to pursue/support in FIRE.

Let's not get judgy.  I didn't realize there was a rule against 1% earners adopting and embracing mustachianism.

my point was youre wealthy and have a large income with large income benefits.  So the tax negatively effecting you isnt necessarily a bad thing for society as a whole.

I never said it was.  I actually agree with you.  The point of this thread, however, was to discuss how the tax plan impacts us personally, not how it impacts society.   But, what does bother me is that these incremental taxes to me are not going to pay for incremental services that benefit society. Instead, it is simply a redistribution of wealth from my pocket to someone whose pockets are much deeper already.

Not to start another tangent, but many exec comp lawyers and advisors see this as the end of current approaches to exec comp. If you’re thinking hundreds of thousands of dollars of accelerated taxes from bringing deferred income into current brackets and paying taxes on options that never strike, I doubt that’s how it will work—�I think comp structure will change instead.

BigRed

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Re: Republican Tax Plan 2017
« Reply #247 on: November 07, 2017, 08:08:02 AM »
I'm missed the elimination of the 5k for childcare deduction. That's 1250 in savings gone for us when we have kids. I thought this was an area that they were looking to expand.

You will still have the Child Care Tax Credit available, which gives a 20% credit on $3000 (1 kid) or $6000 (2+ kids).  20% of $6k is still a $1200 credit, which is close enough to a 25% rate on a $5k deduction plus 20% of the remaining $1k ($6k - $5k) from the credit.  This is a simplification, I don't know why there are two overlapping child care tax treatments, and probably a more equitable approach, since the size of the tax reduction doesn't rise with income.

Of course, it's all moot, since yesterday's amendment by the committee chair put DC FSAs back in.

boarder42

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Re: Republican Tax Plan 2017
« Reply #248 on: November 07, 2017, 08:12:46 AM »
I'm missed the elimination of the 5k for childcare deduction. That's 1250 in savings gone for us when we have kids. I thought this was an area that they were looking to expand.

You will still have the Child Care Tax Credit available, which gives a 20% credit on $3000 (1 kid) or $6000 (2+ kids).  20% of $6k is still a $1200 credit, which is close enough to a 25% rate on a $5k deduction plus 20% of the remaining $1k ($6k - $5k) from the credit.  This is a simplification, I don't know why there are two overlapping child care tax treatments, and probably a more equitable approach, since the size of the tax reduction doesn't rise with income.

Of course, it's all moot, since yesterday's amendment by the committee chair put DC FSAs back in.

do you have a link to the ammendments. or does someone have a quick summary.
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PathtoFIRE

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Re: Republican Tax Plan 2017
« Reply #249 on: November 07, 2017, 08:16:53 AM »
Whoa, didn't realize that deferred compensation was also being axed. I take part in a 409a plan with my company, and while it's less than 10% of my income, the taxes on that income alone pushes my family back into the "this new plan increases my taxes" group. Is it just me, or as this plan begins to get carefully dissected, does it not seem like the number of constituencies that will be against it continue to pile up?