Author Topic: Republican Tax Plan 2017  (Read 72133 times)

JLee

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Re: Republican Tax Plan 2017
« Reply #750 on: November 29, 2017, 03:19:25 PM »

Because it's a tax loophole. Employer perks are wage income and should be taxed. If they are not taxed, they are tax loopholes (like your employer-based health insurance, which is the biggest tax loophole in America). It's no different at a university just because the perk happens to be reduced tuition.

Is the bill closing even one CORPORATE tax loophole???  Corporations keep their SALT deduction and get a 20% rate, but all of a sudden the Republicans think it makes sense to take away loopholes for individuals??  They keep the carried interest loophole benefiting hedge fund managers but make tuition waivers for grad students taxable???

I don't see why the existence of some loopholes makes other loopholes justified. I also am not really worried about corporations: the best corporate income tax rate is 0%. Corporations should only pay tax on the unimproved land value of their property and whatever surtaxes are assigned to their utilities. They shouldn't get a deduction for those taxes anymore than individuals do, because Uncle Sam should not be subsidizing local and state governments through the tax code.

I guess you could say they should pay a VAT too, if support that kind of taxation.

I don't particularly care about the carried interest taxation. I am more interested in imposing a general tax on financial transactions than changing tax codes for hedge funds. Carried interest only seems to be a really huge issue for people who care majorly about income inequality, which is not something I'm interested in.

You're dodging the point.

A Definite Beta Guy

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Re: Republican Tax Plan 2017
« Reply #751 on: November 29, 2017, 03:40:30 PM »

Because it's a tax loophole. Employer perks are wage income and should be taxed. If they are not taxed, they are tax loopholes (like your employer-based health insurance, which is the biggest tax loophole in America). It's no different at a university just because the perk happens to be reduced tuition.

Is the bill closing even one CORPORATE tax loophole???  Corporations keep their SALT deduction and get a 20% rate, but all of a sudden the Republicans think it makes sense to take away loopholes for individuals??  They keep the carried interest loophole benefiting hedge fund managers but make tuition waivers for grad students taxable???

I don't see why the existence of some loopholes makes other loopholes justified. I also am not really worried about corporations: the best corporate income tax rate is 0%. Corporations should only pay tax on the unimproved land value of their property and whatever surtaxes are assigned to their utilities. They shouldn't get a deduction for those taxes anymore than individuals do, because Uncle Sam should not be subsidizing local and state governments through the tax code.

I guess you could say they should pay a VAT too, if support that kind of taxation.

I don't particularly care about the carried interest taxation. I am more interested in imposing a general tax on financial transactions than changing tax codes for hedge funds. Carried interest only seems to be a really huge issue for people who care majorly about income inequality, which is not something I'm interested in.

You're dodging the point.
How so?
Quote
I don't see why the existence of some loopholes makes other loopholes justified.

JLee

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Re: Republican Tax Plan 2017
« Reply #752 on: November 29, 2017, 03:44:54 PM »

Because it's a tax loophole. Employer perks are wage income and should be taxed. If they are not taxed, they are tax loopholes (like your employer-based health insurance, which is the biggest tax loophole in America). It's no different at a university just because the perk happens to be reduced tuition.

Is the bill closing even one CORPORATE tax loophole???  Corporations keep their SALT deduction and get a 20% rate, but all of a sudden the Republicans think it makes sense to take away loopholes for individuals??  They keep the carried interest loophole benefiting hedge fund managers but make tuition waivers for grad students taxable???

I don't see why the existence of some loopholes makes other loopholes justified. I also am not really worried about corporations: the best corporate income tax rate is 0%. Corporations should only pay tax on the unimproved land value of their property and whatever surtaxes are assigned to their utilities. They shouldn't get a deduction for those taxes anymore than individuals do, because Uncle Sam should not be subsidizing local and state governments through the tax code.

I guess you could say they should pay a VAT too, if support that kind of taxation.

I don't particularly care about the carried interest taxation. I am more interested in imposing a general tax on financial transactions than changing tax codes for hedge funds. Carried interest only seems to be a really huge issue for people who care majorly about income inequality, which is not something I'm interested in.

You're dodging the point.
How so?
Quote
I don't see why the existence of some loopholes makes other loopholes justified.

If we're writing a new tax bill to close all these alleged loopholes, why are we 1) not closing ANY corporate ones, and 2) lowering the corporate rate further?

Then again, you don't care about income inequality so I suppose you might actually be looking forward to the old days when the .1% lived in castles and everybody else were peasants. Unless, of course, I've misread your post entirely.

dragoncar

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Re: Republican Tax Plan 2017
« Reply #753 on: November 29, 2017, 05:21:19 PM »
So the same would hold for gifts given to children? At what age should this be enforced? If I pay for my kids grad program should that be taxable?
Of course it should.  Income is income.  If your 12 year old is out mowing lawns all summer, he's supposed to pay taxes on his income.  Even his tips.
I think you missed mizz's point, either intentionally or unintentionally.

If I gift my 8 year old a dinner, presumably that should not be taxable to her.
If I gift her a $10 toy for Christmas, presumably that should not be taxable to her.
If I gift her $1000 into her 529 account, that is currently not taxable (and I believe should not be taxable to her either, and legally, it falls into the gift tax exemption amount).

mizz was specifically talking about gifts given to children, not the child working for income.

Dinner and toys sound like non-taxable fringe benefits

jpdx

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Re: Republican Tax Plan 2017
« Reply #754 on: November 29, 2017, 10:53:54 PM »
Interesting development regarding pass-through income. The latest Senate version is likely to include a 20% deduction for pass-through income. The House version works differently, it caps the rate at 25%, whereas the Senate version offers this deduction.

https://www.cnbc.com/2017/11/29/senate-tax-bill-will-reportedly-raise-pass-through-deduction-to-20-percent.html

Meaning small business owners in the 10-15% tax bracket would see a benefit from the Senate plan, compared to the House plan where they would see no benefit at all. Am I correct?

jpdx

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Re: Republican Tax Plan 2017
« Reply #755 on: November 29, 2017, 10:58:08 PM »
...Presumably this would this be an above-the-line deduction, reducing AGI, and thus increasing ACA premium tax credit.

neverrun

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Re: Republican Tax Plan 2017
« Reply #756 on: November 30, 2017, 04:40:22 AM »
JLee- what conclusion am I supposed to draw from this link? That tuition waivers exist?

I argued that PhD students get the massive majority of graduate level tuition waivers. Masters/MBA/ JD/MD degrees are major profit centers. These students are not getting waivers or fellowships the come with tuition assistance.

From your own link:
"Teaching and research assistantships were most common among students in doctoral degree programs, where 47.6% received assistantships. In contrast, only 8.3% of students in Masterís degree programs received assistantships"

Hence I still contend that tax assisting PhD students would constitute the bulk of the expense to universities.

Personal anecdote.  I have a friend currently in a public health PHD, she has been stipend in both her masters and now her PHD program.

Mr Mark

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Re: Republican Tax Plan 2017
« Reply #757 on: November 30, 2017, 05:16:33 AM »
I'm glad they left the LTCG and qualified div rates pretty much unchanged. That and ACA are the key to post-FIRE success. I'm presuming as well that real estate will still be allowed to deduct depreciation, property tax and interest. and 
Mr. Mark

MustachianAccountant

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Re: Republican Tax Plan 2017
« Reply #758 on: November 30, 2017, 05:45:15 AM »
Anyway, at least changing the step-up basis would be prudent - seems crazy not to.  Unrealized capital gains (not family businesses!) account for a large share of estates that get hit with the estate tax.
If you're advocating getting rid of the step-up in basis, I think that's a bad idea from a practical perspective.

When did Grandpa buy those shares? What were the basis figures on the dates of those various purchases? How much was the result of dividend reinvestments? When were those purchases? What was the share count and cost basis of those shares?

A paperwork and logistical nightmare as compared to "what day did Grandpa die? what were the shares worth on that day? Perfect; glad to have that taken care of in 5 minutes."

Can't figure it out? Fine, your basis is $0. Problem solved.

(Incidentally, Grandpa would have run into this problem if he had sold the shares *before* he died, how would that problem be solved? There's no "step up" in basis for people who forgot when they bought shares, or misplaced the paperwork. The best you can do is eyeball when the shares were bought through the company or broker, and use historical data, or if you're lazy, just make the basis $0)
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MustachianAccountant

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Re: Republican Tax Plan 2017
« Reply #759 on: November 30, 2017, 05:50:00 AM »
Agreed, it seems like the biggest argument in favor of the estate tax is "they're rich, they can afford it".

I think the better argument is that the estate tax is part of mitigating structural inequality.  It is wealth redistribution. Taxing the wealthy and wealth redistribution is not something everyone in this country agrees is a good thing, but many (myself included) think that a healthy society has a level of wealth redistribution and limits extreme economic inequality.

If you work your whole life and pay taxes, you don't pay taxes again when you die.  You are dead, you aren't doing anything.  Whoever is inheriting the money is (indirectly) paying the taxes, which seems appropriate. 

Anyway, at least changing the step-up basis would be prudent - seems crazy not to.  Unrealized capital gains (not family businesses!) account for a large share of estates that get hit with the estate tax.

I agree that limiting extreme wealth inequality is a fine goal for a society, but I'm not sure that an Estate tax is the best way to accomplish that. I also think that, if you DO want to accomplish it with an estate tax, EVERYone should be subject to it. As another poster said above, "they're dead, they don't need that money." Why should ANYone be allowed to pass a pile of money on to their heirs?
"If we wait for the moment when everything, absolutely everything is ready, we shall never begin." - Ivan Turgenev
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NeonPegasus

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Re: Republican Tax Plan 2017
« Reply #760 on: November 30, 2017, 07:07:00 AM »
The estate tax should stay.  Nobody receiving over $11M is hurting. 

Not only should it stay, it should be lowered!  Why are we exempting $11 million from estate taxes?  That's more cash than anyone needs, because it will fund more than an entire lifetime at median salaries.  It's just a gift to the super-rich.


Just curious - do you think the number of beneficiaries should play into it? So, instead of the estate being taxed based on the lump sum, individuals are taxed based on what they receive. The more people to whom it is distributed, the less likelihood it has of hitting the limit.

Here's an example - right now, father in law's estate hovers near the current $6.5mm limit. He has three children who will be beneficiaries. At least half of his estate is real estate and he's directing DH and I to receive the family house, which may be valued at nearly a third (and meaning we'd receive little cash) of the value of the estate. If we had to pay a significant tax upon inheriting it, we'd have to sell or mortgage it to pay taxes.

Anyway, point is, $6.5mm split between 3 people is not the same as if all of it is given to 1 person. It seems like treating the estate tax more like the gift tax would be reasonable.

If one of the goals of an estate tax is to reduce the concentration of wealth, making it a per person tax would encourage the distribution amongst more people (though admittedly, it would probably still be the same family).

Anyway, I have agreed with your arguments about the estate tax, etc. Though selfishly, I'd like to not pay a whole bunch of taxes, I don't think it's right to have huge amounts of wealth concentrated in the hands of so few.


desertadapted

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Re: Republican Tax Plan 2017
« Reply #761 on: November 30, 2017, 07:22:37 AM »
Although itís been mentioned over and over again on this thread, the obvious and simple solution to the estate tax is to eliminate the stepped-up basis for everyone.  Then you can inherit unlimited wealth for no tax consequences.  The tax is only collected when you actually benefit from the asset (sell it).   That mythical unicorn, the family farm, could stay in the family indefinitely without tax consequences.  Donít know what the historical tax basis for the asset was?  Fine, make it $0.  It was free to you anyway.  If the dearly departed didnít bother to keep records on the tax basis how are you harmed by that?  But sadly, eliminating the step-up in basis is a fantasy rendered impossible by our current plutocracy.  Inconsolably grumpy about current tax plan, in case you can't tell.

jean

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Re: Republican Tax Plan 2017
« Reply #762 on: November 30, 2017, 08:40:17 AM »
Although itís been mentioned over and over again on this thread, the obvious and simple solution to the estate tax is to eliminate the stepped-up basis for everyone.  Then you can inherit unlimited wealth for no tax consequences.  The tax is only collected when you actually benefit from the asset (sell it).
This is reasonable.  I don't think the estate tax should be repealed at all, but one can make an argument that it should in the case where the step up basis doesn't exist.

I think it is nuts that the plan is to repeal the estate tax and keep the stepped up basis.  This is not something I've seen widely reported in the media. Then again, media attention is somewhat irrelevant since it doesn't really matter what the public thinks.  The law will pass or not pass without any say from normal taxpayers. 

A Definite Beta Guy

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Re: Republican Tax Plan 2017
« Reply #763 on: November 30, 2017, 09:06:44 AM »

Because it's a tax loophole. Employer perks are wage income and should be taxed. If they are not taxed, they are tax loopholes (like your employer-based health insurance, which is the biggest tax loophole in America). It's no different at a university just because the perk happens to be reduced tuition.

Is the bill closing even one CORPORATE tax loophole???  Corporations keep their SALT deduction and get a 20% rate, but all of a sudden the Republicans think it makes sense to take away loopholes for individuals??  They keep the carried interest loophole benefiting hedge fund managers but make tuition waivers for grad students taxable???

I don't see why the existence of some loopholes makes other loopholes justified. I also am not really worried about corporations: the best corporate income tax rate is 0%. Corporations should only pay tax on the unimproved land value of their property and whatever surtaxes are assigned to their utilities. They shouldn't get a deduction for those taxes anymore than individuals do, because Uncle Sam should not be subsidizing local and state governments through the tax code.

I guess you could say they should pay a VAT too, if support that kind of taxation.

I don't particularly care about the carried interest taxation. I am more interested in imposing a general tax on financial transactions than changing tax codes for hedge funds. Carried interest only seems to be a really huge issue for people who care majorly about income inequality, which is not something I'm interested in.

You're dodging the point.
How so?
Quote
I don't see why the existence of some loopholes makes other loopholes justified.

If we're writing a new tax bill to close all these alleged loopholes, why are we 1) not closing ANY corporate ones, and 2) lowering the corporate rate further?

Then again, you don't care about income inequality so I suppose you might actually be looking forward to the old days when the .1% lived in castles and everybody else were peasants. Unless, of course, I've misread your post entirely.


It's not a tax bill to close all loopholes. GOP House leadership picked this particular one to make up some of the money on their bill so they can give a tax cut elsewhere. There's probably a bi-partisan tax overhaul bill that will close more loopholes, but this bill obviously isn't it, and the GOP did not even make an attempt at it.

Why would it bother me that the corporate tax rate is going down? I support that. Like I said, I think the corporate income tax rate should be zero. You're also correct that I don't particularly care about income inequality, but even if I did, I don't think the tax code is the place to reduce inequality. We should be raising tax dollars in the least distortionary matter possible. If that means Warren Bufffet is charged 0% tax, it means Warren Buffet doesn't pay tax. You should address inequality on the SPENDING side, by ensuring money goes to poor kids, poor schools, poor whatever, instead of Warren Buffet. This makes intuitive sense to me.

The specific question is why conservatives aren't up in arms about the graduate student hit, though. At least that's the way I read it. It's because it's a tax loophole. It's also not a tax loophole that will affect me much (unlike the tax loophole on medical insurance, which I would like to keep...everyone likes their own tax loopholes).

ZiziPB

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Re: Republican Tax Plan 2017
« Reply #764 on: November 30, 2017, 09:28:54 AM »

Why would it bother me that the corporate tax rate is going down? I support that. Like I said, I think the corporate income tax rate should be zero. You're also correct that I don't particularly care about income inequality, but even if I did, I don't think the tax code is the place to reduce inequality. We should be raising tax dollars in the least distortionary matter possible. If that means Warren Bufffet is charged 0% tax, it means Warren Buffet doesn't pay tax. You should address inequality on the SPENDING side, by ensuring money goes to poor kids, poor schools, poor whatever, instead of Warren Buffet. This makes intuitive sense to me.

The problem with your thinking is that there would be nothing or precious little to spend if corporations and the Warren Buffets of the world pay zero tax.  You can address income inequality with spending but the money has to come from somewhere...



Glenstache

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Re: Republican Tax Plan 2017
« Reply #765 on: November 30, 2017, 10:10:05 AM »
Just wow. This seems like an inconscionable case of kicking US citizens when they are down. I was not aware of this previously. One provision of the tax bill is to place a 20% excise tax on goods sent from Puerto Rico to the mainland.

http://thehill.com/policy/finance/362309-san-juan-mayor-gop-tax-bill-would-be-more-devastating-to-puerto-ricos-economy

This will destroy parts of their economy. Why? What is the possible justification for this? Why would this have even been put into the bill in the first place? The only thing I can think of is if a competitor to some industry on the island wanted more market share and lobbied a representative to slip it in.

Don't forget that PR does not get a voice in congress. Taxation without representation, anyone?
« Last Edit: November 30, 2017, 10:11:38 AM by Glenstache »

sokoloff

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Re: Republican Tax Plan 2017
« Reply #766 on: November 30, 2017, 10:21:06 AM »
Don't forget that PR does not get a voice in congress. Taxation without representation, anyone?
Is it taxation without representation?

I thought it was "no taxation and no representation" as PR residents are not federally taxed on PR-sourced income.

Assuming that is the case, it seems reasonable to levy a cross-border tax or some other means of putting PR-based manufacturing companies onto a similar footing as non-PR-based US-based companies.

Glenstache

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Re: Republican Tax Plan 2017
« Reply #767 on: November 30, 2017, 10:46:56 AM »
Don't forget that PR does not get a voice in congress. Taxation without representation, anyone?
Is it taxation without representation?

I thought it was "no taxation and no representation" as PR residents are not federally taxed on PR-sourced income.

Assuming that is the case, it seems reasonable to levy a cross-border tax or some other means of putting PR-based manufacturing companies onto a similar footing as non-PR-based US-based companies.

...except that corporations and individuals are taxed in PR.
https://tradingeconomics.com/puerto-rico/corporate-tax-rate
https://en.wikipedia.org/wiki/Implications_of_Puerto_Rico%27s_current_political_status#Taxation

GreenEggs

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Re: Republican Tax Plan 2017
« Reply #768 on: November 30, 2017, 10:49:32 AM »
Death should not be an event that our government collects taxes on.

The amount that has been accumulated in one's lifetime is irrelevant. 

The money was hard earned & taxed all along the way. 

Why not tax corporations %40 each time a CEO retires? 

ZiziPB

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Re: Republican Tax Plan 2017
« Reply #769 on: November 30, 2017, 10:57:47 AM »
Death should not be an event that our government collects taxes on.

The amount that has been accumulated in one's lifetime is irrelevant. 

The money was hard earned & taxed all along the way

Why not tax corporations %40 each time a CEO retires? 
Not quite.  You are forgetting the step up in basis.  Any capital gains would go completely untaxed.



sokoloff

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Re: Republican Tax Plan 2017
« Reply #770 on: November 30, 2017, 10:59:50 AM »
Don't forget that PR does not get a voice in congress. Taxation without representation, anyone?
Is it taxation without representation?

I thought it was "no taxation and no representation" as PR residents are not federally taxed on PR-sourced income.
...except that corporations and individuals are taxed in PR.
https://tradingeconomics.com/puerto-rico/corporate-tax-rate
https://en.wikipedia.org/wiki/Implications_of_Puerto_Rico%27s_current_political_status#Taxation
Your first link details the Puerto Rico taxes imposed (not the federal US government taxes) and your second link says that "Puerto Rico residents who work for the federal government pay US income taxes".

I don't think either of those refute the "no taxation [on PR-sourced income] and no representation" claim. (Yes, they pay into and take out of Social Security; I'll give you that.)

OurTown

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Re: Republican Tax Plan 2017
« Reply #771 on: November 30, 2017, 10:59:58 AM »
Senate Republicans, shorter version:  "Fuck the poor!"  (hat tip to Mel Brooks, History of the Word Part One).

OurTown

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Re: Republican Tax Plan 2017
« Reply #772 on: November 30, 2017, 11:00:53 AM »
Senate Republicans, Christmas version:  "Are the no prisons?  And the workhouses, are they in good working order?"

OurTown

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Re: Republican Tax Plan 2017
« Reply #773 on: November 30, 2017, 11:01:35 AM »
Senate Republicans, Christmas version, now with healthcare policy:  "Let them die and decrease the surplus population."

ixtap

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Re: Republican Tax Plan 2017
« Reply #774 on: November 30, 2017, 11:04:04 AM »
Don't forget that PR does not get a voice in congress. Taxation without representation, anyone?
Is it taxation without representation?

I thought it was "no taxation and no representation" as PR residents are not federally taxed on PR-sourced income.
...except that corporations and individuals are taxed in PR.
https://tradingeconomics.com/puerto-rico/corporate-tax-rate
https://en.wikipedia.org/wiki/Implications_of_Puerto_Rico%27s_current_political_status#Taxation
Your first link details the Puerto Rico taxes imposed (not the federal US government taxes) and your second link says that "Puerto Rico residents who work for the federal government pay US income taxes".

I don't think either of those refute the "no taxation [on PR-sourced income] and no representation" claim. (Yes, they pay into and take out of Social Security; I'll give you that.)

The very first google hit says "Puerto Rican corporations who intend to send funds to the US...pay federal income taxes."

Glenstache

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Re: Republican Tax Plan 2017
« Reply #775 on: November 30, 2017, 11:05:01 AM »
Don't forget that PR does not get a voice in congress. Taxation without representation, anyone?
Is it taxation without representation?

I thought it was "no taxation and no representation" as PR residents are not federally taxed on PR-sourced income.
...except that corporations and individuals are taxed in PR.
https://tradingeconomics.com/puerto-rico/corporate-tax-rate
https://en.wikipedia.org/wiki/Implications_of_Puerto_Rico%27s_current_political_status#Taxation
Your first link details the Puerto Rico taxes imposed (not the federal US government taxes) and your second link says that "Puerto Rico residents who work for the federal government pay US income taxes".

I don't think either of those refute the "no taxation [on PR-sourced income] and no representation" claim. (Yes, they pay into and take out of Social Security; I'll give you that.)

In short, economic activity that stays within PR is not taxed by the Feds. If it extends beyond, then they pay Fed taxes just like everybody else.

sokoloff

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Re: Republican Tax Plan 2017
« Reply #776 on: November 30, 2017, 11:17:38 AM »
In short, economic activity that stays within PR is not taxed by the Feds. If it extends beyond, then they pay Fed taxes just like everybody else.
If my economic activity stayed fully within Massachusetts, I would still be taxed federally. The fact that PR doesn't work the same way substantially undermines the "taxation without representation" claim, IMO.

Want representation? Become fully subject to federal taxation (basically, petition to become a state, which has its own quagmire of pros and cons to different constituencies).

mizzourah2006

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Re: Republican Tax Plan 2017
« Reply #777 on: November 30, 2017, 11:32:50 AM »
Although itís been mentioned over and over again on this thread, the obvious and simple solution to the estate tax is to eliminate the stepped-up basis for everyone.  Then you can inherit unlimited wealth for no tax consequences.  The tax is only collected when you actually benefit from the asset (sell it).   That mythical unicorn, the family farm, could stay in the family indefinitely without tax consequences.  Donít know what the historical tax basis for the asset was?  Fine, make it $0.  It was free to you anyway.  If the dearly departed didnít bother to keep records on the tax basis how are you harmed by that?  But sadly, eliminating the step-up in basis is a fantasy rendered impossible by our current plutocracy.  Inconsolably grumpy about current tax plan, in case you can't tell.

I completely agree with this. Now that brokerages and investments are tracked via computer it would not be that difficult to calculate the original price paid and tax the gains if/when the investments were sold. It's not like people are walking around with hundreds of stock certificates today and the govt. can't find out how much was paid for them.

sol

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Re: Republican Tax Plan 2017
« Reply #778 on: November 30, 2017, 11:33:25 AM »
Death should not be an event that our government collects taxes on.

The estate tax is not a tax on death, it is a tax on heirs who receive vast sums on unearned wealth.

An inheritance is income, just like winning the lottery is income.  Why are lottery winnings taxed but inheritances are not?  The person receiving the money should owe taxes on their income.  The dead person owes nothing.

sokoloff

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Re: Republican Tax Plan 2017
« Reply #779 on: November 30, 2017, 11:37:32 AM »
Now that brokerages and investments are tracked via computer it would not be that difficult to calculate the original price paid and tax the gains if/when the investments were sold. It's not like people are walking around with hundreds of stock certificates today and the govt. can't find out how much was paid for them.
The groundwork is being laid for such a system to be workable, but the data is nowhere near covering the purchases of people who are most likely to die today.

It covers only:
  • Shares of stock, including exchange-traded funds (ETFs) that are not treated as regulated investment companies (RICs) for taxation purposes, you acquired on or after January 1, 2011;
  • Shares of stock in RICs and stocks acquired in connection with dividend reinvestment plans acquired on or after January 1, 2012;
  • Specific debt securities (for example bonds with a fixed rate of interest and fixed maturity date), securities futures contracts, options, rights and warrants purchased or acquired on or after January 1, 2014; and
  • All other debt securities (for example zero coupon bonds that convert into interest paying bonds) purchased or acquired on or after January 1, 2016 (this tax information will be reportable on 1099-B forms filed in 2017).
These regulations were passed to reduce the tax compliance slippage, but also sets us up for a reasonable way to eliminate the step-up in basis upon death in 50 years.

mizzourah2006

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Re: Republican Tax Plan 2017
« Reply #780 on: November 30, 2017, 11:43:14 AM »
Now that brokerages and investments are tracked via computer it would not be that difficult to calculate the original price paid and tax the gains if/when the investments were sold. It's not like people are walking around with hundreds of stock certificates today and the govt. can't find out how much was paid for them.
The groundwork is being laid for such a system to be workable, but the data is nowhere near covering the purchases of people who are most likely to die today.

It covers only:
  • Shares of stock, including exchange-traded funds (ETFs) that are not treated as regulated investment companies (RICs) for taxation purposes, you acquired on or after January 1, 2011;
  • Shares of stock in RICs and stocks acquired in connection with dividend reinvestment plans acquired on or after January 1, 2012;
  • Specific debt securities (for example bonds with a fixed rate of interest and fixed maturity date), securities futures contracts, options, rights and warrants purchased or acquired on or after January 1, 2014; and
  • All other debt securities (for example zero coupon bonds that convert into interest paying bonds) purchased or acquired on or after January 1, 2016 (this tax information will be reportable on 1099-B forms filed in 2017).
These regulations were passed to reduce the tax compliance slippage, but also sets us up for a reasonable way to eliminate the step-up in basis upon death in 50 years.

so given what you are saying is true (I'm not debating it at all) if I am a 75 year old with some of these investments today and I decide to sell them, how do I pay taxes on them if it isn't trackable by the govt? Do I not pay taxes on the gains?

sokoloff

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Re: Republican Tax Plan 2017
« Reply #781 on: November 30, 2017, 11:54:08 AM »
so given what you are saying is true (I'm not debating it at all) if I am a 75 year old with some of these investments today and I decide to sell them, how do I pay taxes on them if it isn't trackable by the govt? Do I not pay taxes on the gains?
You self-report the basis, calculate the [edit: basis gain] from that, and put it on schedule D. Absent an audit, it's on the honor system.

I used to file a 20+ page schedule D with a generated list of open and close dates (extracted from my online trading records and formatted by excel or python/lisp code). The chance the IRS ever looked at any given line item is approximately zero in my estimation, particularly since I listed some open and close transaction dates as "various", "various ST", or "various LT". I played it entirely straight, but the opportunity for abuse and fraud was rampant.

The reason for the step-up in basis being more practical at death versus before death (IMO) is that before death, you have access to the living taxpayer who might remember when or where they bought the asset, either exactly or approximately. Obviously, in an estate situation, that same inquiry is not possible.
« Last Edit: November 30, 2017, 11:56:15 AM by sokoloff »

ZiziPB

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Re: Republican Tax Plan 2017
« Reply #782 on: November 30, 2017, 11:55:18 AM »
Now that brokerages and investments are tracked via computer it would not be that difficult to calculate the original price paid and tax the gains if/when the investments were sold. It's not like people are walking around with hundreds of stock certificates today and the govt. can't find out how much was paid for them.
The groundwork is being laid for such a system to be workable, but the data is nowhere near covering the purchases of people who are most likely to die today.

It covers only:
  • Shares of stock, including exchange-traded funds (ETFs) that are not treated as regulated investment companies (RICs) for taxation purposes, you acquired on or after January 1, 2011;
  • Shares of stock in RICs and stocks acquired in connection with dividend reinvestment plans acquired on or after January 1, 2012;
  • Specific debt securities (for example bonds with a fixed rate of interest and fixed maturity date), securities futures contracts, options, rights and warrants purchased or acquired on or after January 1, 2014; and
  • All other debt securities (for example zero coupon bonds that convert into interest paying bonds) purchased or acquired on or after January 1, 2016 (this tax information will be reportable on 1099-B forms filed in 2017).
These regulations were passed to reduce the tax compliance slippage, but also sets us up for a reasonable way to eliminate the step-up in basis upon death in 50 years.

so given what you are saying is true (I'm not debating it at all) if I am a 75 year old with some of these investments today and I decide to sell them, how do I pay taxes on them if it isn't trackable by the govt? Do I not pay taxes on the gains?
Presumably the sale would be reported to IRS by your broker with a $0 basis and it would be up to you to show your actual basis.  If you can't, you pay taxes on the entire sale proceeds.



jean

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Re: Republican Tax Plan 2017
« Reply #783 on: November 30, 2017, 12:15:47 PM »
The reason for the step-up in basis being more practical at death versus before death (IMO) is that before death, you have access to the living taxpayer who might remember when or where they bought the asset, either exactly or approximately. Obviously, in an estate situation, that same inquiry is not possible.
I hear you, but lack of paperwork and complexity is no excuse for capital gains incurred during the duration of the now-dead person's life to go untaxed, forever.   Do you agree?  What do you propose as a solution, if not an estate tax or simply making the basis $0 if you can't figure it out?

sokoloff

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Re: Republican Tax Plan 2017
« Reply #784 on: November 30, 2017, 12:26:37 PM »
I don't find a loophole that requires the death of a human being to take advantage of to be particularly objectionable or exploitable and would rather the government forgo the taxes on some income than to excessively tax the inheritance (by a zero basis determination) or to create a bunch of wasteful human activity (to guesstimate the basis and potentially audit the same) particularly for those under the stress of the death of a beloved family member.

So, I think I just don't agree with your premise, though I completely understand your position and agree that it has a different though equally logical consistency as mine does.

I think that an estate exemption in the single-digit millions per deceased person (to avoid taxing "nuisance estates") and a step-up in basis for recipients is practical and pragmatic, even if as an engineer, I can identify certain small unfairnesses about that outcome.

seattlecyclone

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Re: Republican Tax Plan 2017
« Reply #785 on: November 30, 2017, 12:26:48 PM »
Death should not be an event that our government collects taxes on.

The estate tax is not a tax on death, it is a tax on heirs who receive vast sums on unearned wealth.

Not exactly. The estate tax pays no attention to how much you inherited. It is charged on the total value of the deceased person's estate, and is the same amount whether the whole inheritance goes to one person or is split up across 100 far-flung relatives.

Some states do actually have an "inheritance tax" that is calculated based on how much a living person receives from an estate. Nothing like that currently exists at the federal level.
I made a blog! https://seattlecyclone.com/

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loyalreader

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Re: Republican Tax Plan 2017
« Reply #786 on: November 30, 2017, 01:49:32 PM »
Death should not be an event that our government collects taxes on.

The amount that has been accumulated in one's lifetime is irrelevant. 

The money was hard earned & taxed all along the way. 


We can quibble over your third point, but not your first. The government does not collect taxes on death. That's a ridiculous statement and calling it a death tax is false. 

The tax is on your estate. Yes, it is taxed when you die, but it is not a tax on your death. It is a tax on your heir's inheritance. 

I don't think it's unreasonable to think that someone who stands to inherit $11m when their parents die has been given a leg up on... everything... in their life. I don't feel bad for people who have to pay more taxes on inheritances over $11m.

If everyone who had an estate of more than $11m gave the excess to the charity of their choice that would be great. We probably both agree that would be better than the government taking it as a tax. But you can't legislate moral responsibility, only rights.

sokoloff

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Re: Republican Tax Plan 2017
« Reply #787 on: November 30, 2017, 02:40:33 PM »
Death should not be an event that our government collects taxes on.

The amount that has been accumulated in one's lifetime is irrelevant. 

The money was hard earned & taxed all along the way. 
We can quibble over your third point, but not your first. The government does not collect taxes on death. That's a ridiculous statement and calling it a death tax is false. 

The tax is on your estate. Yes, it is taxed when you die, but it is not a tax on your death. It is a tax on your heir's inheritance.
If there's something ridiculous written above, I don't agree with you on which statements are ridiculous.

"My labor isn't taxed; it's an income tax after all."

"My purchases aren't taxed. It's a sales tax, not a purchase tax."

Those both seem equally valid as "It's not a tax on a death event; it's an estate tax."

sol

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Re: Republican Tax Plan 2017
« Reply #788 on: November 30, 2017, 02:50:57 PM »
You've misunderstood.  The estate tax is not an extra tax you pay after death, it is an exemption from the gift tax because of your death.  You are allowed to make a one time tax free gift of your estate after death, without being subject to the normal gift taxes on such a transfer.  You're welcome!

I would be totally in favor of "repealing" the estate tax if it meant we just went back to using normal gift tax rates.  If you want to give huge sums of money to someone, that person should pay the normal taxes on it.  no more special treatment just because you died first.

jean

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Re: Republican Tax Plan 2017
« Reply #789 on: November 30, 2017, 02:54:47 PM »
I think that an estate exemption in the single-digit millions per deceased person (to avoid taxing "nuisance estates") and a step-up in basis for recipients is practical and pragmatic, even if as an engineer, I can identify certain small unfairnesses about that outcome.
I agree with that!  Let's let Congress know of our plan!  Ha.

seattlecyclone

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Re: Republican Tax Plan 2017
« Reply #790 on: November 30, 2017, 03:23:19 PM »
You've misunderstood.  The estate tax is not an extra tax you pay after death, it is an exemption from the gift tax because of your death.  You are allowed to make a one time tax free gift of your estate after death, without being subject to the normal gift taxes on such a transfer.  You're welcome!

I would be totally in favor of "repealing" the estate tax if it meant we just went back to using normal gift tax rates.  If you want to give huge sums of money to someone, that person should pay the normal taxes on it.  no more special treatment just because you died first.

I think you might misunderstand how the gift tax works. The primary reason it even exists is to limit the opportunity for elderly folks to make an end run around the estate tax by giving away all of their wealth shortly before death. The transfer of the estate value on death is taxed essentially the same way as gifts during life would be.

You start with a large lifetime exemption (currently about $5.5 million, adjusted annually for inflation). You only have to report any gifts that exceed $14k per giver/recipient pair in a year. Any reportable gifts eat into your lifetime exemption. Only after the exemption is exhausted do you start owing any gift taxes on future gifts. Whatever amount of the exemption that remains at death then becomes exempt from estate tax. The transfer of wealth is thus taxed the same whether it happens before or after death. Death does have a nice tax benefit in that the cost basis of appreciated assets gets reset to current market values. Otherwise there's no real difference.
I made a blog! https://seattlecyclone.com/

The Roth IRA was named after William Roth, who represented Delaware in the US senate from 1971-2001. "Roth" is a name, not an acronym. There's no need to capitalize the final three letters.

simonsez

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Re: Republican Tax Plan 2017
« Reply #791 on: November 30, 2017, 03:44:54 PM »
Death does have a nice tax benefit.
Damn straight, if you die you don't have to worry about taxes.

JLee

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Re: Republican Tax Plan 2017
« Reply #792 on: November 30, 2017, 04:28:01 PM »
You've misunderstood.  The estate tax is not an extra tax you pay after death, it is an exemption from the gift tax because of your death.  You are allowed to make a one time tax free gift of your estate after death, without being subject to the normal gift taxes on such a transfer.  You're welcome!

I would be totally in favor of "repealing" the estate tax if it meant we just went back to using normal gift tax rates.  If you want to give huge sums of money to someone, that person should pay the normal taxes on it.  no more special treatment just because you died first.

I think you might misunderstand how the gift tax works. The primary reason it even exists is to limit the opportunity for elderly folks to make an end run around the estate tax by giving away all of their wealth shortly before death. The transfer of the estate value on death is taxed essentially the same way as gifts during life would be.

You start with a large lifetime exemption (currently about $5.5 million, adjusted annually for inflation). You only have to report any gifts that exceed $14k per giver/recipient pair in a year. Any reportable gifts eat into your lifetime exemption. Only after the exemption is exhausted do you start owing any gift taxes on future gifts. Whatever amount of the exemption that remains at death then becomes exempt from estate tax. The transfer of wealth is thus taxed the same whether it happens before or after death. Death does have a nice tax benefit in that the cost basis of appreciated assets gets reset to current market values. Otherwise there's no real difference.

Or..."other than erasing capital gains entirely, there's no difference."

Small details.

seattlecyclone

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Re: Republican Tax Plan 2017
« Reply #793 on: November 30, 2017, 04:42:47 PM »
Erasing capital gains is worth a few percent of the overall value of the estate, give or take a bit depending on how much the assets have appreciated and what tax bracket the heirs are in. Compared to the strategy of giving your assets to your heirs during life, this advantage is counteracted a bit by the ability to give $14k per year completely free of any tax tracking. I still consider the two taxes to be roughly equivalent. This was the intent all along.
I made a blog! https://seattlecyclone.com/

The Roth IRA was named after William Roth, who represented Delaware in the US senate from 1971-2001. "Roth" is a name, not an acronym. There's no need to capitalize the final three letters.

bacchi

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Re: Republican Tax Plan 2017
« Reply #794 on: November 30, 2017, 11:07:03 PM »
Corker is holding his party's feet to the fire re: the deficit. It's amazing what not being up for reelection can do to one's spine.

It's tough to find a viable solution if your corporate masters are preventing you from getting off your knees.

ZiziPB

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Re: Republican Tax Plan 2017
« Reply #795 on: December 01, 2017, 04:48:27 AM »
Corker is holding his party's feet to the fire re: the deficit. It's amazing what not being up for reelection can do to one's spine.

It's tough to find a viable solution if your corporate masters are preventing you from getting off your knees.
I certainly hope this dog's breakfast of a bill goes up in flames!  Not that our system is good now, but neither the House bill nor the Senate one are an improvement to the system.



MustachianAccountant

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Re: Republican Tax Plan 2017
« Reply #796 on: December 01, 2017, 05:43:45 AM »
The estate tax should stay.  Nobody receiving over $11M is hurting. 

Not only should it stay, it should be lowered!  Why are we exempting $11 million from estate taxes?  That's more cash than anyone needs, because it will fund more than an entire lifetime at median salaries.  It's just a gift to the super-rich.


Just curious - do you think the number of beneficiaries should play into it? So, instead of the estate being taxed based on the lump sum, individuals are taxed based on what they receive. The more people to whom it is distributed, the less likelihood it has of hitting the limit.

Here's an example - right now, father in law's estate hovers near the current $6.5mm limit. He has three children who will be beneficiaries. At least half of his estate is real estate and he's directing DH and I to receive the family house, which may be valued at nearly a third (and meaning we'd receive little cash) of the value of the estate. If we had to pay a significant tax upon inheriting it, we'd have to sell or mortgage it to pay taxes.

Anyway, point is, $6.5mm split between 3 people is not the same as if all of it is given to 1 person. It seems like treating the estate tax more like the gift tax would be reasonable.

I was thinking the same thing this morning, and I think it's also a workable solution. Each inheritor pays income tax on the inheritance, and gets a certain exemption amount (like, maybe $500,000 or something similarly low). But, to my mind, the step up in basis would still have to go.
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jim555

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Re: Republican Tax Plan 2017
« Reply #797 on: December 01, 2017, 06:05:25 AM »
What a difference a few hours makes.  Now they say it is in trouble.  The billionaire boys club must be upset.

NoStacheOhio

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Re: Republican Tax Plan 2017
« Reply #798 on: December 01, 2017, 07:04:01 AM »
Quote
PhDs aren't the only kind of grad students that receive tuition waivers

Such as? And in large numbers? Genuine curiosity - can't think of a field where Masters or JD candidates are given waived tuition.

My wife got tuition as part of her TA package as a Master's student in Journalism
The first step is acknowledging you have a problem, right?

https://forum.mrmoneymustache.com/journals/digging-out-of-a-hole/

StarBright

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Re: Republican Tax Plan 2017
« Reply #799 on: December 01, 2017, 07:31:13 AM »


Just curious - do you think the number of beneficiaries should play into it? So, instead of the estate being taxed based on the lump sum, individuals are taxed based on what they receive. The more people to whom it is distributed, the less likelihood it has of hitting the limit.

Here's an example - right now, father in law's estate hovers near the current $6.5mm limit. He has three children who will be beneficiaries. At least half of his estate is real estate and he's directing DH and I to receive the family house, which may be valued at nearly a third (and meaning we'd receive little cash) of the value of the estate. If we had to pay a significant tax upon inheriting it, we'd have to sell or mortgage it to pay taxes.

Anyway, point is, $6.5mm split between 3 people is not the same as if all of it is given to 1 person. It seems like treating the estate tax more like the gift tax would be reasonable.

If one of the goals of an estate tax is to reduce the concentration of wealth, making it a per person tax would encourage the distribution amongst more people (though admittedly, it would probably still be the same family).

Anyway, I have agreed with your arguments about the estate tax, etc. Though selfishly, I'd like to not pay a whole bunch of taxes, I don't think it's right to have huge amounts of wealth concentrated in the hands of so few.

I've never given it much thought but your idea makes a bit of sense to me. We are in a similar situation to you where my in-laws have a fair amount of real estate in a VHCOL area. DH's grandfather specified that he wanted the family property (several acres and a house) to go to my DH and my in-laws plan to follow his wishes, but there is frankly no way we could afford to keep the property paying 40% tax on it. We've always assumed we would sell the land to a developer and do our best to keep the house. But we'd be able to come closer to paying the taxes and keeping a historic family property if we were only paying taxes on the house and land rather than my in-laws entire estate.