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General Discussion => Welcome and General Discussion => Topic started by: Glenstache on November 02, 2017, 10:44:02 AM

Title: Republican Tax Plan 2017
Post by: Glenstache on November 02, 2017, 10:44:02 AM
So... the GOP has released the first cut at the tax plan.
http://www.businessinsider.com/trump-gop-tax-reform-plan-bill-text-details-rate-2017-10

https://www.nytimes.com/2017/11/02/us/politics/tax-plan-republicans.html

How will this (as currently proposed as it will certainly change) impact your FIRE plans?

In FIRE, most of us will not have a high income, but changes to mortgage interest deductions, and deductions for medical expenses could be important both during FIRE and accumulations phases.

This list from the BI article above seems the most impacting elements:

Quote

Elimination of most personal itemized deductions and many credits. The only deduction preserved explicitly in the plan is for charitable gifts and and edited home-mortgage interest. Some of these include:
        Elimination of the student loan interest deduction: The amount paid toward student loan interest can currently be deducted.
        Elimination of the medical expense deduction: Under current law, individuals who spend over 10% of their income on medical expenses are allowed to deduct part of those costs from their taxes. The proposed new bill would remove that deduction.
        Elimination of the moving deduction: This allows anyone who moved to a new home in the past year to deduct moving expenses.
        Elimination of alimony payment deduction.
    Repeal of the alternative minimum tax (AMT): The tax, which forces people who qualify due to an outsized number of deductions, would be eliminated under the legislation. Incidentally, Trump's own tax bill has been shown to be millions of dollars more because of the tax.
Title: Re: Republican Tax Plan 2017
Post by: NeonPegasus on November 02, 2017, 11:14:28 AM
I am surprised by how okay I am with the details as presented thus far. Really, I expected much worse. My comments below in red.

- The tax rate changes I'm not super thrilled about. It used to be that joint filers making over $470k got put into the top bracket. Now that's been doubled. But maybe that's not the biggest deal since the current system starts single filers in that bracket at $418k and joint at $470k. I'm guessing two high earner families would simply have both filed single. Anyway, I would have liked to see another bracket at the top for super earners.
- GOP reached a deal that would allow people to deduct state and local property taxes up to $10,000 but not income or sales taxes. I know that will hurt in some high tax areas but it seems that states should bear the responsibility for their high taxes. Why should someone in a low tax state effectively be funding the deductions for someone in a high tax state?
Corporate tax cut will be immediate and permanent: The cut to 20% from the current 35% will is designed to be permanent. I wonder about this one.
Elimination of the estate tax: I disagree with this one. Sure, make it higher and index it to inflation but I think eliminating it will worsen inequality issues while adding to the deficit.
Repatriation tax rate: The repatriation rate on overseas assets for US companies would be as high as 12%. I wonder if this will backfire later.
No repeal of Obamacare's individual mandate: No argument here.
No changes to 401(k) plans: Hooray.
Increase in the size of the child tax credit. Yay but really, it won't make much difference for those who need it most.
Limiting home mortgage interest deduction: On new home purchases, interest on loans up to $500,000 would be deductible. Agreed.
A larger standard deduction. To avoid raising taxes on those currently in the 10% tax bracket, the standard deduction for all taxes would increase to $12,000 for individuals (up from $6,350) and $24,000 for married couples (up from $12,700). I'm in favor of simplifying our tax system and hopefully this would help.
A 25% rate for pass-through businesses. Instead of getting taxed at an individual rate for business profits, people who own their own business would pay at the so-called pass-through rate. There will be some guardrails on what kinds of businesses can claim this rate, to avoid individuals abusing the lower tax. Seems reasonable that legit small businesses shouldn't be taxed at a higher rate than corporations, though it looks like there will still be a difference.
Elimination of most personal itemized deductions and many credits. The only deduction preserved explicitly in the plan is for charitable gifts and and edited home-mortgage interest. Some of these include:
Elimination of the student loan interest deduction: Disagree. Education is a super important investment. But maybe the elimination would put pressure on colleges to make tuition more affordable?
Elimination of the medical expense deduction: Under current law, individuals who spend over 10% of their income on medical expenses are allowed to deduct part of those costs from their taxes. The proposed new bill would remove that deduction. Disagree.
Elimination of the moving deduction: Agree. Why did we have this in the first place?
Elimination of alimony payment deduction. Agree.
Repeal of the alternative minimum tax (AMT): Possibly disagree. I agree with the purpose of the AMT but I'm wondering if the changes to the deductions above make it less necessary.
Create a tax on large private university endowments: Private universities with assets of more than $100,000 per student will pay a 1.4% excise tax on their net investment income. Possibly disagree. This may really make it harder for private universities to offer good scholarships.
Repeal the Johnson Amendment: The current rule prevents tax-exempt nonprofits from making explicit election endorsements. Disagree.
Eliminate the ability to deduct interest on bonds for sports stadiums from federal taxes: Agree.
Title: Re: Republican Tax Plan 2017
Post by: acroy on November 02, 2017, 11:26:53 AM
Summary from Marketwatch how it will affect personal taxes https://www.marketwatch.com/story/heres-a-breakdown-of-how-the-new-house-tax-bill-impacts-your-taxes-2017-11-02

• There will be four tax rates: 12%, 25%, 35% and 39.6%. For single people, the brackets will be up to $45,000, up to $200,000, up to $500,000 and over $500,000, and for married people, those brackets will be up to $90,000, up to $260,000, up to $1 million and over $1 million.

The standard deduction would be hiked from $6,350 to $12,000 for individuals and $12,700 to $24,000 for married couples. But there will be no personal exemptions.

• The child tax credit will be hiked to $1,600 from $1,000 per child, and there will be a credit of $300 for each parent to help with expenses.

• The mortgage interest deduction will be preserved for existing mortgages but capped at $500,000 for newly purchased homes.

• State and local income taxes will not be able to be deducted, but state and local property taxes will be, up to $10,000.

• Despite intense debate, there doesn’t appear to be any change to 401(k) and Individual Retirement Accounts.

• The alternative minimum tax is repealed.

• The estate tax exemption will be doubled, and in six years, will be repealed.

• The deduction for interest on education loans and the deduction for qualified tuition and related expenses would be repealed.

Overall I'm a fan. Some simplification. Personally will score big with the child tax credit.
Title: Re: Republican Tax Plan 2017
Post by: Cheddar Stacker on November 02, 2017, 11:28:19 AM
I make a nice living. A little into the six figure category, family of 4. Certainly not poor, likely top 10% of family income. Not necesarily middle class, likely upper middle class, but certainly not wealthy/rich/ultra high earner by most standards.

I just ran all the numbers for my scenario based on everything I read. Best case scenario, my taxes would go up by about $800. Taxable income will increase $19k but the lower rates keep the increase reasonable. It's still an increase. Most people who itemize will end up paying more due to the loss of exemptions.

It doesn't really impact my FIRE plans, but it sure pisses me off knowing I'm paying more for this proposed "middle class tax cut" while people much more well off than me will pay substantially less.
Title: Re: Republican Tax Plan 2017
Post by: Inaya on November 02, 2017, 11:36:22 AM
PTF
Title: Re: Republican Tax Plan 2017
Post by: CCCA on November 02, 2017, 11:42:32 AM
has anyone seen info on capital gains rates?  I'm searching but not finding any info.  Wondering if they are keeping the low rates 15% and 0% for long-term gains.
Title: Re: Republican Tax Plan 2017
Post by: Cheddar Stacker on November 02, 2017, 11:49:10 AM
has anyone seen info on capital gains rates?  I'm searching but not finding any info.  Wondering if they are keeping the low rates 15% and 0% for long-term gains.

I think details on most everything are scarce. Still just a framework. I haven't seen anything about capital gains.
Title: Re: Republican Tax Plan 2017
Post by: CCCA on November 02, 2017, 11:54:04 AM
has anyone seen info on capital gains rates?  I'm searching but not finding any info.  Wondering if they are keeping the low rates 15% and 0% for long-term gains.

I think details on most everything are scarce. Still just a framework. I haven't seen anything about capital gains.


yeah, I figure it'll be more or less the same just because it plays to the GOP's wealthy base.  Maybe even a drop for the very top bracket. 
Title: Re: Republican Tax Plan 2017
Post by: BigRed on November 02, 2017, 11:55:42 AM
I, too, am surprised at how well it ends up for us.  We're HCOL, northern NJ.  As renters, we will have slightly higher taxable income, due to the combined effect of increased standard deduction and elimination of personal and dependent exemptions.  But, the new brackets mean less tax, and the increase of the phase out point for the increased child tax credit is a huge win.  Overall, we'd see a $6k tax cut, by my calculations.

We are currently looking to buy, though.  The new tax plan exchanges the AMT for the cap on the Property Tax deduction, and end up with almost identical taxes either way for our price/tax range. 

So, the net effect is to make buying much less attractive, which lowers my expectation on house value appreciation, which makes buying even less attractive.  Maybe we continue to rent if this passes or buy only if the perfect option comes along.

That said, I don't need a tax cut.  And certainly not a deficit financed one so that services can be cut later.

Title: Re: Republican Tax Plan 2017
Post by: v8rx7guy on November 02, 2017, 12:11:07 PM
I think that it's a decent proposal.  I will benefit from the 12% tax rate, I'll benefit from the increase in the Child Tax Credit, and I'll no longer have to work through the schedule A.  I don't think it will make a massive difference for me, but I do think it will help a lot of people who really need the a break in taxes.
Title: Re: Republican Tax Plan 2017
Post by: Cheddar Stacker on November 02, 2017, 12:12:51 PM
The 429 page bill is attached if anyone else cares for more details.
Title: Re: Republican Tax Plan 2017
Post by: JSMustachian on November 02, 2017, 12:18:41 PM
I ran the numbers for my tax situation. Wife and I with all pretax retirement accounts maxed. The higher standard deduction, lower rate down to 12%, and keeping the pretax retirement plans are really helping my situation. I am looking at a $2500 savings.

I am interested in seeing if the child tax credit phases out for higher income earners since we have one on the way and exceed the income cap. Currently it phases out at $110,000. With the expanded child tax credit I could see my tax saving increase to over $4000.

Even with losing personal exemptions my taxes will go down from the lower rate and expanded child tax credit.
Title: Re: Republican Tax Plan 2017
Post by: Glenstache on November 02, 2017, 12:21:25 PM
The 429 page bill is attached if anyone else cares for more details.

you can search the text in PDF for specific things you are interested in, such as "Capital gain" to find how they adjust that.
Title: Re: Republican Tax Plan 2017
Post by: BigRed on November 02, 2017, 12:30:48 PM
I am interested in seeing if the child tax credit phases out for higher income earners since we have one on the way and exceed the income cap. Currently it phases out at $110,000. With the expanded child tax credit I could see my tax saving increase to over $4000.

The Child Tax Credit Phase-Out starting point moves from $110k to $230k.
Title: Re: Republican Tax Plan 2017
Post by: fi_minded on November 02, 2017, 12:31:17 PM
Can anyone clarify the change on page 143 of the PDF above?

Quote
SEC. 1501. REPEAL OF SPECIAL RULE PERMITTING RE-CHARACTERIZATION OF ROTH IRA CONTRIBUTIONS AS TRADITIONAL IRA CONTRIBUTIONS.
18 (a) IN GENERAL.—Section 408A(d) is amended by
19 striking paragraph (6) and by redesignating paragraph
20 (7) as paragraph (6).

I believe you have to cross-reference it with the current tax code to make any sense of it: https://www.law.cornell.edu/uscode/text/26/408A

Paragraph (6) that is being struck out:

Quote
(6) Taxpayer may make adjustments before due date
(A) In general
Except as provided by the Secretary, if, on or before the due date for any taxable year, a taxpayer transfers in a trustee-to-trustee transfer any contribution to an individual retirement plan made during such taxable year from such plan to any other individual retirement plan, then, for purposes of this chapter, such contribution shall be treated as having been made to the transferee plan (and not the transferor plan).
(B) Special rules
(i) Transfer of earnings
Subparagraph (A) shall not apply to the transfer of any contribution unless such transfer is accompanied by any net income allocable to such contribution.
(ii) No deduction
Subparagraph (A) shall apply to the transfer of any contribution only to the extent no deduction was allowed with respect to the contribution to the transferor plan.

My real question is whether this affects a backdoor roth or a mega backdoor roth? I've never done either so I'm not quite clear if a Roth -> Traditional re-characterization is part of the process.
Title: Re: Republican Tax Plan 2017
Post by: madamwitty on November 02, 2017, 12:34:18 PM
So, does the property tax deduction apply on top of the $24,000 standard deduction (for MFJ) or only if it combines with some other kind of deduction (e.g. charitable donation) to exceed the standard deduction? Since it's limited to $10,000, it seems like it would apply to very few people if it has to "replace" the standard deduction.
Title: Re: Republican Tax Plan 2017
Post by: sunnyca on November 02, 2017, 12:35:09 PM
PTF
Title: Re: Republican Tax Plan 2017
Post by: Bruinguy on November 02, 2017, 12:44:52 PM
Can anyone clarify the change on page 143 of the PDF above?

Quote
SEC. 1501. REPEAL OF SPECIAL RULE PERMITTING RE-CHARACTERIZATION OF ROTH IRA CONTRIBUTIONS AS TRADITIONAL IRA CONTRIBUTIONS.
18 (a) IN GENERAL.—Section 408A(d) is amended by
19 striking paragraph (6) and by redesignating paragraph
20 (7) as paragraph (6).

I believe you have to cross-reference it with the current tax code to make any sense of it: https://www.law.cornell.edu/uscode/text/26/408A

Paragraph (6) that is being struck out:

Quote
(6) Taxpayer may make adjustments before due date
(A) In general
Except as provided by the Secretary, if, on or before the due date for any taxable year, a taxpayer transfers in a trustee-to-trustee transfer any contribution to an individual retirement plan made during such taxable year from such plan to any other individual retirement plan, then, for purposes of this chapter, such contribution shall be treated as having been made to the transferee plan (and not the transferor plan).
(B) Special rules
(i) Transfer of earnings
Subparagraph (A) shall not apply to the transfer of any contribution unless such transfer is accompanied by any net income allocable to such contribution.
(ii) No deduction
Subparagraph (A) shall apply to the transfer of any contribution only to the extent no deduction was allowed with respect to the contribution to the transferor plan.

My real question is whether this affects a backdoor roth or a mega backdoor roth? I've never done either so I'm not quite clear if a Roth -> Traditional re-characterization is part of the process.

If I understand it, if you make a non-deductible contribution your IRA in one year (say 2018) and you convert it to a Roth IRA before your deadline to file (April 2019), then this new section says that you treat it as if you only made the contribution to the Roth IRA and disregard the first step. 

Again, if I understand it correctly, it would mean that you would have to wait to convert, but that it would not prohibit it.  So, now you would have to make the non-deductible contribution in 2018, and then convert it sometime after April 2019.
Title: Re: Republican Tax Plan 2017
Post by: v8rx7guy on November 02, 2017, 12:46:15 PM
So, does the property tax deduction apply on top of the $24,000 standard deduction (for MFJ) or only if it combines with some other kind of deduction (e.g. charitable donation) to exceed the standard deduction? Since it's limited to $10,000, it seems like it would apply to very few people if it has to "replace" the standard deduction.

Good question.  My original interpretation was that it would be like before where all of the combined items on the Schedule A could be used in lieu of the Standard deduction.  But what would be left on the Schedule A now... not a whole lot, that's for sure.  If it were a separate line item in ADDITION to the standard deduction, that would be a great change for me!
Title: Re: Republican Tax Plan 2017
Post by: Cheddar Stacker on November 02, 2017, 12:59:52 PM
So, does the property tax deduction apply on top of the $24,000 standard deduction (for MFJ) or only if it combines with some other kind of deduction (e.g. charitable donation) to exceed the standard deduction? Since it's limited to $10,000, it seems like it would apply to very few people if it has to "replace" the standard deduction.

Good question.  My original interpretation was that it would be like before where all of the combined items on the Schedule A could be used in lieu of the Standard deduction.  But what would be left on the Schedule A now... not a whole lot, that's for sure.  If it were a separate line item in ADDITION to the standard deduction, that would be a great change for me!

It's not on top of the $24k.

Itemized deductions will apply to very few people now. $10k real estate tax plus maybe $25k mortgage interest on a $500k mortgage. Plus charitable contributions and little else. It will be hard for most people to exceed the $24k standard deduction now.
Title: Re: Republican Tax Plan 2017
Post by: BFGirl on November 02, 2017, 01:07:25 PM
So, does the property tax deduction apply on top of the $24,000 standard deduction (for MFJ) or only if it combines with some other kind of deduction (e.g. charitable donation) to exceed the standard deduction? Since it's limited to $10,000, it seems like it would apply to very few people if it has to "replace" the standard deduction.

I believe you would have to itemize to get the property tax deduction, so your itemized deductions would have to exceed the standard deduction
Title: Re: Republican Tax Plan 2017
Post by: Cheddar Stacker on November 02, 2017, 01:09:40 PM
Other notes from my first glance at the first 150 pages:

1- Page 127/128 discusses HSAs and makes me think that deduction may be going away, confusing read though.

2- Definition of personal residence moved from 2 years to 5 years living in the house. Tax on sale of residence will be more common as a result.

3- Dependent care benefits may be going away, again it's a confusing read though.

4- DPAD is going away. Domestic Production Activities Deduction. This will directly affect very few, restricted to business owners who qualify, but it could indirectly affect thousands of American jobs as it removes incentives for manufacturing jobs in the United States. Not surprising given the current powers that be, but it isn't being highlighted by anyone and it is going to really screw the middle class.
Title: Re: Republican Tax Plan 2017
Post by: BFGirl on November 02, 2017, 01:10:03 PM
Although, I have not run the numbers, I think this would be worse for me.  I lose the personal exemptions for me and my college children, plus I no longer get the head of household standard deduction, but have to use the individual.  Even if I can itemize, I think I will come out owing more as I am still essentially in the same tax bracket as before.
Title: Re: Republican Tax Plan 2017
Post by: BigRed on November 02, 2017, 01:19:19 PM
Other notes from my first glance at the first 150 pages:

1- Page 127/128 discusses HSAs and makes me think that deduction may be going away, confusing read though.

2- Definition of personal residence moved from 2 years to 5 years living in the house. Tax on sale of residence will be more common as a result.

3- Dependent care benefits may be going away, again it's a confusing read though.


I can't imagine HSAs going anywhere, that's a huge GOP healthcare 'solution.'

Is that the Dependent Care Tax Credit or the DCFSA, or both? 
Title: Re: Republican Tax Plan 2017
Post by: index on November 02, 2017, 01:19:28 PM
I think some people may be celebrating the move of the standard deduction from 12.7k to 24k but forgetting the personal exemption of 4k has been removed. This means your effective deduction using the standard deduction for a couple on the old plan was 12.7k + 4k + 4k = 20.7k. If your itemized deductions last year were greater than 16k, you are going to be taxed on more of your income.

The big detriment is to those with kids. Say you had two kids, if you took the standard deduction you were able to deduct (12.7k +4k x 4 persons) 28.7k from your income without itemizing. Now it is 24k. In addition the provision to use a (5k) child care flexible spending account is off the table. 
Title: Re: Republican Tax Plan 2017
Post by: talltexan on November 02, 2017, 01:19:47 PM
ptf
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 02, 2017, 01:23:11 PM
Although, I have not run the numbers, I think this would be worse for me.  I lose the personal exemptions for me and my college children, plus I no longer get the head of household standard deduction, but have to use the individual.  Even if I can itemize, I think I will come out owing more as I am still essentially in the same tax bracket as before.

Not true - Head of Household is retained, deduction is 18,300. I file as HOH, live in NYC, and my itemized deductions were about 18K. So it is a wash for me which is great considering my SALT taxes as so freaking high!
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 02, 2017, 01:26:58 PM
I think some people may be celebrating the move of the standard deduction from 12.7k to 24k but forgetting the personal exemption of 4k has been removed. This means your effective deduction using the standard deduction for a couple on the old plan was 12.7k + 4k + 4k = 20.7k. If your itemized deductions last year were greater than 16k, you are going to be taxed on more of your income.

The big detriment is to those with kids. Say you had two kids, if you took the standard deduction you were able to deduct (12.7k +4k x 4 persons) 28.7k from your income without itemizing. Now it is 24k. In addition the provision to use a (5k) child care flexible spending account is off the table.

Thant what I thought, but, you get a child CREDIT of $1600 for each child, so in your scenario, you will pay $1200 less tax for the two kids.
Title: Re: Republican Tax Plan 2017
Post by: JSMustachian on November 02, 2017, 01:29:40 PM
I think some people may be celebrating the move of the standard deduction from 12.7k to 24k but forgetting the personal exemption of 4k has been removed. This means your effective deduction using the standard deduction for a couple on the old plan was 12.7k + 4k + 4k = 20.7k. If your itemized deductions last year were greater than 16k, you are going to be taxed on more of your income.

The big detriment is to those with kids. Say you had two kids, if you took the standard deduction you were able to deduct (12.7k +4k x 4 persons) 28.7k from your income without itemizing. Now it is 24k. In addition the provision to use a (5k) child care flexible spending account is off the table.

I thought this myself but after running the numbers for my situation that was not the case. I still came out with a lower tax bill. I ran hypothetical numbers once our first is born and a second in the future. The expanded child credit makes up for losing those exemptions at least in my situation.
Title: Re: Republican Tax Plan 2017
Post by: BFGirl on November 02, 2017, 01:31:14 PM
Although, I have not run the numbers, I think this would be worse for me.  I lose the personal exemptions for me and my college children, plus I no longer get the head of household standard deduction, but have to use the individual.  Even if I can itemize, I think I will come out owing more as I am still essentially in the same tax bracket as before.

Actually, reading through the bill, I think they may be keeping head of household, it just doesn't seem like any of the news stories are mentioning it.  Anyone else read the bill this way?

‘‘(c) STANDARD DEDUCTION.—For purposes of this subtitle—
‘‘(1) IN GENERAL.—Except as otherwise provided in this subsection, the term ‘standard deduction’ means—
  ‘‘(A) $24,400, in the case of a joint return (or a surviving spouse (as defined in section 2(a)),
  ‘‘(B) three-quarters of the amount in effect  under subparagraph (A) for the taxable year, in the case of an unmarried individual with at least one qualifying child (within the meaning of section 7706), and
  ‘‘(C) one-half of the amount in effect under subparagraph (A) for the taxable year, in any other case.

I'm a lawyer and this makes my head hurt...
Title: Re: Republican Tax Plan 2017
Post by: BFGirl on November 02, 2017, 01:32:09 PM
Although, I have not run the numbers, I think this would be worse for me.  I lose the personal exemptions for me and my college children, plus I no longer get the head of household standard deduction, but have to use the individual.  Even if I can itemize, I think I will come out owing more as I am still essentially in the same tax bracket as before.

Not true - Head of Household is retained, deduction is 18,300. I file as HOH, live in NYC, and my itemized deductions were about 18K. So it is a wash for me which is great considering my SALT taxes as so freaking high!

Thanks, I was reading the actual bill and that was what I thought after reading it.
Title: Re: Republican Tax Plan 2017
Post by: Inaya on November 02, 2017, 01:33:29 PM
So honest question, is this version actually "simplified" compared to the current tax code? That was ostensibly the (stated) goal of tax reform in the first place.
Title: Re: Republican Tax Plan 2017
Post by: ketchup on November 02, 2017, 01:36:21 PM
Hand-waved the numbers and it'll save me a few hundred bucks a year.  Not enough to make me feel too strongly about it on a personal level.

But as for my thoughts on some of the details:

Fewer tax brackets makes the tax code "seem" simpler on the surface, but it doesn't really mean that much on its own.  Fine.  Less overall, saving the most for people at $200k+/yr.  As expected.
Corporate tax cut going from 35% to 20% seems like a drastic change that will sure mean something, but I don't know enough to have a real opinion.  Maybe lower margin businesses will pop up?
Eliminating the estate tax is just dumb.  Less dynastic wealth would be better, not more.
The "repatriation tax rate" sounds like a good idea, but I don't know enough of the nuance to say whether it'll have unintended consequences or be easily dodged in some way.
Increase child tax credit: sure.
Limit mortgage-deduction to 500k loans: sure - I'm generally opposed to this deduction anyway, and limiting this plus the larger standard deduction means it'll do less.
Larger standard deduction: this means a bit less monkey business with deductions so fine.
Pass-through rate for small businesses: sounds good, don't know the details of how that works.
Eliminating student loan interest deduction sounds really bad, but in reality it probably won't mean a ton with the increased standard deduction.  My guess is this will be the least popular part of the whole thing that will be reversed the easiest.
Tax on private university endowments? No, that's dumb.  Education is already too expensive.
Title: Re: Republican Tax Plan 2017
Post by: sherr on November 02, 2017, 01:39:58 PM
So honest question, is this version actually "simplified" compared to the current tax code? That was ostensibly the (stated) goal of tax reform in the first place.

Yes, a lot of the itemized deductions are going away, and that's what makes it so complicated in the first place. They could have gone farther, but it is simpler.

The number of tax brackets I don't think make any difference for "simplicity". If there are no deductions at all then you can have 100 brackets and it's still perfectly simple. "What's your income? How many people in your household? Okay, you owe X in taxes, refund check's in the mail!"
Title: Re: Republican Tax Plan 2017
Post by: frugalecon on November 02, 2017, 01:41:02 PM
Based on a quick calculation, our taxes (MFJ) would have been about $2000 higher in 2016 if these rates and other provisions had been in force. If this passes, I may move to a system of consolidating charitable deductions for two years into one year, and then alternating between itemizing and claiming the standard deduction.
Title: Re: Republican Tax Plan 2017
Post by: MMMarbleheader on November 02, 2017, 01:41:54 PM
I had about $24 in itemized last year and $16k in personal.

I will pay about $2k more in taxes loosing the $16k in personal but get back $1200 in expanded child tax credit so overall about $800 more in taxes.

Interesting digging on the home sale exemption. The 2 to 5 years will add taxes to a lot of FIRE live in flippers with high incomes.
Title: Re: Republican Tax Plan 2017
Post by: PathtoFIRE on November 02, 2017, 01:45:20 PM
Deductions have always come off at your marginal rate, right? I'm just confused, because a story on CNBC attempting to explain the winners and losers says that MFJ will pay 12% at incomes between 24k and 90k, which makes it sound like the opposite. Under the current rules, if the MFJ 12% bracket were set at 90k, then your real rates would be 0% on the first 24k, and 12% on every dollar earned from 24k to 114k (90+24). I'm guessing some writer/editor was just being too flippant about this, and I haven't read any of the actual bill, but wondering if anyone else noticed this, as it would be a rather large change.
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 02, 2017, 01:46:30 PM
Hand-waved the numbers and it'll save me a few hundred bucks a year.  Not enough to make me feel too strongly about it on a personal level.

But as for my thoughts on some of the details:

Fewer tax brackets makes the tax code "seem" simpler on the surface, but it doesn't really mean that much on its own.  Fine.  Less overall, saving the most for people at $200k+/yr.  As expected. Maybe not so - households with around 200K income usually rely heavily on mortgage and SALT deductions. With those gone, they will have to pay more. Seems fair. I know a number of people in this situation employed in finance, who buy 1.5MM apt, or pay 6K for rent, and can do that because they don't pay a lot of tax.
Corporate tax cut going from 35% to 20% seems like a drastic change that will sure mean something, but I don't know enough to have a real opinion.  Maybe lower margin businesses will pop up?
Eliminating the estate tax is just dumb.  Less dynastic wealth would be better, not more. I guess then, you will live it up in retirement and not leave nothing from your stash to your kids! True mustachian
The "repatriation tax rate" sounds like a good idea, but I don't know enough of the nuance to say whether it'll have unintended consequences or be easily dodged in some way.
Increase child tax credit: sure.
Limit mortgage-deduction to 500k loans: sure - I'm generally opposed to this deduction anyway, and limiting this plus the larger standard deduction means it'll do less. This is the best! This really benefits folks that dont need it.
Larger standard deduction: this means a bit less monkey business with deductions so fine.
Pass-through rate for small businesses: sounds good, don't know the details of how that works.
Eliminating student loan interest deduction sounds really bad, but in reality it probably won't mean a ton with the increased standard deduction.  My guess is this will be the least popular part of the whole thing that will be reversed the easiest.
Tax on private university endowments? No, that's dumb.  Education is already too expensive. Well, I think Harvard can spare 1.5% of its profits on the 20B in endowment they have. They have room for that.
Title: Re: Republican Tax Plan 2017
Post by: MMMarbleheader on November 02, 2017, 01:47:44 PM
Deductions have always come off at your marginal rate, right? I'm just confused, because a story on CNBC attempting to explain the winners and losers says that MFJ will pay 12% at incomes between 24k and 90k, which makes it sound like the opposite. Under the current rules, if the MFJ 12% bracket were set at 90k, then your real rates would be 0% on the first 24k, and 12% on every dollar earned from 24k to 114k (90+24). I'm guessing some writer/editor was just being too flippant about this, and I haven't read any of the actual bill, but wondering if anyone else noticed this, as it would be a rather large change.

Yes and for most of us Mustachians who max out our 401k its 12% up to $132k.
Title: Re: Republican Tax Plan 2017
Post by: effigy98 on November 02, 2017, 01:50:20 PM
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 02, 2017, 01:52:39 PM
Deductions have always come off at your marginal rate, right? I'm just confused, because a story on CNBC attempting to explain the winners and losers says that MFJ will pay 12% at incomes between 24k and 90k, which makes it sound like the opposite. Under the current rules, if the MFJ 12% bracket were set at 90k, then your real rates would be 0% on the first 24k, and 12% on every dollar earned from 24k to 114k (90+24). I'm guessing some writer/editor was just being too flippant about this, and I haven't read any of the actual bill, but wondering if anyone else noticed this, as it would be a rather large change.

Yes and for most of us Mustachians who max out our 401k its 12% up to $132k.

Calculation please? Seems to me - 90K + 36K (18x2 for 401K contributions) + 24K standard deduction - $150K of income will keep you in the 12% rate.
Title: Re: Republican Tax Plan 2017
Post by: v8rx7guy on November 02, 2017, 01:53:56 PM
So honest question, is this version actually "simplified" compared to the current tax code? That was ostensibly the (stated) goal of tax reform in the first place.

I'd say so.
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 02, 2017, 01:55:31 PM
  • I like that they are capping or removing completely deductions in all areas and raising the standard deduction. We should not incentivize getting into massive debt for your college degree or mcmansion. There are many ways to go to college cheap or avoid college and get alternative educations. I think this may cause a little downward pressure on college tuitions which they need. I also do not like how most Americans see their house as a piggy bank because "hey, the mortgage interest is deductible... FREE MONEY!". I rather see it eliminated but lowering it is a good start. I also hate the argument that spending 10k interest just to save 3k on your taxes is a “good deal”.

So agree with that! Come to New York to see the excesses in the real estate area only because you can use the SALT and mortgage deductions. It is truly crazy.
  • I like the lowering tax for offshore money. In my industry most companies have a massive amount of money offshore that could be put to good R&D use back home.
  • Very happy they did not touch the retirement accounts as we take great advantage of these vehicles and max them out.
  • I think the lower tax rate will help the economy. I like how they are punishing high tax states which may reign in the waste.
Title: Re: Republican Tax Plan 2017
Post by: MMMarbleheader on November 02, 2017, 01:56:30 PM
Deductions have always come off at your marginal rate, right? I'm just confused, because a story on CNBC attempting to explain the winners and losers says that MFJ will pay 12% at incomes between 24k and 90k, which makes it sound like the opposite. Under the current rules, if the MFJ 12% bracket were set at 90k, then your real rates would be 0% on the first 24k, and 12% on every dollar earned from 24k to 114k (90+24). I'm guessing some writer/editor was just being too flippant about this, and I haven't read any of the actual bill, but wondering if anyone else noticed this, as it would be a rather large change.

Yes and for most of us Mustachians who max out our 401k its 12% up to $132k.

Calculation please? Seems to me - 90K + 36K (18x2 for 401K contributions) + 24K standard deduction - $150K of income will keep you in the 12% rate.

My wife doesn't work.. I forgot the glory of the double maxed out 401k. Carry on.
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 02, 2017, 02:01:28 PM
Deductions have always come off at your marginal rate, right? I'm just confused, because a story on CNBC attempting to explain the winners and losers says that MFJ will pay 12% at incomes between 24k and 90k, which makes it sound like the opposite. Under the current rules, if the MFJ 12% bracket were set at 90k, then your real rates would be 0% on the first 24k, and 12% on every dollar earned from 24k to 114k (90+24). I'm guessing some writer/editor was just being too flippant about this, and I haven't read any of the actual bill, but wondering if anyone else noticed this, as it would be a rather large change.

Yes and for most of us Mustachians who max out our 401k its 12% up to $132k.

Calculation please? Seems to me - 90K + 36K (18x2 for 401K contributions) + 24K standard deduction - $150K of income will keep you in the 12% rate.

My wife doesn't work.. I forgot the glory of the double maxed out 401k. Carry on.

Ahh, yes, of course - makes sense to have both single 401K contribution and dual.
Title: Re: Republican Tax Plan 2017
Post by: CCCA on November 02, 2017, 02:02:24 PM
Deductions have always come off at your marginal rate, right? I'm just confused, because a story on CNBC attempting to explain the winners and losers says that MFJ will pay 12% at incomes between 24k and 90k, which makes it sound like the opposite. Under the current rules, if the MFJ 12% bracket were set at 90k, then your real rates would be 0% on the first 24k, and 12% on every dollar earned from 24k to 114k (90+24). I'm guessing some writer/editor was just being too flippant about this, and I haven't read any of the actual bill, but wondering if anyone else noticed this, as it would be a rather large change.


the 90 is the upper limit on taxable income for the 2nd tax bracket (12%), not 90k in income over the 24k upper limit on the 1st bracket.


So if you make 90K, you'll be taxed at 12% on the 66k that fits into that 2nd bracket.
Title: Re: Republican Tax Plan 2017
Post by: PathtoFIRE on November 02, 2017, 02:05:03 PM
We are a relatively high dual income family, and my quick calculator math says we would save 4k this year compared to the current regime, although I don't understand the child credits (the current AND the proposed new) so maybe it would be a little less or more. But that's almost entirely due to us living in Texas and getting the grandfathered mortgage deduction, without those we would be paying about 3k more than last year.
Title: Re: Republican Tax Plan 2017
Post by: dandarc on November 02, 2017, 02:05:36 PM
Other notes from my first glance at the first 150 pages:

1- Page 127/128 discusses HSAs and makes me think that deduction may be going away, confusing read though.

2- Definition of personal residence moved from 2 years to 5 years living in the house. Tax on sale of residence will be more common as a result.

3- Dependent care benefits may be going away, again it's a confusing read though.


I can't imagine HSAs going anywhere, that's a huge GOP healthcare 'solution.'

Is that the Dependent Care Tax Credit or the DCFSA, or both?
According to the summary here: https://waysandmeansforms.house.gov/uploadedfiles/tax_cuts_and_jobs_act_section_by_section_hr1.pdf (https://waysandmeansforms.house.gov/uploadedfiles/tax_cuts_and_jobs_act_section_by_section_hr1.pdf)

That part of the bill makes Archer MSAs non-deductible.  This is to push more money into HSAs.
Title: Re: Republican Tax Plan 2017
Post by: CCCA on November 02, 2017, 02:06:32 PM
Deductions have always come off at your marginal rate, right? I'm just confused, because a story on CNBC attempting to explain the winners and losers says that MFJ will pay 12% at incomes between 24k and 90k, which makes it sound like the opposite. Under the current rules, if the MFJ 12% bracket were set at 90k, then your real rates would be 0% on the first 24k, and 12% on every dollar earned from 24k to 114k (90+24). I'm guessing some writer/editor was just being too flippant about this, and I haven't read any of the actual bill, but wondering if anyone else noticed this, as it would be a rather large change.

Yes and for most of us Mustachians who max out our 401k its 12% up to $132k.


no this is incorrect.  It's $90k + $18k multiplied by the number of tax deferred accounts you have access to.  Personally we have access to 3, so it's 90k + 54k but for most i'll be $126k (for 2 401Ks).
Title: Re: Republican Tax Plan 2017
Post by: AdrianC on November 02, 2017, 02:08:19 PM
Personally will score big with the child tax credit.

You lose the exemption for everyone, though. It looks about a wash for our family of 5. The $24K standard deduction is no help.
Title: Re: Republican Tax Plan 2017
Post by: ketchup on November 02, 2017, 02:14:25 PM
Fewer tax brackets makes the tax code "seem" simpler on the surface, but it doesn't really mean that much on its own.  Fine.  Less overall, saving the most for people at $200k+/yr.  As expected. Maybe not so - households with around 200K income usually rely heavily on mortgage and SALT deductions. With those gone, they will have to pay more. Seems fair. I know a number of people in this situation employed in finance, who buy 1.5MM apt, or pay 6K for rent, and can do that because they don't pay a lot of tax.
That makes sense then.  Keeping their actual overall tax pretty similar but make things actually "simpler."

Eliminating the estate tax is just dumb.  Less dynastic wealth would be better, not more. I guess then, you will live it up in retirement and not leave nothing from your stash to your kids! True mustachian
First off, my vasectomy speaks to my kids-status, but even if I had kids, I wouldn't want to simply leave them a big pot of money.  A smaller pot, sure.  I'm not suggesting the estate tax should be 100%.
Limit mortgage-deduction to 500k loans: sure - I'm generally opposed to this deduction anyway, and limiting this plus the larger standard deduction means it'll do less. This is the best! This really benefits folks that dont need it.
Absolutely.
Tax on private university endowments? No, that's dumb.  Education is already too expensive. Well, I think Harvard can spare 1.5% of its profits on the 20B in endowment they have. They have room for that.
I'd rather Harvard do other things with that money, but that's just me.
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 02, 2017, 02:24:18 PM
Fewer tax brackets makes the tax code "seem" simpler on the surface, but it doesn't really mean that much on its own.  Fine.  Less overall, saving the most for people at $200k+/yr.  As expected. Maybe not so - households with around 200K income usually rely heavily on mortgage and SALT deductions. With those gone, they will have to pay more. Seems fair. I know a number of people in this situation employed in finance, who buy 1.5MM apt, or pay 6K for rent, and can do that because they don't pay a lot of tax.
That makes sense then.  Keeping their actual overall tax pretty similar but make things actually "simpler."

Eliminating the estate tax is just dumb.  Less dynastic wealth would be better, not more. I guess then, you will live it up in retirement and not leave nothing from your stash to your kids! True mustachian
First off, my vasectomy speaks to my kids-status, but even if I had kids, I wouldn't want to simply leave them a big pot of money.  A smaller pot, sure.  I'm not suggesting the estate tax should be 100%.
Limit mortgage-deduction to 500k loans: sure - I'm generally opposed to this deduction anyway, and limiting this plus the larger standard deduction means it'll do less. This is the best! This really benefits folks that dont need it.
Absolutely.
Tax on private university endowments? No, that's dumb.  Education is already too expensive. Well, I think Harvard can spare 1.5% of its profits on the 20B in endowment they have. They have room for that.
I'd rather Harvard do other things with that money, but that's just me.
I will tell you what they spend it on - nice dorms, organic food in the food court, luxury bulding renovations, professorships paying 500K a year, university administrators getting 500K- 1MM in salary, etc. They for sure don't spend it on research as that is ALL funded with outside grants. This is how it works in higher ed.  And of course students whose families make less than 50K a year go for free. That is 1% of their class. I know that for a fact.
Title: Re: Republican Tax Plan 2017
Post by: jpdx on November 02, 2017, 02:26:59 PM
There will be a lot of analysis about who wins and who loses under this tax plan. But in one way, we all lose: the 10-year cost of this plan is $1.5 trillion.

Deficit-financed tax cuts make sense in a recession when you need to stimulate the economy. They don't make sense right now. Raising the deficit when the economy is nearly at capacity is risky because it could lead to higher inflation and higher interest rates. How would this effect your FIRE plans?
Title: Re: Republican Tax Plan 2017
Post by: SuperSecretName on November 02, 2017, 02:30:29 PM
Deficit-financed tax cuts make sense in a recession when you need to stimulate the economy. They don't make sense right now.
get that common sense out of here.  no room for it.
Title: Re: Republican Tax Plan 2017
Post by: dandarc on November 02, 2017, 02:31:49 PM
Deficit-financed tax cuts make sense in a recession when you need to stimulate the economy. They don't make sense right now.
get that common sense out of here.  no room for it.
Economy is still IN RECESSION BECAUSE OBAMA!
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 02, 2017, 02:32:10 PM
There will be a lot of analysis about who wins and who loses under this tax plan. But in one way, we all lose: the 10-year cost of this plan is $1.5 trillion.

Deficit-financed tax cuts make sense in a recession when you need to stimulate the economy. They don't make sense right now. Raising the deficit when the economy is nearly at capacity is risky because it could lead to higher inflation and higher interest rates. How would this effect your FIRE plans?

Have you considered a GDP growth between 4.5%-6% in your equation on deficits? If you can run the numbers with that type of GPD growth, what does the deficit look like? Also, with the current administration aggressive stance on trade, that GDP growth can come from better trade outcome in addition to domestic production. So totally reasonable.
Title: Re: Republican Tax Plan 2017
Post by: Bird In Hand on November 02, 2017, 02:36:23 PM
Personally will score big with the child tax credit.

You lose the exemption for everyone, though. It looks about a wash for our family of 5. The $24K standard deduction is no help.

I was sure our family of 5 would get slammed with the new plan because 1) loss of personal exemptions (5x$4050=20250) and 2) our itemized deductions somewhat exceeded the standard deduction (~$15k last year).  Last year we had ~$35k tax free right off the top.  With the new plan it would be $24k.

But the lower tax rates + expanded Child Tax Credit and Family Tax Credit have us coming out about $4k ahead.  About $600 is that from lower tax rates, $3,000 from increased Child Tax Credit (thanks to the increased $230k income phaseout), and $600 from the new Family Tax Credit.  We'll lose ~$200 by having to rely on the Dependent Care Tax Credit vs the DCFSA.
Title: Re: Republican Tax Plan 2017
Post by: Luck12 on November 02, 2017, 02:40:27 PM
Have you considered a GDP growth between 4.5%-6% in your equation on deficits? If you can run the numbers with that type of GPD growth, what does the deficit look like? Also, with the current administration aggressive stance on trade, that GDP growth can come from better trade outcome in addition to domestic production. So totally reasonable.

Can't tell if serious.  If so, you have got to be kidding me.  GDP growth hasn't been over 5% (except once around 2000) in over 30 years.   

https://tradingeconomics.com/united-states/gdp-growth-annual
Title: Re: Republican Tax Plan 2017
Post by: BTDretire on November 02, 2017, 02:40:54 PM
There will be a lot of analysis about who wins and who loses under this tax plan. But in one way, we all lose: the 10-year cost of this plan is $1.5 trillion.
Is that all, or do we need to add more, as in another $9 trillion+ like we had during the 8 years of Obama.
ie. this is just an additional $1.5 trillion because of the tax bill?
Title: Re: Republican Tax Plan 2017
Post by: boarder42 on November 02, 2017, 02:42:41 PM
the people who lost under this plan are people who itemize if you didnt itemize before you likely came out far and away ahead.  its pretty simple the "simplified" the brackets and "simplified" the deductions.
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 02, 2017, 02:59:53 PM
Have you considered a GDP growth between 4.5%-6% in your equation on deficits? If you can run the numbers with that type of GPD growth, what does the deficit look like? Also, with the current administration aggressive stance on trade, that GDP growth can come from better trade outcome in addition to domestic production. So totally reasonable.

Can't tell if serious.  If so, you have got to be kidding me.  GDP growth hasn't been over 5% (except once around 2000) in over 30 years. 

Totally serious. Why would that be not possible given the current administration stance on trade and business? We have forgotten what it looks like but China has not. 

https://tradingeconomics.com/united-states/gdp-growth-annual
Title: Re: Republican Tax Plan 2017
Post by: BTDretire on November 02, 2017, 03:08:41 PM
Quote
How will this (as currently proposed as it will certainly change) impact your FIRE plans?

 No effect on my Fire Plans, alreay FI.
How will it affect my taxes, I expect we'll pay more, at least until my wife quits working.
 On the other hand we paid less than 1% federal tax last year. (not including both sides of SS tax)
 I'm not seeing what we will loose except; an increase of my AGI off $4,900 because of the lost dependent deductions. Probably more than offset by an increase in the child tax credit, 2x $600= $1200. This is an additional $1200 tax CREDIT, that I will probably loose it two years.
 I did get a $3000 tax credit for college expenses, I don't see anything about that, just
the loss of student loan interest. There will be some cryers about that one!
 That $24,000 deduction may be additional incentive to get my wife to retire.
But, alas, the fat lady has not sung yet, so we really have no idea where we stand.

Title: Re: Republican Tax Plan 2017
Post by: JSMustachian on November 02, 2017, 03:36:44 PM
If this plan passes will it change our taxes due April 2017 or not until April 2018?
Title: Re: Republican Tax Plan 2017
Post by: dandarc on November 02, 2017, 03:40:50 PM
If this plan passes will it change our taxes due April 2017 or not until April 2018?
Pretty much everything in the bill for individual taxpayers starts for the 2018 tax year.  For which you'd file by April 15th, 2019 (plus extensions, if you go that route).
Title: Re: Republican Tax Plan 2017
Post by: sherr on November 02, 2017, 03:42:13 PM
There will be a lot of analysis about who wins and who loses under this tax plan. But in one way, we all lose: the 10-year cost of this plan is $1.5 trillion.
Is that all, or do we need to add more, as in another $9 trillion+ like we had during the 8 years of Obama.
ie. this is just an additional $1.5 trillion because of the tax bill?

$1.5 Trillion in addition to the current deficit. And that's using the "optimistic" Republican math that assumes it will power a strongly-growing economy. Even assuming that's true, the next time an economic downturn hits us (like the huge one Obama had to contend with) that number is going to skyrocket.

So, given the existing deficit and assuming the Republicans are 100% correct about their stronger economy estimates and that we never hit an economic downturn, we're looking at 0.44 (current deficit) * 10 years + 1.5 (new 10-year tax deficit) = $13.5 Trillion in new debt over a decade. Assuming everything is perfect.
Title: Re: Republican Tax Plan 2017
Post by: Pylortes on November 02, 2017, 03:47:51 PM
This proposal looks pretty good to me overall.  Simplifies the tax code significantly, makes our corporate tax rate more competitive with the rest of the world (thus helping to keep companies from moving headquarters and jobs overseas), and offers a modest tax cut for most (hope not too much of the cut goes to the top income brackets though).   

I would like to see the estate tax repeal removed however.  I think keeping the estate tax but indexing for inflation would be appropriate.  I've also seen that the Dependent Care Flexible Spending Account is removed.   http://www.sacbee.com/news/politics-government/article182260906.html    The child tax credit phaseout going up from from $110k to $230k is nice however, along with the increase to $1,600/child.
Title: Re: Republican Tax Plan 2017
Post by: Daisy on November 02, 2017, 03:56:18 PM
This plan will destroy my standard deduction games strategy I was going to start in FIRE.  See https://forum.mrmoneymustache.com/ask-a-mustachian/standard-deduction-games/.

Oh well, a higher standard deduction for someone with a paid off mortgage and using the Roth conversion strategy sounds pretty good to me. I do realize that the personal exemption is going away, but I still think with a $12k standard deduction, it will be hard to double up property tax and charitable donations to exceed this amount.
Title: Re: Republican Tax Plan 2017
Post by: MDM on November 02, 2017, 04:06:01 PM
has anyone seen info on capital gains rates?  I'm searching but not finding any info.  Wondering if they are keeping the low rates 15% and 0% for long-term gains.

The section below seems to cover it.

(b) APPLICATION OF CURRENT INCOME TAX BRACKETS TO CAPITAL GAINS BRACKETS.—
 (1) IN GENERAL.—
 (A) 0-PERCENT CAPITAL GAINS BRACKET.—Section 1(h)(1) is amended by striking
     ‘‘which would (without regard to this paragraph) be taxed at a rate below 25 percent’’ in  subparagraph (B)(i) and inserting ‘‘below the 15-percent rate threshold’’.
 (B) 15-PERCENT CAPITAL GAINS BRACKET.—Section 1(h)(1)(C)(ii)(I) is amended by striking ‘‘which would (without regard to this
 paragraph) be taxed at a rate below 39.6 percent’’ and inserting ‘‘below the 20-percent rate threshold’’.
 (2) RATE THRESHOLDS DEFINED.—Section 1(h) is amended by adding at the end the following new paragraph:
 ‘‘(12) RATE THRESHOLDS DEFINED.—For purposes of this subsection—
 ‘‘(A) 15-PERCENT RATE THRESHOLD.—
 The 15-percent rate threshold shall be—
 ‘‘(i) in the case of a joint return or surviving spouse, $77,200 (1⁄2 such amount
 in the case of a married individual filing a separate return),
 ‘‘(ii) in the case of an individual who is the head of a household (as defined in
 section 2(b)), $51,700,
 ‘‘(iii) in the case of any other individual (other than an estate or trust), an
 amount equal to 1⁄2 of the amount in effect for the taxable year under clause (i), and
 ‘‘(iv) in the case of an estate or trust, $2,600.
 ‘‘(B) 20-PERCENT RATE THRESHOLD.—
 The 20-percent rate threshold shall be—
 ‘‘(i) in the case of a joint return or surviving spouse, $479,000 (1⁄2 such amount in the case of a married individual filing a separate return),
 ‘‘(ii) in the case of an individual who is the head of a household (as defined in 3 section 2(b)), $452,400,
 ‘‘(iii) in the case of any other individual (other than an estate or trust), $425,800, and
 ‘‘(iv) in the case of an estate or trust, $12,700.
Title: Re: Republican Tax Plan 2017
Post by: TexasRunner on November 02, 2017, 04:27:27 PM
The 429 page bill is attached if anyone else cares for more details.

THANK YOU!

The online host has been locked down / crashing all day.  Hadn't been able to download it myself.
Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 02, 2017, 04:31:32 PM
Create a tax on large private university endowments: Private universities with assets of more than $100,000 per student will pay a 1.4% excise tax on their net investment income. Possibly disagree. This may really make it harder for private universities to offer good scholarships.
That is an excellent point. I was supportive of the idea when I first heard about it, but your argument is entirely compelling to me.
Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 02, 2017, 04:37:22 PM
So, the net effect is to make buying much less attractive, which lowers my expectation on house value appreciation, which makes buying even less attractive.  Maybe we continue to rent if this passes or buy only if the perfect option comes along.
If it similarly affects the thinking of those competing with you for those same properties, it will serve to reduce the current value of homes as well, which would be good for prospective buyers.

If landlord interest remains uncapped as I assume it will (as it's on schedule E), that will shift a little more purchasing power towards landlords and away from private buyers.
Title: Re: Republican Tax Plan 2017
Post by: CCCA on November 02, 2017, 05:06:02 PM
has anyone seen info on capital gains rates?  I'm searching but not finding any info.  Wondering if they are keeping the low rates 15% and 0% for long-term gains.

The section below seems to cover it.

(b) APPLICATION OF CURRENT INCOME TAX BRACKETS TO CAPITAL GAINS BRACKETS.—
 (1) IN GENERAL.—
 (A) 0-PERCENT CAPITAL GAINS BRACKET.—Section 1(h)(1) is amended by striking
     ‘‘which would (without regard to this paragraph) be taxed at a rate below 25 percent’’ in  subparagraph (B)(i) and inserting ‘‘below the 15-percent rate threshold’’.
 (B) 15-PERCENT CAPITAL GAINS BRACKET.—Section 1(h)(1)(C)(ii)(I) is amended by striking ‘‘which would (without regard to this
 paragraph) be taxed at a rate below 39.6 percent’’ and inserting ‘‘below the 20-percent rate threshold’’.
 (2) RATE THRESHOLDS DEFINED.—Section 1(h) is amended by adding at the end the following new paragraph:
 ‘‘(12) RATE THRESHOLDS DEFINED.—For purposes of this subsection—
 ‘‘(A) 15-PERCENT RATE THRESHOLD.—
 The 15-percent rate threshold shall be—
 ‘‘(i) in the case of a joint return or surviving spouse, $77,200 (1⁄2 such amount
 in the case of a married individual filing a separate return),
 ‘‘(ii) in the case of an individual who is the head of a household (as defined in
 section 2(b)), $51,700,
 ‘‘(iii) in the case of any other individual (other than an estate or trust), an
 amount equal to 1⁄2 of the amount in effect for the taxable year under clause (i), and
 ‘‘(iv) in the case of an estate or trust, $2,600.
 ‘‘(B) 20-PERCENT RATE THRESHOLD.—
 The 20-percent rate threshold shall be—
 ‘‘(i) in the case of a joint return or surviving spouse, $479,000 (1⁄2 such amount in the case of a married individual filing a separate return),
 ‘‘(ii) in the case of an individual who is the head of a household (as defined in 3 section 2(b)), $452,400,
 ‘‘(iii) in the case of any other individual (other than an estate or trust), $425,800, and
 ‘‘(iv) in the case of an estate or trust, $12,700.


Thanks for quoting this although the language is very confusing and I'm not following it very well. 
THis is my best guess:
That a 0% LTCG bracket does exist, but it has a lower income threshold for qualifying (below the 15% rate threshold) which is MFJ $77.2k or $51.7K individual, rather than the old 10 and 15% tax brackets and lower than the MFJ upper income limit on the 12% tax bracket. 
 
The 15% LTCG bracket is now for those in higher tax brackets but lower than the top one (39.6%), which is 20% rate.   
Title: Re: Republican Tax Plan 2017
Post by: TexasRunner on November 02, 2017, 05:09:59 PM
THis is my best guess:
That a 0% LTCG bracket does exist, but it has a lower income threshold for qualifying (below the 15% rate threshold) which is MFJ $77.2k or $51.7K individual, rather than the old 10 and 15% tax brackets and lower than the MFJ upper income limit on the 12% tax bracket. 
 
The 15% LTCG bracket is now for those in higher tax brackets but lower than the top one (39.6%), which is 20% rate.   

So am I understanding it correctly that under ~30k a year capital gains is taxed at 0%?....

Isn't that HUGE for an early retiree?  It seems if you can be confident in that situation remaining a reality, taxable accounts are MUCH more attractive if you can live below the 0% mark.  Essentially every account is a tax free account if you don't take very much out each year.

Its completely doable for many on here to live @ 20-30k per year.  Now that should be possible with a taxable account and avoid paying any taxes.

This will make the fire simulations regarding tax-advantaged accounts very interesting for low cost of living FIRE-ees.

:)
Title: Re: Republican Tax Plan 2017
Post by: boarder42 on November 02, 2017, 05:37:38 PM
THis is my best guess:
That a 0% LTCG bracket does exist, but it has a lower income threshold for qualifying (below the 15% rate threshold) which is MFJ $77.2k or $51.7K individual, rather than the old 10 and 15% tax brackets and lower than the MFJ upper income limit on the 12% tax bracket. 
 
The 15% LTCG bracket is now for those in higher tax brackets but lower than the top one (39.6%), which is 20% rate.   

So am I understanding it correctly that under ~30k a year capital gains is taxed at 0%?....

Isn't that HUGE for an early retiree?  It seems if you can be confident in that situation remaining a reality, taxable accounts are MUCH more attractive if you can live below the 0% mark.  Essentially every account is a tax free account if you don't take very much out each year.

Its completely doable for many on here to live @ 20-30k per year.  Now that should be possible with a taxable account and avoid paying any taxes.

This will make the fire simulations regarding tax-advantaged accounts very interesting for low cost of living FIRE-ees.

:)

No it's total agi under that number. This didn't change from how ltcgs we're taxed before.
Title: Re: Republican Tax Plan 2017
Post by: MDM on November 02, 2017, 05:51:13 PM
Thanks for quoting this although the language is very confusing and I'm not following it very well. 
THis is my best guess:
That a 0% LTCG bracket does exist, but it has a lower income threshold for qualifying (below the 15% rate threshold) which is MFJ $77.2k or $51.7K individual, rather than the old 10 and 15% tax brackets and lower than the MFJ upper income limit on the 12% tax bracket. 
 
The 15% LTCG bracket is now for those in higher tax brackets but lower than the top one (39.6%), which is 20% rate.   
So am I understanding it correctly that under ~30k a year capital gains is taxed at 0%?....

Isn't that HUGE for an early retiree?  It seems if you can be confident in that situation remaining a reality, taxable accounts are MUCH more attractive if you can live below the 0% mark.  Essentially every account is a tax free account if you don't take very much out each year.

Its completely doable for many on here to live @ 20-30k per year.  Now that should be possible with a taxable account and avoid paying any taxes.

This will make the fire simulations regarding tax-advantaged accounts very interesting for low cost of living FIRE-ees.
No it's total agi under that number. This didn't change from how ltcgs we're taxed before.
At a quick glance, LTCG taxation is essentially unchanged from current law, in the sense that the taxable income step changes occur at ~"the same dollar amounts in 2017, plus inflation."  They no longer correspond exactly with the ordinary income bracket amounts, but it seems pretty much a "no change" thing.

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.
Title: Re: Republican Tax Plan 2017
Post by: Fomerly known as something on November 02, 2017, 05:56:04 PM
What I don't get is why Property taxes are "OK" but not state and local income taxes, why not just limit all of them to the up to $10,000.  Oh it's because this way states with income taxes are hurt but Texas residents still get theirs.
Title: Re: Republican Tax Plan 2017
Post by: Peter Parker on November 02, 2017, 06:44:26 PM
This tax plan is a shell game.  It is just shifting tax burdens by slightly reducing personal rates while eliminating many deductions for wage earners.  Only corporations will see any signficant reductions.  And, as far as I can tell, there is no cuts in government spending--and they are suggesting it will be deficit nuetral because of it's effect on the economy.  I don't buy it.

As best I can I have tried to estimate my taxes under this plan, and I believe my taxes will go up.  They would have been through the roof had they done away with the deferred comp deductions. 
Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 02, 2017, 07:19:31 PM
Doing some quick and dirty math backed up with a scenario tested in calcxml.com online tools entering my 2016 actual return figures vs what I project they would look like under this plan in 2018 [assuming same income, just different treatment for some items], it looks like we get crushed by this plan by about +$24K/yr in federal taxes, as the lowered top marginal rate doesn't come close to offsetting the loss of state income tax deduction for us and the loss of a few thousand in property tax deduction (if capped at $10K).
Title: Re: Republican Tax Plan 2017
Post by: Mariposa on November 02, 2017, 07:35:19 PM
^^^You must make some salary to take that kind of hit under the proposed plan. It does seem to disproportionately take from higher earners in high-tax states.

My back of the envelope calculations show we would be paying $2850 more under the House plan.

1. Our itemized deductions + exemptions are currently 46k. We would take the standard 24k exemption under the new plan. The difference is somewhat offset by the Child Tax Credit, Family Tax Credit, and lower tax brackets, but not quite. +$1350.

2. The loss of the DCFSA is a surprisingly big hit. We are getting a $2100 tax break for this [(7% FICA + 25% Federal + 10% Local) x $5000] = $2100. The Dependent Care Tax Credit would only give us a $600 tax break with one child in daycare (20% x $3000). +$1500.
Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 02, 2017, 07:48:22 PM
It does seem to disproportionately take from higher earners in high-tax states.
Reasonably high W-2 income, but what really kills us with the new House proposal is the loss of deduction of 12% short-term capital gains tax the state imposes.

This plan doesn't look like much of a giveaway to this high earner. (It might be to the truly wealthy.)
Title: Re: Republican Tax Plan 2017
Post by: Laura33 on November 02, 2017, 07:49:34 PM
I would like to see the estate tax repeal removed however.  I think keeping the estate tax but indexing for inflation would be appropriate.

I feel that the estate tax should be repealed and at the same time the step up in basis should be eliminated.  The repeal of the estate tax is often done under the guise of "keeping family businesses in the family" so lets remove the step up in basis and remove the incentive for someone to begin selling assets as soon as said assets are passed on to them.

How is this an incentive to sell?  You get the step-up in basis as of the date you inherit.  You keep that step-up regardless of whether you sell immediately or continue to maintain the investment. 

Removing the step-up basis and the estate tax would hurt those with less to pass on, and benefit those with the most.

For most people in the MC/UMC range, their biggest asset is their home, and maybe some stock/index fund investments.  They have zero chance of reaching the estate tax thresholds.  But they can pass on say $200K in equity and $50K in investments to their heirs, and their heirs get $250K.  Remove the step-up in basis, and the heirs get to pay CG tax on all of the gains in that $250K since however long ago they were purchased (and God forbid if the dead guy didn't keep perfect records of when everything was bought and you can't prove the original basis).

OTOH, someone with say $10M to pass on no longer has to pay @$2M+ in estate taxes (or pay lots and lots of cash to lawyers to set up trusts to avoid it).  That's a pretty big benefit that is likely going to outweigh the loss of the step-up in basis.

The part that worries me the most is the loss of the tax credit for keeping manufacturing in the US.  We are already at a disadvantage to many foreign competitors who have incredibly cheap labor and no environmental/safety protections.  Given all of the talk about keeping manufacturing jobs in the US and excoriating those who offshore, I am frankly stunned that this is on the chopping block.  I also don't like the loss of the dependent care account, given that the alternative child tax credits phase out.  But the $200K+ income threshold is a reasonable threshold for that (although it once again clearly targets those dual-income professional couples in HCOLA areas, a/k/a the blue states).

Other than that, it all seems like a shell game -- give here, take there, so that we can brag about simplifying and cutting tax rates while hiding the actual cost to most folks until it's too late.  Personally, I will probably be just fine -- we get to keep our 401(k)s and profit-sharing; we don't have student loans and this is my last year with the dependent care account anyway; we have a 15-yr mortgage and our interest deductions are low and getting lower; our property taxes aren't huge; and all in all I bet if we cut our charitable contributions, the new standard deduction will work just fine (and the lower tax rates will probably offset any difference).  Plus I'm a lawyer, so if we can figure out this new pass-through entity rule and take advantage of it, I will make out like a freaking bandit.

All of which is wrong IMO.  People like me don't need big-ass tax breaks (not to mention incentives to cut charitable giving); we're doing just fine as is.
Title: Re: Republican Tax Plan 2017
Post by: Romag on November 02, 2017, 07:54:47 PM
I am strongly opposed to repealing the estate tax fully, but open to reasonable modification to the caps and rates. We are heading towards unsustainable wealth inequality in my opinion.

Also it should be noted (as I understand it - willing to being schooled on this...) that high-tax states such as NY, NJ and CA receive less federal support than they contribute in federal taxes, so other states are not subsidizing them despite the current SALT deductions. They are supporting many low tax states with their federal taxes.
Title: Re: Republican Tax Plan 2017
Post by: Peter Parker on November 02, 2017, 08:00:37 PM
I am strongly opposed to repealing the estate tax fully, but open to reasonable modification to the caps and rates. We are heading towards unsustainable wealth inequality in my opinion.

Amen to that.
Title: Re: Republican Tax Plan 2017
Post by: teen persuasion on November 02, 2017, 08:03:33 PM
Other notes from my first glance at the first 150 pages:

1- Page 127/128 discusses HSAs and makes me think that deduction may be going away, confusing read though.

2- Definition of personal residence moved from 2 years to 5 years living in the house. Tax on sale of residence will be more common as a result.

3- Dependent care benefits may be going away, again it's a confusing read though.


I can't imagine HSAs going anywhere, that's a huge GOP healthcare 'solution.'

Is that the Dependent Care Tax Credit or the DCFSA, or both?
According to the summary here: https://waysandmeansforms.house.gov/uploadedfiles/tax_cuts_and_jobs_act_section_by_section_hr1.pdf (https://waysandmeansforms.house.gov/uploadedfiles/tax_cuts_and_jobs_act_section_by_section_hr1.pdf)

That part of the bill makes Archer MSAs non-deductible.  This is to push more money into HSAs.
Thanks for the link, I was having trouble interpreting the MSA/HSA parts.

Looking further, I see that only $1k of the CTC is refundable, and none of the $300 other dependent/family credits.  Not as useful to us as at first glance. 

I see that they are rolling all the college credits into the AOTC, and making it extend to a 5th year at half amount.  No more LLC (which you could use beyond undergrad, I believe).  No exemption for savings bond interest used for college expenses.  No exemption for employer paid tuition.

It'll take some thinking to evaluate how this will possibly affect our taxes/options in FIRE a few years from now, especially w/ DS5 and college aid/expenses.
Title: Re: Republican Tax Plan 2017
Post by: MDM on November 02, 2017, 08:07:04 PM
Somewhat surprised that eliminating the medical expense deduction (https://www.aarp.org/politics-society/advocacy/info-2017/tax-bill-americans-fd.html) hasn't received more press. 

Not surprised that it leads AARP's objections.

But who knows what the final result will be...?
Title: Re: Republican Tax Plan 2017
Post by: JLee on November 02, 2017, 08:07:27 PM
I am strongly opposed to repealing the estate tax fully, but open to reasonable modification to the caps and rates. We are heading towards unsustainable wealth inequality in my opinion.

Also it should be noted (as I understand it - willing to being schooled on this...) that high-tax states such as NY, NJ and CA receive less federal support than they contribute in federal taxes, so other states are not subsidizing them despite the current SALT deductions. They are supporting many low tax states with their federal taxes.

*ding*

The GOP doesn't care about pissing off the blue states, though.

A modest house in NJ (https://www.zillow.com/homedetails/42-Arlington-Blvd-North-Arlington-NJ-07031/37973367_zpid/?fullpage=true) is ~4 years away from matching/exceeding the $10k property tax limit, and we also have the 5th highest state income taxes in the country.
Title: Re: Republican Tax Plan 2017
Post by: Romag on November 02, 2017, 08:13:58 PM
I am strongly opposed to repealing the estate tax fully, but open to reasonable modification to the caps and rates. We are heading towards unsustainable wealth inequality in my opinion.

Also it should be noted (as I understand it - willing to being schooled on this...) that high-tax states such as NY, NJ and CA receive less federal support than they contribute in federal taxes, so other states are not subsidizing them despite the current SALT deductions. They are supporting many low tax states with their federal taxes.

*ding*

The GOP doesn't care about pissing off the blue states, though.

A modest house in NJ (https://www.zillow.com/homedetails/42-Arlington-Blvd-North-Arlington-NJ-07031/37973367_zpid/?fullpage=true) is ~4 years away from matching/exceeding the $10k property tax limit, and we also have the 5th highest state income taxes in the country.

Yeah, I have not seen anyone hit on this fact in the news. Would expect blue state GOPers to get this out there.
Title: Re: Republican Tax Plan 2017
Post by: badger1988 on November 02, 2017, 08:42:41 PM
Ran the numbers...I save $6.45 with this proposal!
Title: Re: Republican Tax Plan 2017
Post by: EscapeVelocity2020 on November 02, 2017, 09:31:49 PM
Certainly not the immediate windfall Trump had led us mid and upper-classers to hope for!  But in the long run, it's potentially a huge boon to my heirs.  I like the idea of simplification, but I use software so the arms race is mostly moot.  Adding to the deficit during boom times is disconcerting, I applaud GOP reps that stand up for fiscal discipline as opposed to party line populism.  It seems like anything will fly if it comes down to 'party lines', but national debt is real and it's never going to be a better time to turn the Titanic around, or at least symbolically balance the budget.  Continuing the metaphor, it's like Cpt. Trump is steering us toward the iceberg because, hey, we're the Titanic baby!  Turn up the music and break out the bubbly :)
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 02, 2017, 09:37:17 PM
A lot of great info in this thread.  After struggling with about a half dozen internet articles, I also found the full bill text this afternoon and have read/skimmed through all sections regarding individual income taxes.  A few things:

a) It appears that the current itemized deduction phase out remains unchanged.  In some situations, this will make it even more unlikely that a person will benefit from itemizing.

b) I saw no mention of personal property taxes (i.e. unrelated to real estate, such as car registration based upon vehicle value).  I'm guessing that remains as  part of the overall "property tax" realm.

c) I agree that the medical expense elimination hasn't received much coverage.  This will remove one key incentive for people NOT to Roth convert substantially all of their tIRA monies.

d) If this passes by mid December, I would expect major charities (especially DAFs) to be flooded with donations.  I wouldn't wait until December to open that DAF, as the custodians are swamped at year end even during "normal" years.  I wish they had changed it so that QCD's could be used to fund DAFs.
Title: Re: Republican Tax Plan 2017
Post by: sol on November 02, 2017, 09:43:26 PM
d) If this passes by mid December, I would expect major charities (especially DAFs) to be flooded with donations.  I wouldn't wait until December to open that DAF, as the custodians are swamped at year end even during "normal" years.  I wish they had changed it so that QCD's could be used to fund DAFs.

My wife and I have already discussed moving all of our planned lifetime charitable donations into the next eight weeks(!), in order to get the tax benefit of making deductible contributions to a DAF.  Next year and every year after, there would be no tax incentive for charitable giving, or at the very least a lot less benefit because your first $24k of giving each year would not be tax deductible.

Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 02, 2017, 09:45:29 PM
It seems like anything will fly if it comes down to 'party lines', but national debt is real and it's never going to be a better time to turn the Titanic around, or at least symbolically balance the budget.  Continuing the metaphor, it's like Cpt. Trump is steering us toward the iceberg because, hey, we're the Titanic baby!  Turn up the music and break out the bubbly :)

Didn't you see the movie?  IIRC, the first class passengers had no problem finding space in the life boats.  Of course, unlike the movie, I don't see this Captain going down with the ship.
Title: Re: Republican Tax Plan 2017
Post by: TVRodriguez on November 02, 2017, 10:01:30 PM
I would like to see the estate tax repeal removed however.  I think keeping the estate tax but indexing for inflation would be appropriate.

Under current law, the estate tax is already indexed for inflation and affects a tiny number of people.

The idea of removing the step up is an administrative nightmare.
Title: Re: Republican Tax Plan 2017
Post by: alexpkeaton on November 02, 2017, 10:20:48 PM
Haven't run the numbers yet, but seems like it'll be "meh". Yeah, we get hosed in the Northeast by losing SALT deductions, except those huge SALT deductions subject high-earners like myself to AMT which disallows the SALT deductions anyway. (Or phases them out? I forget.) So I'll still have a huge tax bill, but perhaps a simpler one. Really not even sure if it'll be worth it to itemize anymore, whereas before I easily blew past the standard deduction a few times over.
Title: Re: Republican Tax Plan 2017
Post by: Daisy on November 02, 2017, 10:26:36 PM
d) If this passes by mid December, I would expect major charities (especially DAFs) to be flooded with donations.  I wouldn't wait until December to open that DAF, as the custodians are swamped at year end even during "normal" years.  I wish they had changed it so that QCD's could be used to fund DAFs.

My wife and I have already discussed moving all of our planned lifetime charitable donations into the next eight weeks(!), in order to get the tax benefit of making deductible contributions to a DAF.  Next year and every year after, there would be no tax incentive for charitable giving, or at the very least a lot less benefit because your first $24k of giving each year would not be tax deductible.

I may go this route too. I don't know quite enough about Donor Advised Funds. The little I read, it made it seem like Vanguard would choose the charities the money goes to? This can't be right. I only skimmed over it during my last working days a month ago and now that I am FIREd I should look at this before the end of the year.

It would be a good time for me to do it this year as well, as I have more taxable income this year due to working most of the year, rather than the next few years while FIREd. I could get a big tax break on this for this year.

Can someone give a quick tutorial on DAFs? I thought it would work that I would put money in a DAF and then I could choose which charities the money would go to.
Title: Re: Republican Tax Plan 2017
Post by: maizeman on November 02, 2017, 10:34:56 PM
(and God forbid if the dead guy didn't keep perfect records of when everything was bought and you can't prove the original basis).

I've always assumed this was the reason for the basis step-up on death, rather than representing any form of intentional tax break.
Title: Re: Republican Tax Plan 2017
Post by: Romag on November 02, 2017, 10:38:42 PM
d) If this passes by mid December, I would expect major charities (especially DAFs) to be flooded with donations.  I wouldn't wait until December to open that DAF, as the custodians are swamped at year end even during "normal" years.  I wish they had changed it so that QCD's could be used to fund DAFs.

My wife and I have already discussed moving all of our planned lifetime charitable donations into the next eight weeks(!), in order to get the tax benefit of making deductible contributions to a DAF.  Next year and every year after, there would be no tax incentive for charitable giving, or at the very least a lot less benefit because your first $24k of giving each year would not be tax deductible.

I may go this route too. I don't know quite enough about Donor Advised Funds. The little I read, it made it seem like Vanguard would choose the charities the money goes to? This can't be right. I only skimmed over it during my last working days a month ago and now that I am FIREd I should look at this before the end of the year.

It would be a good time for me to do it this year as well, as I have more taxable income this year due to working most of the year, rather than the next few years while FIREd. I could get a big tax break on this for this year.

Can someone give a quick tutorial on DAFs? I thought it would work that I would put money in a DAF and then I could choose which charities the money would go to.

You choose the charities and what funds to put the money into. I opened a Vanguard account last year (my last year of W2 income). Take the deduction in the year that you give the money, donate as you go, $500 minimum donation. $25K donation to start and then $5K increments later. It has worked very well.

Here is JLCollins from a few years ago...http://jlcollinsnh.com/2012/02/08/how-to-give-like-a-billionaire/

Title: Re: Republican Tax Plan 2017
Post by: JLee on November 02, 2017, 10:55:59 PM
Haven't run the numbers yet, but seems like it'll be "meh". Yeah, we get hosed in the Northeast by losing SALT deductions, except those huge SALT deductions subject high-earners like myself to AMT which disallows the SALT deductions anyway. (Or phases them out? I forget.) So I'll still have a huge tax bill, but perhaps a simpler one. Really not even sure if it'll be worth it to itemize anymore, whereas before I easily blew past the standard deduction a few times over.

I'll lose the SALT deductions and don't make enough for AMT to matter...alas.

Gotta fund the 1%'s tax cuts somehow, I guess.
Title: Re: Republican Tax Plan 2017
Post by: Daisy on November 02, 2017, 11:07:30 PM
d) If this passes by mid December, I would expect major charities (especially DAFs) to be flooded with donations.  I wouldn't wait until December to open that DAF, as the custodians are swamped at year end even during "normal" years.  I wish they had changed it so that QCD's could be used to fund DAFs.

My wife and I have already discussed moving all of our planned lifetime charitable donations into the next eight weeks(!), in order to get the tax benefit of making deductible contributions to a DAF.  Next year and every year after, there would be no tax incentive for charitable giving, or at the very least a lot less benefit because your first $24k of giving each year would not be tax deductible.

I may go this route too. I don't know quite enough about Donor Advised Funds. The little I read, it made it seem like Vanguard would choose the charities the money goes to? This can't be right. I only skimmed over it during my last working days a month ago and now that I am FIREd I should look at this before the end of the year.

It would be a good time for me to do it this year as well, as I have more taxable income this year due to working most of the year, rather than the next few years while FIREd. I could get a big tax break on this for this year.

Can someone give a quick tutorial on DAFs? I thought it would work that I would put money in a DAF and then I could choose which charities the money would go to.

You choose the charities and what funds to put the money into. I opened a Vanguard account last year (my last year of W2 income). Take the deduction in the year that you give the money, donate as you go, $500 minimum donation. $25K donation to start and then $5K increments later. It has worked very well.

Here is JLCollins from a few years ago...http://jlcollinsnh.com/2012/02/08/how-to-give-like-a-billionaire/

Thanks!

I just saw this on Vanguard's site. For cash donations to the DAF, you can deduct up to 50% of AGI. It's 30% for appreciated shares. I'm not sure what the max deductability is if you do a combo of cash and shares. Are the 50% and 30% mutually exclusive? If so, I could put more into the DAF and have this fund my charitable contributions, possibly for the rest of my life. And I would get a nice tax break this year.

https://www.vanguardcharitable.org/resource_center/taxes

Also, the jhcollins article comments state that the minimum grant you can give to a charity for the Vanguard DAF is $500, whereas for Fidelity Charitable it is $50. I can't find these details on their respective sites. Can anyone confirm?
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 02, 2017, 11:54:41 PM
d) If this passes by mid December, I would expect major charities (especially DAFs) to be flooded with donations.  I wouldn't wait until December to open that DAF, as the custodians are swamped at year end even during "normal" years.  I wish they had changed it so that QCD's could be used to fund DAFs.

My wife and I have already discussed moving all of our planned lifetime charitable donations into the next eight weeks(!), in order to get the tax benefit of making deductible contributions to a DAF.  Next year and every year after, there would be no tax incentive for charitable giving, or at the very least a lot less benefit because your first $24k of giving each year would not be tax deductible.

I may go this route too. I don't know quite enough about Donor Advised Funds. The little I read, it made it seem like Vanguard would choose the charities the money goes to? This can't be right. I only skimmed over it during my last working days a month ago and now that I am FIREd I should look at this before the end of the year.

It would be a good time for me to do it this year as well, as I have more taxable income this year due to working most of the year, rather than the next few years while FIREd. I could get a big tax break on this for this year.

Can someone give a quick tutorial on DAFs? I thought it would work that I would put money in a DAF and then I could choose which charities the money would go to.

Ultra quick.  Feel free to ask for more details:

a) you open a DAF with $5000 minimum at Fidelity (the $5000 is an irrevocable charitable gift to a legit 501c3 charity (i.e. your DAF).
b) you manage the investments (many low cost Fido index funds)
c) you and anybody you appoint recommends grants to whichever charity you wish to benefit
d) Fidelity Charitable confirms that it is a legit charity and sends them a check (you can choose to have the charity know who you are or not)
e) Fidelity charges you 0.6% average balance administrative fee (minimum $100) each year
f) you receive a tax deduction for when you donate the money to the DAF (i.e. before the end of 2017)
g) if Fido doesn't already have your charity on their "list," they require a few days to process (I have a monthly grant to my local, small, non-denominational church and it has worked without a hitch)

VG is also used by many, but IIRC the minimum is $25000.  Fees are roughly the same for typical balances.
Title: Re: Republican Tax Plan 2017
Post by: powskier on November 03, 2017, 12:35:33 AM
Surprisingly , looks like we'll save a few grand, if it passes as proposed. Mainly by bracket changes and doubling of standard deduction. ( we itemize between 14k and 18k , so the standard deduction going to 24K will help us)

Increasing the debt in times of economic prosperity is  so dumb. This entire circus and their tax plan reminds me of a local bar slogan : "we cheat the other guy and pass the savings on to you".
Title: Re: Republican Tax Plan 2017
Post by: dragoncar on November 03, 2017, 02:11:32 AM
A 25% rate for pass-through businesses. Instead of getting taxed at an individual rate for business profits, people who own their own business would pay at the so-called pass-through rate. There will be some guardrails on what kinds of businesses can claim this rate, to avoid individuals abusing the lower tax. Seems reasonable that legit small businesses shouldn't be taxed at a higher rate than corporations, though it looks like there will still be a difference.
Unless I’m missing something his doesn’t make any sense to me.  Why should a pass-through entity (eg contractor) pay a lower rate than an individual (eg salaried employee)?  The comparison to corporate rates is not apt— corporations are not pass through, so the dividends they pay are taxed (the oft maligned double taxation, but it’s explained by the lower corporate tax rate and internal reinvestment tax deferral).  I have no problem with small businesses paying the corporate tax rate as long as their owners also pay taxes on their withdrawals from the business account 
Title: Re: Republican Tax Plan 2017
Post by: dresden on November 03, 2017, 03:27:11 AM
I am skeptical of the bill.  Here is what MSNBC is reporting on brackets.

Under the House bill there will be four brackets: 12 percent, 25 percent, 35 percent and 39.6 percent.

12 percent: This rate applies to single filers above $12,000, up to $45,000. Married couples are subject to this rate starting at $24,000, up to $90,000.
25 percent: For single filers, this rate applies at $45,000 of taxable income. Joint filers who are married are subject to this rate starting at $90,000.
35 percent: This rate applies at $200,000 for singles and $260,000 for married couples.
39.6 percent: The top rate applies at $500,000 for singles and $1 million for married filers.


I don't think there is a "0" rate from 0-24,000 for couples which makes me suspect the 25% rate is starting at 66,000 rather than the current 76,000 and the 24,000 standard deduction is actually the 0-24,000 0% range.    That is not how the current brackets work - the standard deduction isn't baked into the brackets which is why I think that 24,000-90,000 bracket is BS and it's really 0-66,000 for 12%.  So this means people making 70-80k after standard deduction will pay more - much more if they currently get a decent savings from itemizing.  It seems most over 200k will come out ahead and the higher the income the more certain it becomes you will come out ahead. 

From what I can tell the bill helps primarily the 300k+ earners.  Obviously those with high pass through income are the biggest winners.

The bill would save me a little bit this year by eliminating the 28% rate ,but next year I go to part time @24 hours and with the lower income next year my taxes are slightly higher under the new plan with 3 exemptions and some benefit from itemizing under the current law.   The difference in tax won't even be noticeable but it's ironic my taxes are going up to pay for a cut for people making more than me.  This is all assuming there is no 0% bracket from 0-24,000 thousand they are making it appear the bracket is raised by including the standard deduction as a 0-24,000 bracket.
Title: Re: Republican Tax Plan 2017
Post by: boarder42 on November 03, 2017, 04:06:25 AM
I started a thread on DAFs.

https://forum.mrmoneymustache.com/taxes/let's-talk-about-dafs/
Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 03, 2017, 04:20:51 AM
From what I can tell the bill helps primarily the 300k+ earners.  Obviously those with high pass through income are the biggest winners.
Unsurprisingly, it doesn't help high income earners in high state tax states. It's almost like they were able to nearly perfectly target blue states...
Title: Re: Republican Tax Plan 2017
Post by: nalor511 on November 03, 2017, 04:34:58 AM
I would love to see the US stop taking citizens when residing outside the country.
Title: Re: Republican Tax Plan 2017
Post by: ZiziPB on November 03, 2017, 04:59:08 AM
I would love to see the US stop taking citizens when residing outside the country.

If you mean taxing, then YES, me too :-)  Or at least apply the corporate rate for foreign profits of 12%...
Title: Re: Republican Tax Plan 2017
Post by: Bird In Hand on November 03, 2017, 07:09:19 AM
12 percent: This rate applies to single filers above $12,000, up to $45,000. Married couples are subject to this rate starting at $24,000, up to $90,000.
25 percent: For single filers, this rate applies at $45,000 of taxable income. Joint filers who are married are subject to this rate starting at $90,000.
35 percent: This rate applies at $200,000 for singles and $260,000 for married couples.
39.6 percent: The top rate applies at $500,000 for singles and $1 million for married filers.


I don't think there is a "0" rate from 0-24,000 for couples which makes me suspect the 25% rate is starting at 66,000 rather than the current 76,000 and the 24,000 standard deduction is actually the 0-24,000 0% range.    That is not how the current brackets work - the standard deduction isn't baked into the brackets which is why I think that 24,000-90,000 bracket is BS and it's really 0-66,000 for 12%.  So this means people making 70-80k after standard deduction will pay more - much more if they currently get a decent savings from itemizing.

Feel free to correct me if I'm wrong, but I believe MSNBC presented the information incorrectly.  I don't believe there's any change to how the standard deduction is treated in the new plan; it will continue to reduce the total taxable income as in the current code, and then brackets will apply to taxable income in the same way.  i.e., the standard deduction will continue to reduce taxes paid at the highest marginal rate for your income.

If deductions (including the standard deduction) were switched to reducing taxable income from the lowest bracket, I think this would have been widely reported and discussed.
Title: Re: Republican Tax Plan 2017
Post by: wenchsenior on November 03, 2017, 07:41:44 AM
I haven't had time to look this bill over. Does anyone who has know whether it proposes eliminating medical FSAs as well as dependent care FSAs? That would suck, since I just started using one as our medical bills have climbed steadily the past few years.
Title: Re: Republican Tax Plan 2017
Post by: NeonPegasus on November 03, 2017, 08:16:13 AM
4- DPAD is going away. Domestic Production Activities Deduction. This will directly affect very few, restricted to business owners who qualify, but it could indirectly affect thousands of American jobs as it removes incentives for manufacturing jobs in the United States. Not surprising given the current powers that be, but it isn't being highlighted by anyone and it is going to really screw the middle class.

The part that worries me the most is the loss of the tax credit for keeping manufacturing in the US.  We are already at a disadvantage to many foreign competitors who have incredibly cheap labor and no environmental/safety protections.  Given all of the talk about keeping manufacturing jobs in the US and excoriating those who offshore, I am frankly stunned that this is on the chopping block.

Selfishly, I don't like that this is going away but I believe it should. I take the DPAD and it saves me thousands in taxes every year. The funny thing is that there is literally no way I would not qualify. See, it covers not only manufacturers but also construction companies and contractors that make substantial improvements to buildings. There is no way that we could move that part of our business offshore. How exactly would we outsource onsite fabrication and installation of railings? So,in that sense, it is just a boondoggle. Since it is a deduction on the personal tax return, it applies mainly to pass through type entities so I can't see how many manufacturers there would be that are small enough for that business designation to make sense that would also be considering outsourcing production.


Tax on private university endowments? No, that's dumb.  Education is already too expensive. Well, I think Harvard can spare 1.5% of its profits on the 20B in endowment they have. They have room for that.
I'd rather Harvard do other things with that money, but that's just me.

Create a tax on large private university endowments: Private universities with assets of more than $100,000 per student will pay a 1.4% excise tax on their net investment income. Possibly disagree. This may really make it harder for private universities to offer good scholarships.
That is an excellent point. I was supportive of the idea when I first heard about it, but your argument is entirely compelling to me.


My thinking on this is that an endowment would operate similarly to our own stashes in FIRE. They must maintain a certain amount in the endowment so that it can grow and fund future scholarships. I think it really could hurt smaller colleges that spend a higher percentage of their endowments on scholarships. For example, my alma mater has ~900 students, which would allow a tax free endowment of $90mm. Their current endowment is $223mm. The financial aid awarded by the college last year was $22mm. That's already 10% of their endowment. An excise tax on the additional endowment would cost $1.8mm, which is 8% of what they spend on scholarships each year. Guess who will end up hurting?

A 25% rate for pass-through businesses. Instead of getting taxed at an individual rate for business profits, people who own their own business would pay at the so-called pass-through rate. There will be some guardrails on what kinds of businesses can claim this rate, to avoid individuals abusing the lower tax. Seems reasonable that legit small businesses shouldn't be taxed at a higher rate than corporations, though it looks like there will still be a difference.
Unless I’m missing something his doesn’t make any sense to me.  Why should a pass-through entity (eg contractor) pay a lower rate than an individual (eg salaried employee)?  The comparison to corporate rates is not apt— corporations are not pass through, so the dividends they pay are taxed (the oft maligned double taxation, but it’s explained by the lower corporate tax rate and internal reinvestment tax deferral).  I have no problem with small businesses paying the corporate tax rate as long as their owners also pay taxes on their withdrawals from the business account

Nevermind. You're right. I was thinking about it backwards.
Title: Re: Republican Tax Plan 2017
Post by: maizeman on November 03, 2017, 08:26:05 AM
Create a tax on large private university endowments: Private universities with assets of more than $100,000 per student will pay a 1.4% excise tax on their net investment income. Possibly disagree. This may really make it harder for private universities to offer good scholarships.
That is an excellent point. I was supportive of the idea when I first heard about it, but your argument is entirely compelling to me.


My thinking on this is that an endowment would operate similarly to our own stashes in FIRE. They must maintain a certain amount in the endowment so that it can grow and fund future scholarships. I think it really could hurt smaller colleges that spend a higher percentage of their endowments on scholarships. For example, my alma mater has ~900 students, which would allow a tax free endowment of $90mm. Their current endowment is $223mm. The financial aid awarded by the college last year was $22mm. That's already 10% of their endowment. An excise tax on the additional endowment would cost $1.8mm, which is 8% of what they spend on scholarships each year. Guess who will end up hurting?

I must admit I'm a little confused about this tax. I've read it reported as 1.4% tax on investment income. Given that an endowment might earn 8%/year, that'd be ~0.1% of the total endowment in taxes per year. OTOH, if it is a 1.4% tax on the value of the endowment, that's a more than 10x greater hit to the endowment.

Also keep in mind that a lot of financial aid -- particularly need-based rather than merit-based -- at universities is funded from current revenue (i.e. by the students paying full tuition), it doesn't all come out of the endowment.

This is why universities will sometimes talk about being able to increase the economic diversity of their study bodies by raising tuition. Make of that what you will.
Title: Re: Republican Tax Plan 2017
Post by: Proud Foot on November 03, 2017, 09:13:23 AM
Create a tax on large private university endowments: Private universities with assets of more than $100,000 per student will pay a 1.4% excise tax on their net investment income. Possibly disagree. This may really make it harder for private universities to offer good scholarships.
That is an excellent point. I was supportive of the idea when I first heard about it, but your argument is entirely compelling to me.


My thinking on this is that an endowment would operate similarly to our own stashes in FIRE. They must maintain a certain amount in the endowment so that it can grow and fund future scholarships. I think it really could hurt smaller colleges that spend a higher percentage of their endowments on scholarships. For example, my alma mater has ~900 students, which would allow a tax free endowment of $90mm. Their current endowment is $223mm. The financial aid awarded by the college last year was $22mm. That's already 10% of their endowment. An excise tax on the additional endowment would cost $1.8mm, which is 8% of what they spend on scholarships each year. Guess who will end up hurting?

I must admit I'm a little confused about this tax. I've read it reported as 1.4% tax on investment income. Given that an endowment might earn 8%/year, that'd be ~0.1% of the total endowment in taxes per year. OTOH, if it is a 1.4% tax on the value of the endowment, that's a more than 10x greater hit to the endowment.

Also keep in mind that a lot of financial aid -- particularly need-based rather than merit-based -- at universities is funded from current revenue (i.e. by the students paying full tuition), it doesn't all come out of the endowment.

This is why universities will sometimes talk about being able to increase the economic diversity of their study bodies by raising tuition. Make of that what you will.

The text of the bill reads "Net Investment Income" so yes it will be a rather small percentage of the total endowment.

As far as schools which this would apply to it would seem it would mainly apply to schools with massive endowments like Harvard or Yale. I haven't read to fully understand what is excluded from assets according to this
Quote
‘‘(C) the aggregate fair market value of the assets of which at the end of the preceding taxable year (other than those assets which are used directly in carrying out the institution’s exempt purpose) is at least $100,000 per student of the institution.
but for my alma mater with around 2,000 students it would need assets of $200m. Their total assets are $234m with an endowment of approximately $77m.
Title: Re: Republican Tax Plan 2017
Post by: TVRodriguez on November 03, 2017, 09:41:06 AM
(and God forbid if the dead guy didn't keep perfect records of when everything was bought and you can't prove the original basis).

I've always assumed this was the reason for the basis step-up on death, rather than representing any form of intentional tax break.

Pretty much. 
Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 03, 2017, 10:34:41 AM
Plus, only targeting private universities seems spiteful given that there are public universities with massive endowments as well (e.g. University of Michigan ~$11B, Stanford ~$22B).
Government doesn't eat their young.
Title: Re: Republican Tax Plan 2017
Post by: Need2Save on November 03, 2017, 12:04:26 PM
I haven't had time to look this bill over. Does anyone who has know whether it proposes eliminating medical FSAs as well as dependent care FSAs? That would suck, since I just started using one as our medical bills have climbed steadily the past few years.

I believe that it is only the Dependent Care FSA in the cross-hairs.  A few additional nuggets that are not getting too much attention appear to be:

1. Hardships withdrawals from 401ks would no longer require you to take a loan first or prevent you from contributing for the next 6 months
2. Repeal nonrefundable credits (I think this may include the Retirement Saver's Credit but having trouble confirming - it's in section 1102)
3. Moving Expenses and Adoption Assistance Programs would no longer be excludable from taxable income
4. Change timing on how non-qualified pensions are treated as taxable income (change to when vested not when paid)
5. Recharacterizing Roth to Traditional IRA contributions repealed

Title: Re: Republican Tax Plan 2017
Post by: PathtoFIRE on November 03, 2017, 12:08:06 PM
I haven't seen it reported, but I'm guessing the carried interest loophole has also once again survived.
Title: Re: Republican Tax Plan 2017
Post by: MDM on November 03, 2017, 12:10:13 PM
I haven't seen it reported, but I'm guessing the carried interest loophole has also once again survived.
Yes, it has been reported that it has survived.  Seems to be one thing that both Dems and Reps agree on....
Title: Re: Republican Tax Plan 2017
Post by: oldmannickels on November 03, 2017, 12:31:43 PM
So honest question, is this version actually "simplified" compared to the current tax code? That was ostensibly the (stated) goal of tax reform in the first place.

No
Title: Re: Republican Tax Plan 2017
Post by: v8rx7guy on November 03, 2017, 12:33:51 PM
So honest question, is this version actually "simplified" compared to the current tax code? That was ostensibly the (stated) goal of tax reform in the first place.

No

Could you please explain why you would not consider it to be simplified?
Title: Re: Republican Tax Plan 2017
Post by: OurTown on November 03, 2017, 12:58:58 PM
I suppose it is simplified to the extent that many filers who used to itemize would not do so under the proposed bill.
Title: Re: Republican Tax Plan 2017
Post by: VoteCthulu on November 03, 2017, 01:24:47 PM
So honest question, is this version actually "simplified" compared to the current tax code? That was ostensibly the (stated) goal of tax reform in the first place.

No

Could you please explain why you would not consider it to be simplified?
For one thing, they aren't replacing the existing tax code. They are amending it. While this is common and may result in code that is easier (i.e., lots has been struck out), it's tough to say if all of the other amendments to the code have been rendered null and void as well.
What does this have to do with whether the code is simplified or not?

If a hypothetical tax code was one page long and described two tax brackets, and then an amendment was passed reducing it to one bracket, that's a simplification even if the tax code is now two pages long.

Is this proposed amendment a simplification? As far as I've heard it is, but I'm certainly open to anyone who explains what parts make the code more complicated than the reduced brackets and deductions would reduce its complexity.
Title: Re: Republican Tax Plan 2017
Post by: OurTown on November 03, 2017, 01:31:27 PM
They may have the votes the pass this thing, we'll see.  My employer will be a big winner if it happens, hey maybe they will pay me more money!!!!!  Or, maybe not.
Title: Re: Republican Tax Plan 2017
Post by: wannabe-stache on November 03, 2017, 01:32:02 PM
Deficit-financed tax cuts make sense in a recession when you need to stimulate the economy. They don't make sense right now.
get that common sense out of here.  no room for it.

on the bright side: now every FI blogger and podcast will have something new to talk about.
Title: Re: Republican Tax Plan 2017
Post by: CCCA on November 03, 2017, 01:46:39 PM
Plus, only targeting private universities seems spiteful given that there are public universities with massive endowments as well (e.g. University of Michigan ~$11B, Stanford ~$22B).
Government doesn't eat their young.
Stanford isn't a public university. . .  unless your point was just comparing UM to Stanford to show that they have a large endowment relative to the private Universities. 
Title: Re: Republican Tax Plan 2017
Post by: CCCA on November 03, 2017, 01:49:53 PM
The increase in Standard Deduction and the reduction/limit in prop tax and mortgage interest deductions seems like it'll mean that very, very few people will benefit from any sort of mortgage deduction.  The calculus of buying a house changes pretty significantly when you take out the benefits from mortgage interest deduction.
Title: Re: Republican Tax Plan 2017
Post by: MDM on November 03, 2017, 02:01:39 PM
The increase in Standard Deduction and the reduction/limit in prop tax and mortgage interest deductions seems like it'll mean that very, very few people will benefit from any sort of mortgage deduction.  The calculus of buying a house changes pretty significantly when you take out the benefits from mortgage interest deduction.
Yes, probably so in the Bay Area.

For most of the country, probably not so much.  E.g., at 4% interest on the median home price in the U.S. (https://www.cnbc.com/2017/06/29/what-the-median-home-price-of-200000-will-get-you-across-the-us.html), after a 20% down payment, the ~$6,300/yr in mortgage interest is probably not fully above the current standard deduction (i.e., the other itemized deductions probably don't exceed the standard amount) for a single filer, and even less likely for MFJ.

At least, that's the reality.  People's perception may differ, and perception can drive behavior.
Title: Re: Republican Tax Plan 2017
Post by: CCCA on November 03, 2017, 02:19:33 PM
The increase in Standard Deduction and the reduction/limit in prop tax and mortgage interest deductions seems like it'll mean that very, very few people will benefit from any sort of mortgage deduction.  The calculus of buying a house changes pretty significantly when you take out the benefits from mortgage interest deduction.
Yes, probably so in the Bay Area.

For most of the country, probably not so much.  E.g., at 4% interest on the median home price in the U.S. (https://www.cnbc.com/2017/06/29/what-the-median-home-price-of-200000-will-get-you-across-the-us.html), after a 20% down payment, the ~$6,300/yr in mortgage interest is probably not fully above the current standard deduction (i.e., the other itemized deductions probably don't exceed the standard amount) for a single filer, and even less likely for MFJ.

At least, that's the reality.  People's perception may differ, and perception can drive behavior.


I suppose you are correct.  $200k median seems really cheap, but that is coming from the bay area (Median in CA is over $500k).  So a significant portion of home sales even now are not really impacted by the mortgage interest deduction. 


The benefit for a $500k mortgage at 4% is about $20k in interest for the first year, so you are still under the limit for standard deduction for a married couple ($24k).  And with a $10k limit on property tax the most you can deduct is about $30k, so the benefits of moving off the standard deduction is only about a max of $6k, which won't change your taxes too much (for most people in this category) maybe about at most $2k/yr.  That's not really going to change anyone's mind when they are considering buying a $500k - $1M+ house.   


Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 03, 2017, 02:35:34 PM
The brackets look very beneficial for single upper income (top 10%) filers and okay for married couples - big advantages don't come for married couples until they are in the top 3% of income earners.  Definitely great for married doctors/successful business owners/lawyers.

Whether there are big advantages or big disadvantages for top 3% couples (outside the top <0.5%) seems to primarily depend on whether they live in a high income tax state. 
Title: Re: Republican Tax Plan 2017
Post by: maizeman on November 03, 2017, 02:38:33 PM
I suppose you are correct.  $200k median seems really cheap, but that is coming from the bay area (Median in CA is over $500k).  So a significant portion of home sales even now are not really impacted by the mortgage interest deduction.

Having lived both in the bay area and outside of it, I can vouch for the fact that it really does distort ones perceptions of what normal houses or rents (or salaries) are. Definitely enjoying being back out in the rest of the world, where the mortgage payment on a nice house is 2/3s of what my old studio apartment in the bay area now rents for. ;-)

I would would add a caveat to your last statement in that I think the mortgage interest deduction has an emotional/cultural impact on people's decisions about whether or not to take out a mortgage and purchase a house that is not entirely linked to whether or not they actually end up saving any money on their taxes by doing so.
Title: Re: Republican Tax Plan 2017
Post by: Ocinfo on November 03, 2017, 02:54:18 PM
The unexpected happened for me, the latest plan drops my taxes ~11% (from about 18% to 16% rate). The reason is that I live in a high but not extreme “state” income tax location (DC) but don’t own my primary residence. Itemizing only results in a few thousand over the current standard deduction. I’m currently in the 28% bracket, and would move down into the 25% as a MFJ return + get ~$4k in less taxable income due to higher standard deduction.

I’m not a fan of these tax cuts, even though they appear to directly benefit me. I’d rather see us move towards fiscal restraint, rather than blowing up the deficit even more.


Sent from my iPhone using Tapatalk
Title: Re: Republican Tax Plan 2017
Post by: CCCA on November 03, 2017, 03:01:35 PM
I suppose you are correct.  $200k median seems really cheap, but that is coming from the bay area (Median in CA is over $500k).  So a significant portion of home sales even now are not really impacted by the mortgage interest deduction.

Having lived both in the bay area and outside of it, I can vouch for the fact that it really does distort ones perceptions of what normal houses or rents (or salaries) are. Definitely enjoying being back out in the rest of the world, where the mortgage payment on a nice house is 2/3s of what my old studio apartment in the bay area now rents for. ;-)

I would would add a caveat to your last statement in that I think the mortgage interest deduction has an emotional/cultural impact on people's decisions about whether or not to take out a mortgage and purchase a house that is not entirely linked to whether or not they actually end up saving any money on their taxes by doing so.


Yes, I agree that people don't make rational decisions (with spreadsheets).  I guess if the conventional wisdom changes to where there's the general realization that there's only a very small minority that will be able to take advantage of any mortgage interest benefits, then maybe people won't really add that to their "list of reasons why I should buy this house".


All that said, we're in the camp that we will still itemize deductions.  We'll have about a total of $25-26k in mortgage interest and property tax with the limits (we used to have ~$32K).  Adding our charitable contributions to that total, it makes sense to itemize, though there's not that much benefit over the $24k standard deduction.  But since I do everything in turbotax, no reason not to itemize. 
Title: Re: Republican Tax Plan 2017
Post by: VoteCthulu on November 03, 2017, 03:16:08 PM
Furthermore, small businesses that operate as pass through might actually have more complicated taxes since they have to deal with all of the "guardrail" provisions that the law would put in place.
What are the "guardrail" provisions?
Title: Re: Republican Tax Plan 2017
Post by: v8rx7guy on November 03, 2017, 03:38:37 PM
Here is the proposed "postcard" tax return... seems pretty simple to me.

(https://loudermilk.house.gov/uploadedphotos/highresolution/b753c229-0daf-437b-a60d-cee9dd9d6b0d.jpg)
Title: Re: Republican Tax Plan 2017
Post by: Jrr85 on November 03, 2017, 03:48:06 PM
I like that renters are not subsidizing the wealthier homeowners mortgages as much with this plan (lower mortgage deduction cap, higher standard deduction).



Renters do not "subsidize" homeowners with mortgages in the federal tax code.  The interest on the debt for any residence they are renting is deductible by the landlord.  And that interest is deductible without regard for any standard deduction.  So if anything, they get a better deal, because they get the benefit of the interest deduction and the standard deduction if they don't itemize for other reasons, whereas a homeowner only gets the benefit of the mortgage interest deduction to the extent it exceeds the standard deduction.   

At the local level, it is common for homeowners to pay a lower property tax on a primary residence compared to the property tax paid on second homes and rental properties.  But that's a feature of state or local law, not the federal tax code.
Title: Re: Republican Tax Plan 2017
Post by: ixtap on November 03, 2017, 04:00:02 PM
Here is the proposed "postcard" tax return... seems pretty simple to me.

(https://loudermilk.house.gov/uploadedphotos/highresolution/b753c229-0daf-437b-a60d-cee9dd9d6b0d.jpg)

So, it doesn't actually fit on a postcard of you have so much as a savings account?
Title: Re: Republican Tax Plan 2017
Post by: dragoncar on November 03, 2017, 04:25:44 PM
For one thing, they aren't replacing the existing tax code. They are amending it. While this is common and may result in code that is easier (i.e., lots has been struck out), it's tough to say if all of the other amendments to the code have been rendered null and void as well.
What does this have to do with whether the code is simplified or not?

If a hypothetical tax code was one page long and described two tax brackets, and then an amendment was passed reducing it to one bracket, that's a simplification even if the tax code is now two pages long.

Is this proposed amendment a simplification? As far as I've heard it us, but I'm certainly open to anyone who explains what parts make the code more complicated than the reduced brackets and deductions would reduce its complexity.
It's relevant because if they don't explicitly redact old amendments to the code, then they are still active. So at the end of the day this may actually make the tax code harder to understand even though the average person may have a simpler form to file. Furthermore, small businesses that operate as pass through might actually have more complicated taxes since they have to deal with all of the "guardrail" provisions that the law would put in place.

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. 
Title: Re: Republican Tax Plan 2017
Post by: RangerOne on November 03, 2017, 04:32:04 PM
I make a nice living. A little into the six figure category, family of 4. Certainly not poor, likely top 10% of family income. Not necesarily middle class, likely upper middle class, but certainly not wealthy/rich/ultra high earner by most standards.

I just ran all the numbers for my scenario based on everything I read. Best case scenario, my taxes would go up by about $800. Taxable income will increase $19k but the lower rates keep the increase reasonable. It's still an increase. Most people who itemize will end up paying more due to the loss of exemptions.

It doesn't really impact my FIRE plans, but it sure pisses me off knowing I'm paying more for this proposed "middle class tax cut" while people much more well off than me will pay substantially less.

This.

I feel we are in an odd bracket to wind up minor losers in a deal like this but that seems the way they want ti to do. It really all stems from them essentially killing any incentive to itemize which historically was a clear win over taking a standard deduction for families with a home.

My only hope would be dialing back home tax breaks will slam overpriced housing markets back into a some semblance of reality.
Title: Re: Republican Tax Plan 2017
Post by: Viking Thor on November 03, 2017, 04:46:31 PM
The increase in Standard Deduction and the reduction/limit in prop tax and mortgage interest deductions seems like it'll mean that very, very few people will benefit from any sort of mortgage deduction.  The calculus of buying a house changes pretty significantly when you take out the benefits from mortgage interest deduction.
Yes, probably so in the Bay Area.

For most of the country, probably not so much.  E.g., at 4% interest on the median home price in the U.S. (https://www.cnbc.com/2017/06/29/what-the-median-home-price-of-200000-will-get-you-across-the-us.html), after a 20% down payment, the ~$6,300/yr in mortgage interest is probably not fully above the current standard deduction (i.e., the other itemized deductions probably don't exceed the standard amount) for a single filer, and even less likely for MFJ.

At least, that's the reality.  People's perception may differ, and perception can drive behavior.
CCCA is correct, it will absolutely wipe out the tax benefits of home ownership nationwide, that's not even debatable. The standard deduction will be raised and itemized deductions will be so limited they will either not apply (most people) or have a very small impact. State tax deduction is gone, property tax deduction limited, and mortgage deduction limited for new homes purchases. For most people it's the only through the combination  of these three together that provide enough deductions for any tax benefit.

This is why all the housing industry trade groups (home builders, real estate agents) are strongly against this bill.
Title: Re: Republican Tax Plan 2017
Post by: RangerOne on November 03, 2017, 04:49:40 PM
In reality I think this could pass close to as is with most of the lobbying probably impacting corporate tax loopholes but the middle class in most of the country will end up either not noticing or feeling slightly better off.

I don't like the home tax changes but only because of timing and the fact that I live in San Diego, where a 2 bedroom condo goes for $500k... and potential tax savings today make ownership $150-$300 cheaper a month depending on how I straddle the 25% tax bracket.

But San Diego is in the top 10 least affordable cities for housing. So in reality this change probably doesn't impact middle class families any place or city outside of the top 20 highest cost areas.

I can't help but be a bit selfish though an resent having to pay a penny more in taxes to spare those poor babies estate tax on inheritance over 5 million per child... I am less opposed to pass through changes or removing AMT since those are cutting breaks to people working for money.
Title: Re: Republican Tax Plan 2017
Post by: RangerOne on November 03, 2017, 04:53:12 PM
The increase in Standard Deduction and the reduction/limit in prop tax and mortgage interest deductions seems like it'll mean that very, very few people will benefit from any sort of mortgage deduction.  The calculus of buying a house changes pretty significantly when you take out the benefits from mortgage interest deduction.
Yes, probably so in the Bay Area.

For most of the country, probably not so much.  E.g., at 4% interest on the median home price in the U.S. (https://www.cnbc.com/2017/06/29/what-the-median-home-price-of-200000-will-get-you-across-the-us.html), after a 20% down payment, the ~$6,300/yr in mortgage interest is probably not fully above the current standard deduction (i.e., the other itemized deductions probably don't exceed the standard amount) for a single filer, and even less likely for MFJ.

At least, that's the reality.  People's perception may differ, and perception can drive behavior.
CCCA is correct, it will absolutely wipe out the tax benefits of home ownership nationwide, that's not even debatable. The standard deduction will be raised and itemized deductions will be so limited they will either not apply (most people) or have a very small impact. State tax deduction is gone, property tax deduction limited, and mortgage deduction limited for new homes purchases. For most people it's the only through the combination  of these three together that provide enough deductions for any tax benefit.

This is why all the housing industry trade groups (home builders, real estate agents) are strongly against this bill.

If it reduces incentives for people to buy multiple homes to become mini land barrens and eating up starter homes for the rest of us I am kind of a fan of getting rid of fed tax breaks on mortgages. I believe they are eliminating tax breaks on second homes altogether am I right?

I would rather they came out and but a massive FU tax on foreign purchases though.
Title: Re: Republican Tax Plan 2017
Post by: MDM on November 03, 2017, 04:57:19 PM
...it will absolutely wipe out the tax benefits of home ownership nationwide, that's not even debatable.
The point being that those tax benefits, for probably a majority of the country, are more imagined than real.
Title: Re: Republican Tax Plan 2017
Post by: Davids on November 03, 2017, 05:08:37 PM
Here is a dumb question. Does this pretty much eliminate the W4 form you fill out when you start your new job and adjust when needed (i.e. when you have a kid)?
Title: Re: Republican Tax Plan 2017
Post by: frugalecon on November 03, 2017, 05:18:05 PM
It seems this bill potentially would make it much more attractive to pay off an outstanding mortgage. I have 9 years to go in a 3% 15 year mortgage, and currently my after tax rate is a hair below 2%. If I lose the ability to itemize, I now have a 3% after tax guaranteed rate. That is way better than any other taxable fixed rate alternative.
Title: Re: Republican Tax Plan 2017
Post by: Viking Thor on November 03, 2017, 05:33:59 PM
...it will absolutely wipe out the tax benefits of home ownership nationwide, that's not even debatable.
The point being that those tax benefits, for probably a majority of the country, are more imagined than real.
A lot of people get these deductions nationwide, if course it's more prevalent in high housing cost states (with mainly Democratic congress reps, which is likely the driving factor in targeting this area for heavy cuts). Presumably  most people would know if they personally are benefiting from itemized deductions, and if not benefiting probably don't care that they are going away.
Title: Re: Republican Tax Plan 2017
Post by: Bucksandreds on November 03, 2017, 05:34:20 PM
Due to raising the income threshold for child tax credit I would make out nicely. Im completely against this as it removes the estate tax, adds to the deficit and makes the rich richer. IMHO everyone making 6 figures up needs to pay a little more (not less).
Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 03, 2017, 05:42:23 PM
Here is a dumb question. Does this pretty much eliminate the W4 form you fill out when you start your new job and adjust when needed (i.e. when you have a kid)?
No. How would it? No individual employer has enough information about your overall tax situation to skip the W-4 or the taxpayer responsibility for filing quarterly estimated tax payments if they are required.
Title: Re: Republican Tax Plan 2017
Post by: dragoncar on November 03, 2017, 05:50:39 PM
It seems this bill potentially would make it much more attractive to pay off an outstanding mortgage. I have 9 years to go in a 3% 15 year mortgage, and currently my after tax rate is a hair below 2%. If I lose the ability to itemize, I now have a 3% after tax guaranteed rate. That is way better than any other taxable fixed rate alternative.

I don’t think this applies to existing mortgages, and going forward $500k is still deductible no?
Title: Re: Republican Tax Plan 2017
Post by: frugalecon on November 03, 2017, 05:53:50 PM
It seems this bill potentially would make it much more attractive to pay off an outstanding mortgage. I have 9 years to go in a 3% 15 year mortgage, and currently my after tax rate is a hair below 2%. If I lose the ability to itemize, I now have a 3% after tax guaranteed rate. That is way better than any other taxable fixed rate alternative.

I don’t think this applies to existing mortgages, and going forward $500k is still deductible no?

Yes, that is true, but other aspects of the plan eliminate the advantage of itemizing for me. If state and local income taxes are not deductible, my household would take the standard deduction. Thus, the after tax cost of the mortgage is just the headline interest rate, while we would still pay tax on, e.g., interest from CDs.
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 03, 2017, 05:56:56 PM
It seems this bill potentially would make it much more attractive to pay off an outstanding mortgage. I have 9 years to go in a 3% 15 year mortgage, and currently my after tax rate is a hair below 2%. If I lose the ability to itemize, I now have a 3% after tax guaranteed rate. That is way better than any other taxable fixed rate alternative.

I don’t think this applies to existing mortgages, and going forward $500k is still deductible no?

True, but, it's that "lost the ability to itemize" point that will affect many. 75% of my itemized deduction this year will be state income taxes. My mortgage interest and property taxes on their own would be well shy of the standard deduction.
Title: Re: Republican Tax Plan 2017
Post by: dragoncar on November 03, 2017, 05:57:09 PM
It seems this bill potentially would make it much more attractive to pay off an outstanding mortgage. I have 9 years to go in a 3% 15 year mortgage, and currently my after tax rate is a hair below 2%. If I lose the ability to itemize, I now have a 3% after tax guaranteed rate. That is way better than any other taxable fixed rate alternative.

I don’t think this applies to existing mortgages, and going forward $500k is still deductible no?

Yes, that is true, but other aspects of the plan eliminate the advantage of itemizing for me. If state and local income taxes are not deductible, my household would take the standard deduction. Thus, the after tax cost of the mortgage is just the headline interest rate, while we would still pay tax on, e.g., interest from CDs.

Ah gotacha.  That might be true for me too, since state taxes were always greater than the standard deductiob
Title: Re: Republican Tax Plan 2017
Post by: nalor511 on November 03, 2017, 06:06:22 PM
I would love to see the US stop taking citizens when residing outside the country.

If you mean taxing, then YES, me too :-)  Or at least apply the corporate rate for foreign profits of 12%...

Thanks autocorrect. Yes, taxing. The fact that this bill no longer taxes foreign corporate income, but the US is still trying to tax worldwide income for non-resident citizens boggles my mind.
Title: Re: Republican Tax Plan 2017
Post by: Viking Thor on November 03, 2017, 06:09:05 PM
It seems this bill potentially would make it much more attractive to pay off an outstanding mortgage. I have 9 years to go in a 3% 15 year mortgage, and currently my after tax rate is a hair below 2%. If I lose the ability to itemize, I now have a 3% after tax guaranteed rate. That is way better than any other taxable fixed rate alternative.

I don’t think this applies to existing mortgages, and going forward $500k is still deductible no?
If passed as is, there is no state income tax deduction and property tax deduction is limited to max $10k. The standard deduction for married couple would be $24k. Given this, very few people would benefit from itemizing (mortgage interest plus the capped property tax is typically not too going to exceed $24k, and if exceeding it will be a much smaller benefit than before)

So depending on home interest rate, paying down could be more attractive relative to what it was before, if you were previously getting a tax benefit. You still have to decide if it's more attractive than other investment options.
Title: Re: Republican Tax Plan 2017
Post by: MDM on November 03, 2017, 06:11:32 PM
The point being that those tax benefits, for probably a majority of the country, are more imagined than real.
A lot of people get these deductions nationwide
Both statements are true.
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 03, 2017, 06:20:46 PM
Here is the proposed "postcard" tax return... seems pretty simple to me.

(https://loudermilk.house.gov/uploadedphotos/highresolution/b753c229-0daf-437b-a60d-cee9dd9d6b0d.jpg)

Okay.  While I am generally in favor of the bill so far, I've got to call BS on this.  Interest income?  Dividends?  Capital gains?  Pension income?  IRA distributions?  Social Security income?  And that's just a few excerpts from the current 1040.  If I dozed off and missed the part that I won't have to report any of those anymore; GREAT!!!

It seems that nobody remembers that this "file on a postcard" verbage was introduced by Reagan when he was selling his tax cuts. Those tax cuts are still generally applauded, but we never got anywhere close to postcard-level simplification.  Not that this would be a good thing......
Title: Re: Republican Tax Plan 2017
Post by: teen persuasion on November 03, 2017, 07:53:03 PM
Here is the proposed "postcard" tax return... seems pretty simple to me.

(https://loudermilk.house.gov/uploadedphotos/highresolution/b753c229-0daf-437b-a60d-cee9dd9d6b0d.jpg)
I don't see that Retirement Saver's credit.  Did I miss where that got cut?
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 03, 2017, 08:26:49 PM
Here is the proposed "postcard" tax return... seems pretty simple to me.

(https://loudermilk.house.gov/uploadedphotos/highresolution/b753c229-0daf-437b-a60d-cee9dd9d6b0d.jpg)
I don't see that Retirement Saver's credit.  Did I miss where that got cut?

Sweet, no penalty for under-withholding!
Title: Re: Republican Tax Plan 2017
Post by: maizeman on November 03, 2017, 08:31:29 PM
Here is the proposed "postcard" tax return... seems pretty simple to me.

(https://loudermilk.house.gov/uploadedphotos/highresolution/b753c229-0daf-437b-a60d-cee9dd9d6b0d.jpg)

If people are going to keep quoting this post, can you guys edit it to have a reasonable "width" tag? It really improves readability.

Example:

Code: [Select]
[img width=600]https://loudermilk.house.gov/uploadedphotos/highresolution/b753c229-0daf-437b-a60d-cee9dd9d6b0d.jpg[/img]
Title: Re: Republican Tax Plan 2017
Post by: MDM on November 03, 2017, 08:38:07 PM
Here is the proposed "postcard" tax return... seems pretty simple to me.
<snip>
I don't see that Retirement Saver's credit.  Did I miss where that got cut?
AFAIK it remains.

The saver's credit is authorized by Section 25B (see 26 U.S. Code § 25B - Elective deferrals and IRA contributions by certain individuals | US Law | LII / Legal Information Institute (https://www.law.cornell.edu/uscode/text/26/25B)) of the tax code.  The only thing I could find in the new bill that even comes close is the quote below.

Quote
(c) TERMINATION OF SECTION 25.—Section 25, as
2 amended by section 3601, is amended by adding at the
3 end the following new subsection:
4 ‘‘(k) TERMINATION.—No credit shall be allowed
5 under this section with respect to any mortgage credit cer6
tificate issued after December 31, 2017.’’.
Title: Re: Republican Tax Plan 2017
Post by: sol on November 03, 2017, 08:56:53 PM
Frankly I don't see how that "postcard" is any better than the one-page 1040EZ it would replace.  They just removed the top third of the form where you have to put your name and all of your personal info, and the bottom third where you have to sign and authorize, and presumably you'll still have to put all of that on the new form.

Anybody who has a schedule E won't be able to use it (landlords).  Anybody who takes the foreign tax credit can't use it (indexers).  They've left out the separate worksheets for things like calculating the child tax credits and investment taxes.  They haven't simplified anything, they've just left out all of the information required to figure out what numbers to put into the same number of boxes.  I don't think this is an improvement.

On the other hand, I don't think simplification is really the goal here.  More like "signalling that the IRS won't double check you and you can put whatever you want on your tax forms because there is no required documentation of anything."
Title: Re: Republican Tax Plan 2017
Post by: Paul der Krake on November 03, 2017, 10:15:29 PM
This looks like a win for high earners who don't itemize, right?
Title: Re: Republican Tax Plan 2017
Post by: secondcor521 on November 03, 2017, 10:22:44 PM
Statements I heard from Paul Ryan on the news yesterday lead me to believe that the "file on a postcard" idea is intended to apply to about 90% of (individual?) taxpayers.  Presumably because with the elimination of many deductions and an increase in the standard deduction, fewer people will have to itemize and can therefore skip schedule A.  I assume that for the other 10%, there will still be a full form 1040 and schedules and forms to fill out to collect all of the deductions and whatnot that apply.

In other word, don't read the postcard image and assume that it covers everyone and every situation.  It certainly doesn't.  I'm personally not even sure if the postcard thing is real or going to happen; I think it's just an attempt by Republicans to drive home the tax simplification message.

(For the record, IMHO it does simplify things for me on taxes, but I think they could have done much more simplification.  I think in at least some cases they added some complications (the new $300 credit, and the 45.6% stealth bracket are two examples).)
Title: Re: Republican Tax Plan 2017
Post by: MDM on November 03, 2017, 10:52:56 PM
Until one can find a "Form 1040-Postcard" on the IRS site, it seems a safe assumption that the postcard is a stage prop, not a serious proposal.
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 04, 2017, 01:21:22 AM
Statements I heard from Paul Ryan on the news yesterday lead me to believe that the "file on a postcard" idea is intended to apply to about 90% of (individual?) taxpayers. 

Do 90% of taxpayers have no interest income, dividends or capital gains?  Maybe, I just don't know....

Why are you wasting your time listening to what comes out or politicians' mouths???
Title: Re: Republican Tax Plan 2017
Post by: Ocinfo on November 04, 2017, 06:20:12 AM
This looks like a win for high earners who don't itemize, right?

Yes, it’ll be about an 11% cut for me. MFJ, rent primary residence with around $200k income after maxing retirement accounts, etc...I don’t want it or need it. It’s also likely a win for some high earners that itemize as they’ll lose some deductions but not having AMT could be huge (e.g., we know Trump paid $30+ million due to AMT in 2005).


Sent from my iPhone using Tapatalk
Title: Re: Republican Tax Plan 2017
Post by: boarder42 on November 04, 2017, 06:47:45 AM
It seems this bill potentially would make it much more attractive to pay off an outstanding mortgage. I have 9 years to go in a 3% 15 year mortgage, and currently my after tax rate is a hair below 2%. If I lose the ability to itemize, I now have a 3% after tax guaranteed rate. That is way better than any other taxable fixed rate alternative.

I don’t think this applies to existing mortgages, and going forward $500k is still deductible no?

Yes, that is true, but other aspects of the plan eliminate the advantage of itemizing for me. If state and local income taxes are not deductible, my household would take the standard deduction. Thus, the after tax cost of the mortgage is just the headline interest rate, while we would still pay tax on, e.g., interest from CDs.

You should be putting this money in the market during the growth stage anyways. You're not even keeping up with inflation with your strategy. A 3% mortgage shouldn't be paid down and you should invest the money in vtsax or something similar
Title: Re: Republican Tax Plan 2017
Post by: boarder42 on November 04, 2017, 06:49:29 AM
Statements I heard from Paul Ryan on the news yesterday lead me to believe that the "file on a postcard" idea is intended to apply to about 90% of (individual?) taxpayers. 

Do 90% of taxpayers have no interest income, dividends or capital gains?  Maybe, I just don't know....

Why are you wasting your time listening to what comes out or politicians' mouths???

Really wouldn't be too hard to add those lines.
Title: Re: Republican Tax Plan 2017
Post by: frugalecon on November 04, 2017, 06:57:12 AM
It seems this bill potentially would make it much more attractive to pay off an outstanding mortgage. I have 9 years to go in a 3% 15 year mortgage, and currently my after tax rate is a hair below 2%. If I lose the ability to itemize, I now have a 3% after tax guaranteed rate. That is way better than any other taxable fixed rate alternative.

I don’t think this applies to existing mortgages, and going forward $500k is still deductible no?

Yes, that is true, but other aspects of the plan eliminate the advantage of itemizing for me. If state and local income taxes are not deductible, my household would take the standard deduction. Thus, the after tax cost of the mortgage is just the headline interest rate, while we would still pay tax on, e.g., interest from CDs.

You should be putting this money in the market during the growth stage anyways. You're not even keeping up with inflation with your strategy. A 3% mortgage shouldn't be paid down and you should invest the money in vtsax or something similar

I don’t dispute that equities have a higher expected return, but you seem to not be aware that inflation has been averaging below 2% in recent years. A nominal after tax return of 3% does exceed the current inflation rate, as well as the likely inflation rate in the near to medium term.
Title: Re: Republican Tax Plan 2017
Post by: secondcor521 on November 04, 2017, 08:38:20 AM
Why are you wasting your time listening to what comes out or politicians' mouths???

They amuse and irritate me, the latter of which I sometimes find oddly entertaining.
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 04, 2017, 09:49:21 AM
Am I the only one who finds it odd that three of the four proposed married, filing jointly brackets start at twice the level that applies to single filers, while the 35% bracket does not? That’s the kind of distorting complexity I thought the Republicans were keen to leave behind.
Title: Re: Republican Tax Plan 2017
Post by: Peter Parker on November 04, 2017, 09:59:36 AM
What would be so wrong with eliminating income taxes (and most of the IRS), instituting a consumption tax (which may have a negative effect on the economy by discouraging purchases) AND keeping an Estate Tax (capped at 5 million or some other number) which would have the positive effect of stimulating the economy by encouraging one to spend it or lose it....

The use of the tax code of as an award to lobbyist and/or social engineering seems counter-intuitive to a capitalistic society.  I like the idea of a consumption tax (and estate tax) because it is naturally progressive.  Don't by a car-0% tax.  Buy a Prius X% tax paid.  Buy a Rolls Royce pay Y%

Playing the existing game of "beating the system" (and who's better at it than us Mustachians? :-))  is really kind of ridiculous when you think about it.  Think about the wasted money that goes into such shell games--financial planners, CPA's, tax attorneys, tax preparers, and  a whole governmental agency (IRS)--all being paid for to create nothing (other than a plan to game the system).  This is such a waste of resources.

The Republicans talk about the new tax plan's simplicity.  "You can simply do your taxes on a post-card sized return!"  But I'm a little skeptical.  It seems like they are really saying is:  "We've taken away all the deductions that were available to everyday, common folk.  Now we can simply take your money if you sign this post-card.  LOOK how simple that was!"
Title: Re: Republican Tax Plan 2017
Post by: achvfi on November 04, 2017, 10:14:45 AM
Found this article.
Seems like there are few provisions to make 401k more flexible.
https://finance.yahoo.com/news/good-news-401-k-tax-090116382.html

Also an interesting article how the taxes may raise on middle class due to inflation adjustment related gimmicks and tax credit expirations.

https://medium.com/@kamin_83016/how-a-tax-cut-turns-into-a-tax-increase-960c32d1ba82
OR
https://slate.com/business/2017/11/the-sneaky-ways-republicans-would-raise-taxes-on-the-middle-class.html
Title: Re: Republican Tax Plan 2017
Post by: RangerOne on November 04, 2017, 10:37:23 AM
Essentially making it so nearly no one itimize is the real simplification here. But there is no reason that has to mean we raise taxes of home owners... I guess we will find out how much sway upper middle income families have as I almost grantee you every family making over $125k with kids and a home would see a tax increase.

If we want to remove home ownership incentives I think it should happen in phases to let the market adapt to each change. First tax and stop foreign buying.. next take away tax breaks for second homes. Finally they can considering removing primary home breaks. Though I always thought it was a reasonable goal to encourage home ownership of at least a families primary residence.
Title: Re: Republican Tax Plan 2017
Post by: ncornilsen on November 04, 2017, 10:38:43 AM
What would be so wrong with eliminating income taxes (and most of the IRS), instituting a consumption tax (which may have a negative effect on the economy by discouraging purchases) AND keeping an Estate Tax (capped at 5 million or some other number) which would have the positive effect of stimulating the economy by encouraging one to spend it or lose it....

The use of the tax code of as an award to lobbyist and/or social engineering seems counter-intuitive to a capitalistic society.  I like the idea of a consumption tax (and estate tax) because it is naturally progressive.  Don't by a car-0% tax.  Buy a Prius X% tax paid.  Buy a Rolls Royce pay Y%

Playing the existing game of "beating the system" (and who's better at it than us Mustachians? :-))  is really kind of ridiculous when you think about it.  Think about the wasted money that goes into such shell games--financial planners, CPA's, tax attorneys, tax preparers, and  a whole governmental agency (IRS)--all being paid for to create nothing (other than a plan to game the system).  This is such a waste of resources.

The Republicans talk about the new tax plan's simplicity.  "You can simply do your taxes on a post-card sized return!"  But I'm a little skeptical.  It seems like they are really saying is:  "We've taken away all the deductions that were available to everyday, common folk.  Now we can simply take your money if you sign this post-card.  LOOK how simple that was!"

Consumption taxes are inherently the most regressive form of taxation that exists.  No matter how you exempt certain goods or purchases, wealthy people have the flexibility to avoid them, poor/middle class people don't. Research yacht taxes, for one thing. The only people who felt the pinch of that one was the middle class yacht builders.

Title: Re: Republican Tax Plan 2017
Post by: Peter Parker on November 04, 2017, 10:46:48 AM
What would be so wrong with eliminating income taxes (and most of the IRS), instituting a consumption tax (which may have a negative effect on the economy by discouraging purchases) AND keeping an Estate Tax (capped at 5 million or some other number) which would have the positive effect of stimulating the economy by encouraging one to spend it or lose it....

The use of the tax code of as an award to lobbyist and/or social engineering seems counter-intuitive to a capitalistic society.  I like the idea of a consumption tax (and estate tax) because it is naturally progressive.  Don't by a car-0% tax.  Buy a Prius X% tax paid.  Buy a Rolls Royce pay Y%

Playing the existing game of "beating the system" (and who's better at it than us Mustachians? :-))  is really kind of ridiculous when you think about it.  Think about the wasted money that goes into such shell games--financial planners, CPA's, tax attorneys, tax preparers, and  a whole governmental agency (IRS)--all being paid for to create nothing (other than a plan to game the system).  This is such a waste of resources.

The Republicans talk about the new tax plan's simplicity.  "You can simply do your taxes on a post-card sized return!"  But I'm a little skeptical.  It seems like they are really saying is:  "We've taken away all the deductions that were available to everyday, common folk.  Now we can simply take your money if you sign this post-card.  LOOK how simple that was!"

Consumption taxes are inherently the most regressive form of taxation that exists.  No matter how you exempt certain goods or purchases, wealthy people have the flexibility to avoid them, poor/middle class people don't. Research yacht taxes, for one thing. The only people who felt the pinch of that one was the middle class yacht builders.

...But if they were faced with stiff Estate Taxes, they would either buy the yacht while they are alive or give their money to the government when they die....
Title: Re: Republican Tax Plan 2017
Post by: CCCA on November 04, 2017, 10:51:57 AM
It seems this bill potentially would make it much more attractive to pay off an outstanding mortgage. I have 9 years to go in a 3% 15 year mortgage, and currently my after tax rate is a hair below 2%. If I lose the ability to itemize, I now have a 3% after tax guaranteed rate. That is way better than any other taxable fixed rate alternative.

I don’t think this applies to existing mortgages, and going forward $500k is still deductible no?


Oh, I thought it would affect current owners as well.  I was about to say that that was incorrect, but googled it and found this line in a fortune article:


Quote
If you already own your home, changes to the mortgage interest and property tax deductions won’t impact you. But the proposals will hit close to home with home buyers, who could see big changes in their future federal tax bills.

well that's better for us than I thought.  I was expecting a big reduction in the amount we could deduct between mortage interest and property tax.
Title: Re: Republican Tax Plan 2017
Post by: TheAnonOne on November 04, 2017, 11:07:39 AM
Can someone help me out?

In MN with a HHI of 225->250k (probably closer to 190->210 after 401ks, HSA, ect) with a state tax level between 5% and 7%. 2 people 0 kids, small 60k mortgage and no debt.

Are my taxes going up or down? My back of the napkin math basically showed it being less tax until I couldn't deduct state taxes anymore. So I came up with basically no change. Am I sort of right?

Thanks!
Title: Re: Republican Tax Plan 2017
Post by: boarder42 on November 04, 2017, 11:38:19 AM
Am I the only one who finds it odd that three of the four proposed married, filing jointly brackets start at twice the level that applies to single filers, while the 35% bracket does not? That’s the kind of distorting complexity I thought the Republicans were keen to leave behind.

At first glance this appears to be a wtf are you taking mfj more for but. Upon further examination they likely raised the single person to account make it so the death of a spouse doesn't have rmds hit the surviving spouse as hard.
Title: Re: Republican Tax Plan 2017
Post by: badassprof on November 04, 2017, 12:22:34 PM
I will tell you what they spend it on - nice dorms, organic food in the food court, luxury bulding renovations, professorships paying 500K a year, university administrators getting 500K- 1MM in salary, etc. They for sure don't spend it on research as that is ALL funded with outside grants. This is how it works in higher ed.  And of course students whose families make less than 50K a year go for free. That is 1% of their class. I know that for a fact.
I spent a little bit of time working in university development (i.e., the people that collect donations) and quite frankly, most people know shockingly little about how the endowments actually work. Here's the short version:

It's not a single giant pot of money, despite the fact that it's reported in aggregate. Instead, the money goes where the donor designates it, whether that be a "general fund" or "scholarships for students studying underwater basket-weaving." Legally the university can only spend the funds on their designated purposes and if it's a true endowment, then you can cannot touch the principle.

So what does that mean in terms of a tax on net investment income? Basically it means that whomever wrote it doesn't understand how they work and if it goes though, a giant headache for universities. Most likely a giant headache for the IRS as well in terms of actually auditing the provision as well. Plus, only targeting private universities seems spiteful given that there are public universities with massive endowments as well (e.g. University of Michigan ~$11B, Stanford ~$22B).

Bingo, Panda. Most people don't realize how restricted endowments are in terms of use. And while there are some very well compensated professors, 500k is a bit extreme. To say this is the exception is an understatement.
Title: Re: Republican Tax Plan 2017
Post by: FIREwalker Fed on November 04, 2017, 01:06:51 PM
PTF
Title: Re: Republican Tax Plan 2017
Post by: Patches on November 04, 2017, 02:00:37 PM
A 25% rate for pass-through businesses. Instead of getting taxed at an individual rate for business profits, people who own their own business would pay at the so-called pass-through rate. There will be some guardrails on what kinds of businesses can claim this rate, to avoid individuals abusing the lower tax. Seems reasonable that legit small businesses shouldn't be taxed at a higher rate than corporations, though it looks like there will still be a difference.
Unless I’m missing something his doesn’t make any sense to me.  Why should a pass-through entity (eg contractor) pay a lower rate than an individual (eg salaried employee)?  The comparison to corporate rates is not apt— corporations are not pass through, so the dividends they pay are taxed (the oft maligned double taxation, but it’s explained by the lower corporate tax rate and internal reinvestment tax deferral).  I have no problem with small businesses paying the corporate tax rate as long as their owners also pay taxes on their withdrawals from the business account

You may have overlooked S Corporations, which are pass thru... No tax on dividends...
Title: Re: Republican Tax Plan 2017
Post by: sol on November 04, 2017, 08:01:02 PM
They changed the tax plan today, to raise the tax brackets.  This means higher taxes on everyone.

https://www.cbsnews.com/news/house-gop-quietly-changes-tax-bill-to-tax-income-at-higher-rates-over-time/
Title: Re: Republican Tax Plan 2017
Post by: obstinate on November 04, 2017, 09:16:55 PM
This looks like a win for high earners who don't itemize, right?
Yes, but it's somewhat of a hit for those of us who do itemize. I'll face lower tax rates, but about 80k in local income taxes will no longer be deductible. This will cost me more than my savings.

That's without factoring in the corporate tax rate changes, though. I own a slice of the overall body of US 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. I have no idea how to estimate what this does to the value of my portfolio, but I suppose it will, as a first order effect, increase corporate profits by 5-10%.

Transitively, you'd expect it to have a similar effect on my portfolio. If it does, and I expect approximately 5% real return on investment, that means I can now expect between 0.25 and 0.5 points of increased ROI. This would be enough to offset the increased taxes I'll face due to being unable to deduct state and local income taxes. But if I hadn't accumulated a lot of savings during the past decade, this would hurt bad.

This tax cut really seems to favor high wealth people over high income people. It seems like high income folks don't get much out of it. But maybe I'm mistaken.
Title: Re: Republican Tax Plan 2017
Post by: sol on November 04, 2017, 09:22:40 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.

Don't hold your breath.  All that talk about closing corporate loopholes was just smokescreen.  As far as I can tell, nothing about the corporate tax code changes at all, except slashing the rate to 20%.

The carried interest loopholes stayed.
All of the oil and gas loopholes stayed.
The offshore income loopholes stayed.
The capital equipment write-offs stayed, and were even expanded.
The credit union exemption stayed
The medical and pharma exemptions stayed.

Really, I don't see any corporate loopholes closed at all.  Under the current system, US corporations have a nominal 35% rate but pay more like 18.5%, after loopholes.  So they shelter about 16.5% of their income?  If they still get to do all of that, but the nominal rate is now 20%, doesn't that mean that the effective 2018 corporate tax rate can be expected to be 20-16.5 = 3.5%?  How can Treasury possibly justify cutting revenues from 18.5 to 3.5%?

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?
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 04, 2017, 09:48:57 PM
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?

Was that a rhetorical question?   LOL
Title: Re: Republican Tax Plan 2017
Post by: MDM on November 04, 2017, 10:28:59 PM
Nice article by Kitces: Individual Tax Reforms Of House GOP Tax Cuts And Jobs Act (https://www.kitces.com/blog/tax-cuts-and-jobs-act-2018-house-gop-tax-reform-proposal/).
Title: Re: Republican Tax Plan 2017
Post by: NorthernBlitz on November 05, 2017, 01:27:02 AM
Well, I think Harvard can spare 1.5% of its profits on the 20B in endowment they have. They have room for that.
[/quote]

+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.

Quote
Increasing the debt in times of economic prosperity is  so dumb. This entire circus and their tax plan reminds me of a local bar slogan : "we cheat the other guy and pass the savings on to you".
[\quote]

+ 1 (or I guess +19 Trillion (and counting!))
Title: Re: Republican Tax Plan 2017
Post by: Embok on November 05, 2017, 01:40:55 AM
Ptf, partly because I will be completely screwed if this passes.
Title: Re: Republican Tax Plan 2017
Post by: ZiziPB on November 05, 2017, 04:02:40 AM
As far as the simplification goal, I think getting rid of AMT does simplify things a lot. 

To the poster worried that the bill did not explicitly delete prior amendments to the code:  If a particular section is deleted, it is deleted with all prior amendments to that particular section.  No need to say that specifically.
Title: Re: Republican Tax Plan 2017
Post by: boarder42 on November 05, 2017, 04:25:29 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.
Title: Re: Republican Tax Plan 2017
Post by: brian313313 on November 05, 2017, 04:57:42 AM
It seems good for me. I don't have a mortgage, but if I did it would still be under the mortgage deduction as is so I don't itemize. The only thing I may disagree with is Alimony. The reason being is that the recipient pays income tax on this so if both sides have to start paying it seems that it's double-taxed. It doesn't affect me personally though.
Title: Re: Republican Tax Plan 2017
Post by: BTDretire on November 05, 2017, 05:29:07 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.
Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 05, 2017, 06:07:07 AM
Really, I don't see any corporate loopholes closed at all.  Under the current system, US corporations have a nominal 35% rate but pay more like 18.5%, after loopholes.  So they shelter about 16.5% of their income?  If they still get to do all of that, but the nominal rate is now 20%, doesn't that mean that the effective 2018 corporate tax rate can be expected to be 20-16.5 = 3.5%?  How can Treasury possibly justify cutting revenues from 18.5 to 3.5%?
Thought experiment: if they lowered the notional rate to 10%, would the average profitable corporation be getting a fat check from the federal government every year? Of course not.

I've seen you post for a long time here and you seem to have a handle on math. With that combination, you can't possibly think that's how the math applies here...

Here's how it will work, taking some wildly simplifying assumptions:
Imagine a corporation that has a 35% nominal rate and an effective rate of 18.5% (I didn't check your sources; I trust you for this analysis). That means for a notional $100 of profit, they had "loopholes" for $47 of income and were taxed 35% on $53 of income-after-loopholes to pay that $18.55 of tax on $100 of notional profit.

Under a new scheme, with no changes to loopholes, they'll be taxed 20% on that $53, or $10.60 or 10.6% effective rate, not a 3.5% rate.
Title: Re: Republican Tax Plan 2017
Post by: Bird In Hand on November 05, 2017, 06:19:37 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.

There's also a child and dependent care tax credit (CDCC) -- at > $43k AGI, you get a credit of 20% of your first $3,000 of expenses for one child ($600 max credit) or up to $6,000 for 2+ ($1,200 max credit).  In the current code you can only use the CDCC for expenses that exceed what you've put in your DCFSA.  So if you max out your DCFSA ($5k) then with 1 child you can't use the CDCC; with 2 children you get a $200 credit (assuming your child care expenses were at least $6,000).  With that same assumption:

Under the current code with 1 kid your taxes are reduced by $1,250 (DCFSA)
Under the current code with 2+ kids your taxes are reduced by $1,250 (DCFSA) + $200** (CDCC) = $1,450

Under the new plan with 1 kid your taxes are reduced by $600 (CDCC)
Under the new plan with 2+ kids your taxes are reduced by $1,200 (CDCC)
------

tl;dr: you come out $650 behind in the new plan with 1 kid, and $250 behind with 2+ kids.
Title: Re: Republican Tax Plan 2017
Post by: maizeman on November 05, 2017, 06:27:48 AM
It seems good for me. I don't have a mortgage, but if I did it would still be under the mortgage deduction as is so I don't itemize. The only thing I may disagree with is Alimony. The reason being is that the recipient pays income tax on this so if both sides have to start paying it seems that it's double-taxed. It doesn't affect me personally though.

From the coverage I found online, the receiving spouse will no longer pay taxes on alimony payments under the revised bill. It'll still increase total taxes payed on alimony payments somewhat, since the person paying the alimony is generally going to be in a higher tax bracket than the person receiving the alimony, but it sounds like it wouldn't be a double taxation situation. It's also worth noting that child support was taxed this way (on the tax return of the parent who receives the money, not the tax return of the parent who receives the support) already so at least the two are being treated consistently now.

In googling around to try to find an answer to this question, I also stumbled across this statistic: "More than a half-million taxpayers claimed alimony deductions totaling more than $10 billion in 2010 ... Yet recipients' reported alimony income was $2.3 billion less."
Title: Re: Republican Tax Plan 2017
Post by: dresden on November 05, 2017, 06:56:32 AM
Frankly I don't see how that "postcard" is any better than the one-page 1040EZ it would replace.  They just removed the top third of the form where you have to put your name and all of your personal info, and the bottom third where you have to sign and authorize, and presumably you'll still have to put all of that on the new form.

Anybody who has a schedule E won't be able to use it (landlords).  Anybody who takes the foreign tax credit can't use it (indexers).  They've left out the separate worksheets for things like calculating the child tax credits and investment taxes.  They haven't simplified anything, they've just left out all of the information required to figure out what numbers to put into the same number of boxes.  I don't think this is an improvement.

On the other hand, I don't think simplification is really the goal here.  More like "signalling that the IRS won't double check you and you can put whatever you want on your tax forms because there is no required documentation of anything."

I think a high percentage efile anyhow to get their refunds back faster - not sure the postcard means much.  I wish they would address some of the predatory practices like tax refund loans that target the poor.
Title: Re: Republican Tax Plan 2017
Post by: dresden on November 05, 2017, 07:17:29 AM
It seems good for me. I don't have a mortgage, but if I did it would still be under the mortgage deduction as is so I don't itemize. The only thing I may disagree with is Alimony. The reason being is that the recipient pays income tax on this so if both sides have to start paying it seems that it's double-taxed. It doesn't affect me personally though.

From the coverage I found online, the receiving spouse will no longer pay taxes on alimony payments under the revised bill. It'll still increase total taxes payed on alimony payments somewhat, since the person paying the alimony is generally going to be in a higher tax bracket than the person receiving the alimony, but it sounds like it wouldn't be a double taxation situation. It's also worth noting that child support was taxed this way (on the tax return of the parent who receives the money, not the tax return of the parent who receives the support) already so at least the two are being treated consistently now.

In googling around to try to find an answer to this question, I also stumbled across this statistic: "More than a half-million taxpayers claimed alimony deductions totaling more than $10 billion in 2010 ... Yet recipients' reported alimony income was $2.3 billion less."
  Sounds great for the attorneys - all the #s will need to be recalculated.
Title: Re: Republican Tax Plan 2017
Post by: maizeman 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.

Title: Re: Republican Tax Plan 2017
Post by: MsWillow on November 05, 2017, 08:50:43 AM
Ptf
Title: Re: Republican Tax Plan 2017
Post by: Paul der Krake on November 05, 2017, 09:00:18 AM
Nice article by Kitces: Individual Tax Reforms Of House GOP Tax Cuts And Jobs Act (https://www.kitces.com/blog/tax-cuts-and-jobs-act-2018-house-gop-tax-reform-proposal/).
Fantastic "summary" (that took me a good hour to read through), thanks for posting.
Title: Re: Republican Tax Plan 2017
Post by: NorthernBlitz 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.
Title: Re: Republican Tax Plan 2017
Post by: MDM 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 (https://www.law.cornell.edu/uscode/text/26/1):
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....
Title: Re: Republican Tax Plan 2017
Post by: ncornilsen 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.
Title: Re: Republican Tax Plan 2017
Post by: sol 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.
Title: Re: Republican Tax Plan 2017
Post by: jleo 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?
Title: Re: Republican Tax Plan 2017
Post by: Paul der Krake 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.
Title: Re: Republican Tax Plan 2017
Post by: jleo 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.
Title: Re: Republican Tax Plan 2017
Post by: dandarc 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.
Title: Re: Republican Tax Plan 2017
Post by: boarder42 on November 06, 2017, 06:48:29 AM
Word is some big changes are supposed to be published today.
Title: Re: Republican Tax Plan 2017
Post by: dandarc 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.
Title: Re: Republican Tax Plan 2017
Post by: SaucyAussie 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.
Title: Re: Republican Tax Plan 2017
Post by: oldmannickels 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.
Title: Re: Republican Tax Plan 2017
Post by: djadziadax 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...
Title: Re: Republican Tax Plan 2017
Post by: dragoncar 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.
Title: Re: Republican Tax Plan 2017
Post by: dragoncar 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.
Title: Re: Republican Tax Plan 2017
Post by: djadziadax 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.

Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr 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.
Title: Re: Republican Tax Plan 2017
Post by: maizeman 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?
Title: Re: Republican Tax Plan 2017
Post by: index 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.   
Title: Re: Republican Tax Plan 2017
Post by: OurTown 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.
Title: Re: Republican Tax Plan 2017
Post by: index 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.
Title: Re: Republican Tax Plan 2017
Post by: OurTown on November 06, 2017, 01:26:12 PM
Well, it's less regressive if combined with a universal basic income.
Title: Re: Republican Tax Plan 2017
Post by: sokoloff 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."
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr 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)
Title: Re: Republican Tax Plan 2017
Post by: Glenstache 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).
Title: Re: Republican Tax Plan 2017
Post by: JayhawkRacer 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).
Title: Re: Republican Tax Plan 2017
Post by: Jrr85 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. 





Title: Re: Republican Tax Plan 2017
Post by: aneel 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.
Title: Re: Republican Tax Plan 2017
Post by: JLee 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.
Title: Re: Republican Tax Plan 2017
Post by: w@nker 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.
Title: Re: Republican Tax Plan 2017
Post by: sol 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.
Title: Re: Republican Tax Plan 2017
Post by: w@nker 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.
Title: Re: Republican Tax Plan 2017
Post by: boarder42 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.
Title: Re: Republican Tax Plan 2017
Post by: w@nker 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.
Title: Re: Republican Tax Plan 2017
Post by: Rural 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.
Title: Re: Republican Tax Plan 2017
Post by: boarder42 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. 
Title: Re: Republican Tax Plan 2017
Post by: w@nker 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.
Title: Re: Republican Tax Plan 2017
Post by: boarder42 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. 
Title: Re: Republican Tax Plan 2017
Post by: djadziadax 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.
Title: Re: Republican Tax Plan 2017
Post by: djadziadax 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.
Title: Re: Republican Tax Plan 2017
Post by: radram 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:)
Title: Re: Republican Tax Plan 2017
Post by: JayhawkRacer 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.
Title: Re: Republican Tax Plan 2017
Post by: RangerOne 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".
Title: Re: Republican Tax Plan 2017
Post by: Undecided 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.
Title: Re: Republican Tax Plan 2017
Post by: BigRed 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.
Title: Re: Republican Tax Plan 2017
Post by: boarder42 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.
Title: Re: Republican Tax Plan 2017
Post by: PathtoFIRE 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?
Title: Re: Republican Tax Plan 2017
Post by: BigRed on November 07, 2017, 08:18:54 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.

https://www.vox.com/2017/11/6/16616110/read-kevin-brady-manager-amendment-tax-reform (https://www.vox.com/2017/11/6/16616110/read-kevin-brady-manager-amendment-tax-reform)
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 07, 2017, 08:22:31 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.

Yes, here is a nice summary. Gold plated senior executive packages will go away.
https://www.forbes.com/sites/deanzerbe/2017/11/03/tax-reform-bringing-the-wood-to-gold-plated-executives-the-provisions-no-is-talking-about/#228e23f35222
Title: Re: Republican Tax Plan 2017
Post by: boarder42 on November 07, 2017, 08:30:38 AM
thanks.  i think i'll stop reading everything and speculating how it will affect me until something passes and is concrete.  b/c i'm sure they'll tweek this 50 more times before ti passes.
Title: Re: Republican Tax Plan 2017
Post by: OurTown on November 07, 2017, 08:31:15 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?

http://www.napa-net.org/news/technical-competence/legislation/could-tax-reform-destroy-deferred-compensation/

The 457(b) goes away.
Title: Re: Republican Tax Plan 2017
Post by: sol on November 07, 2017, 08:34:30 AM
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

Funny, I can think of LOTS. 

Maternity leave tops the list. 
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 07, 2017, 09:34:42 AM
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

Funny, I can think of LOTS. 

Maternity leave tops the list.

Maternity leave is short term disability insurance which employer "generously allows you to take" ( therefore not provided by employer) for 6 weeks with pay for the lucky ones, and 6 weeks without pay for the rest. Then you are given an option to use your vacation time for any additional time up to 12 weeks. If you get paid, you are of course, taxed on your income during your maternity leave.

Not a "benefit" provided by the company, and nothing comparable to 47K of tax free money for 4 years that tuition remission represents.

Any other examples?
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 07, 2017, 09:47:12 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?

http://www.napa-net.org/news/technical-competence/legislation/could-tax-reform-destroy-deferred-compensation/

The 457(b) goes away.


SAD!
Title: Re: Republican Tax Plan 2017
Post by: Psychstache on November 07, 2017, 10:01:32 AM
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

Funny, I can think of LOTS. 

Maternity leave tops the list.

Maternity leave is short term disability insurance which employer "generously allows you to take" ( therefore not provided by employer) for 6 weeks with pay for the lucky ones, and 6 weeks without pay for the rest. Then you are given an option to use your vacation time for any additional time up to 12 weeks. If you get paid, you are of course, taxed on your income during your maternity leave.

Not a "benefit" provided by the company, and nothing comparable to 47K of tax free money for 4 years that tuition remission represents.

Any other examples?

Any employer who offers maternity leave benefits above and beyond the legal minimum that you describe? I have a friend whose company offers unlimited paid maternity leave within the 1st year.
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 07, 2017, 10:04:04 AM
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

Funny, I can think of LOTS. 

Maternity leave tops the list.

Maternity leave is short term disability insurance which employer "generously allows you to take" ( therefore not provided by employer) for 6 weeks with pay for the lucky ones, and 6 weeks without pay for the rest. Then you are given an option to use your vacation time for any additional time up to 12 weeks. If you get paid, you are of course, taxed on your income during your maternity leave.

Not a "benefit" provided by the company, and nothing comparable to 47K of tax free money for 4 years that tuition remission represents.

Any other examples?

I'm not sure what you guys are arguing about, but that's not at all how maternity (or paternity) leave works at my company. In my office's state, short-term disability does apply for phase one (six weeks, generally) of maternity leave, but covers only a fraction of salary, with the company paying the rest directly. Phase two (an additional six weeks, or a shorter amount to make a total of twelve weeks if the disability coverage was extended, e.g., because of a complication) is paid entirely by the company.
Title: Re: Republican Tax Plan 2017
Post by: Ocinfo on November 07, 2017, 10:04:49 AM
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

Funny, I can think of LOTS. 

Maternity leave tops the list.

Maternity leave is short term disability insurance which employer "generously allows you to take" ( therefore not provided by employer) for 6 weeks with pay for the lucky ones, and 6 weeks without pay for the rest. Then you are given an option to use your vacation time for any additional time up to 12 weeks. If you get paid, you are of course, taxed on your income during your maternity leave.

Not a "benefit" provided by the company, and nothing comparable to 47K of tax free money for 4 years that tuition remission represents.

Any other examples?

This has come up at my work and the answer is that they provide a benefits package. Some people get to take greater advantage of certain parts than others and vice versa. One person might get $500k in health care benefits and I might use $20k worth of tuition assistance. I’m definitely not upset that they got that “benefit” and I didn’t.

At a university they very well might have adoption assistance so a childless employee could get paid to adopt a high school senior then use the tuition remission benefits to put them through school.


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Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 07, 2017, 10:13:18 AM
thanks.  i think i'll stop reading everything and speculating how it will affect me until something passes and is concrete.  b/c i'm sure they'll tweek this 50 more times before ti passes.

This is one approach.  OTOH, if a person feels that something will pass but not become concrete until Christmas eve, they best be paying attention and thinking about it now.  This bill currently has significant implications for some taxpayers with respect to 2017 year-end tax strategies.  Taking a "do not open until Christmas" approach may not allow enough time to truly run the numbers and determine an optimal strategy.
Title: Re: Republican Tax Plan 2017
Post by: boarder42 on November 07, 2017, 10:18:17 AM
thanks.  i think i'll stop reading everything and speculating how it will affect me until something passes and is concrete.  b/c i'm sure they'll tweek this 50 more times before ti passes.

This is one approach.  OTOH, if a person feels that something will pass but not become concrete until Christmas eve, they best be paying attention and thinking about it now.  This bill currently has significant implications for some taxpayers with respect to 2017 year-end tax strategies.  Taking a "do not open until Christmas" approach may not allow enough time to truly run the numbers and determine an optimal strategy.

so far the only thing necessary for me is to open a DAF if needed to get my tax break now if they dont move charitable above the line.  other than that.  these tax changes dont have much else i can do with my finances that would affect us.

and those can be opened in minutes per the discussion congruent to this.
Title: Re: Republican Tax Plan 2017
Post by: sol on November 07, 2017, 10:20:36 AM
Any other examples?

My point was merely that maternity leave is a benefit offered only to mothers.  Not to men.  Not to wonen who are sterile, or who cannot have kids for other reasons.  Like tuition reimbursement and family leave, it is a benefit only for (some) parents.

Another example: tax free subsidized health insurance.  Totally useless to some people.

Another example: executive compensation stock options.  Wtf is up with that sort of blatant unfairness?

Another: overtime pay.  Why do some employees get 2x, some 1.5x, and some are expected to work extra for free?

Let's face it, when you agree to work for someone else, you voluntarily abandon any ideas about "fairness".
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 07, 2017, 10:36:22 AM
Any other examples?

My point was merely that maternity leave is a benefit offered only to mothers.  Not to men.  Not to wonen who are sterile, or who cannot have kids for other reasons.  Like tuition reimbursement and family leave, it is a benefit only for (some) parents.

Another example: tax free subsidized health insurance.  Totally useless to some people.

Another example: executive compensation stock options.  Wtf is up with that sort of blatant unfairness?

Another: overtime pay.  Why do some employees get 2x, some 1.5x, and some are expected to work extra for free?

Let's face it, when you agree to work for someone else, you voluntarily abandon any ideas about "fairness".

Correct, the issue is the tax free nature of tuition remission. The bill proposed that it is taxed, not that it is eliminated. I cannot think of any other benefit that is of that magnitude that is NEVER taxed. The examples above may be available to some of others but the extra "compensation" is taxed in some way. For those advocating for progressive taxes, this seems to be a contradiction in the tax code as it exec compensation.

I also don't understand why capital gains are treated differently than earned income...Income is income, no matter the source.
 
Title: Re: Republican Tax Plan 2017
Post by: ketchup on November 07, 2017, 10:39:01 AM
I also don't understand why capital gains are treated differently than earned income...Income is income, no matter the source.
Probably because typically retirees have high voter turnout.
Title: Re: Republican Tax Plan 2017
Post by: boarder42 on November 07, 2017, 10:45:28 AM
I also don't understand why capital gains are treated differently than earned income...Income is income, no matter the source.
Probably because typically retirees have high voter turnout.

encourages people to invest in companies. and keep that investment in the company vs moving it around frequently.
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 07, 2017, 10:49:45 AM
I also don't understand why capital gains are treated differently than earned income...Income is income, no matter the source.
Probably because typically retirees have high voter turnout.

encourages people to invest in companies. and keep that investment in the company vs moving it around frequently.

By taxing it at a lower rate?? Somehow it does not makes sense. If it should encourage that it stay invested, it probably should be taxed at same rates. So people would not invest if income from the investment is taxed at ordinary rates? If they don't invest, what would they do with that money? Spend, buy gold? Bonds? Seems unlikely.
Title: Re: Republican Tax Plan 2017
Post by: Jrr85 on November 07, 2017, 11:36:41 AM
I also don't understand why capital gains are treated differently than earned income...Income is income, no matter the source.
Probably because typically retirees have high voter turnout.

encourages people to invest in companies. and keep that investment in the company vs moving it around frequently.

By taxing it at a lower rate?? Somehow it does not makes sense. If it should encourage that it stay invested, it probably should be taxed at same rates. So people would not invest if income from the investment is taxed at ordinary rates? If they don't invest, what would they do with that money? Spend, buy gold? Bonds? Seems unlikely.

Capital gains are taxed at a lower rate because taxes on capital gains act as a disincentive to investing in (i.e., creating) capital.  Since capital is generally what allows productivity increases, each incremental tax on capital is ultimately a drag on wages.  It's why we don't just have a wealth tax even though that would be match up with ability to pay much better than a progressive income tax.  Besides the fact that a lot of capital is mobile (and even capital that is not mobile can generally be created anyway, meaning future capital creation is "mobile"), taxing wealth would reduce the incentives for creating, maintaining and growing wealth (which is a pretty good proxy for capital).  Only taxing gains when they are recognized is a much less destructive policy, but it still reduces capital formation. 

Not everybody believes this, but that's the justification. 

There is also a moral justification regarding "double taxation", but I've never really understood that argument.   
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 07, 2017, 12:46:54 PM
thanks.  i think i'll stop reading everything and speculating how it will affect me until something passes and is concrete.  b/c i'm sure they'll tweek this 50 more times before ti passes.

This is one approach.  OTOH, if a person feels that something will pass but not become concrete until Christmas eve, they best be paying attention and thinking about it now.  This bill currently has significant implications for some taxpayers with respect to 2017 year-end tax strategies.  Taking a "do not open until Christmas" approach may not allow enough time to truly run the numbers and determine an optimal strategy.



so far the only thing necessary for me is to open a DAF if needed to get my tax break now if they dont move charitable above the line.  other than that.  these tax changes dont have much else i can do with my finances that would affect us.

and those can be opened in minutes per the discussion congruent to this.

You've probably just cited one of the best examples.  Let's dissect that for a moment.  Assuming you have $5000 already at fidelity in an after tax account, yes it only takes a small amount of time to open and fund the DAF.  It will probably be ready for further contributions within a day or two.  That is a great start, but you're not done yet.  How much more do you want to front load the DAF prior to Dec 31?  Where are these assets coming from?  Have you identified the specific shares to maximize benefit of contributing highly appreciated shares?  If the source is not already spec lot ID, can you change that account(s)?  How do you get the funds into the Fidelity DAF?  If they are at VG, which forms/signatures/holy medalian approvals are they going to require?  Can they make this happen in a few days?  Can they transfer cost basis without screwing it up?

If you already know these answers, and it will all work out for you then it sounds like you've already speculated how this might affect you and given it sufficient thought to be prepared.  This is all I was really suggesting.  That said, I'm guessing you would choose to keep reading (not reading everything, but at least keeping track) so as to track any changes that might affect your situation.  While I certainly don't suggest there won't be changes, those discussed so far are far removed from the basic standard deduction increase that would drive the DAF strategy you described.
Title: Re: Republican Tax Plan 2017
Post by: starguru on November 07, 2017, 03:14:43 PM
I also don't understand why capital gains are treated differently than earned income...Income is income, no matter the source.

I firmly believe that if we taxed all income the same, got rid of most if not all deductions, we could have a completely progressive system with reasonably low rates, and keep our spending levels the same.  I would love to see the TPC do a study on this. 

The main problem with the Republican plan is that it still allows obscenely wealthy folks to pay a ridiculously low rate.  It might make sense to remove the mortgage interest deduction on mortgages over X dollars, but not if that makes high wage earners (or even medium wage earners) pay a higher rate than someone with $10M (or $100M) in the bank. 

Taxing all income the same eliminates this.  Someone with $100M in the bank will pay a higher rate on realized gains than someone who makes $200k.  There would be no way to game your way out of paying taxes.  No Mitt Romneys paying %14 on tens of million in income.  In return we would get lower rates (Im guessing 33% or less, but again would need analysis to figure it out). 
Title: Re: Republican Tax Plan 2017
Post by: Saving4Fire on November 07, 2017, 03:20:57 PM
I also don't understand why capital gains are treated differently than earned income...Income is income, no matter the source.
Probably because typically retirees have high voter turnout.

encourages people to invest in companies. and keep that investment in the company vs moving it around frequently.

By taxing it at a lower rate?? Somehow it does not makes sense. If it should encourage that it stay invested, it probably should be taxed at same rates. So people would not invest if income from the investment is taxed at ordinary rates? If they don't invest, what would they do with that money? Spend, buy gold? Bonds? Seems unlikely.

Capital gains are taxed at a lower rate because taxes on capital gains act as a disincentive to investing in (i.e., creating) capital.  Since capital is generally what allows productivity increases, each incremental tax on capital is ultimately a drag on wages.  It's why we don't just have a wealth tax even though that would be match up with ability to pay much better than a progressive income tax.  Besides the fact that a lot of capital is mobile (and even capital that is not mobile can generally be created anyway, meaning future capital creation is "mobile"), taxing wealth would reduce the incentives for creating, maintaining and growing wealth (which is a pretty good proxy for capital).  Only taxing gains when they are recognized is a much less destructive policy, but it still reduces capital formation. 

Not everybody believes this, but that's the justification. 

There is also a moral justification regarding "double taxation", but I've never really understood that argument.


I'll also add - capital gains, unlike income, is much more sensitive to inflation.   Income is taxed as it's earned, however investments are held over time.   For example, if you sell a 10 year old investment that appreciates exactly with inflation you'll still have to pay cap gains which means you've effectively lost money.

Anyway, here's a solid article that has pros and cons (https://www.wsj.com/articles/how-should-capital-gains-be-taxed-1425271052).   Personally, I'm skeptical cap gains should be taxed exactly like income, but there should be reform.   It's not something I've looked at too closely so I don't have super strong opinions about the topic.  There's some interesting ideas in that article I linked.
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 07, 2017, 03:27:50 PM
I also don't understand why capital gains are treated differently than earned income...Income is income, no matter the source.

I firmly believe that if we taxed all income the same, got rid of most if not all deductions, we could have a completely progressive system with reasonably low rates, and keep our spending levels the same.  I would love to see the TPC do a study on this. 

The main problem with the Republican plan is that it still allows obscenely wealthy folks to pay a ridiculously low rate.  It might make sense to remove the mortgage interest deduction on mortgages over X dollars, but not if that makes high wage earners (or even medium wage earners) pay a higher rate than someone with $10M (or $100M) in the bank. 

Taxing all income the same eliminates this.  Someone with $100M in the bank will pay a higher rate on realized gains than someone who makes $200k.  There would be no way to game your way out of paying taxes.  No Mitt Romneys paying %14 on tens of million in income.  In return we would get lower rates (Im guessing 33% or less, but again would need analysis to figure it out).

Would it be unreasonably punitive to implement that at one stroke, now applying that new rate structure to people who previously paid higher income taxes to buy capital that has already appreciated when the new system is put in place? I know that neither of us is enacting a new tax law, but am curious how you see a transition to such a system being conducted.
Title: Re: Republican Tax Plan 2017
Post by: starguru on November 07, 2017, 03:31:26 PM
I also don't understand why capital gains are treated differently than earned income...Income is income, no matter the source.

I firmly believe that if we taxed all income the same, got rid of most if not all deductions, we could have a completely progressive system with reasonably low rates, and keep our spending levels the same.  I would love to see the TPC do a study on this. 

The main problem with the Republican plan is that it still allows obscenely wealthy folks to pay a ridiculously low rate.  It might make sense to remove the mortgage interest deduction on mortgages over X dollars, but not if that makes high wage earners (or even medium wage earners) pay a higher rate than someone with $10M (or $100M) in the bank. 

Taxing all income the same eliminates this.  Someone with $100M in the bank will pay a higher rate on realized gains than someone who makes $200k.  There would be no way to game your way out of paying taxes.  No Mitt Romneys paying %14 on tens of million in income.  In return we would get lower rates (Im guessing 33% or less, but again would need analysis to figure it out).

Would it be unreasonably punitive to implement that at one stroke, now applying that new rate structure to people who previously paid higher income taxes to buy capital that has already appreciated when the new system is put in place? I know that neither of us is enacting a new tax law, but am curious how you see a transition to such a system being conducted.

I don't think it's punitive in any way.  Can you explain a bit more?
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 07, 2017, 03:41:35 PM
I also don't understand why capital gains are treated differently than earned income...Income is income, no matter the source.

I firmly believe that if we taxed all income the same, got rid of most if not all deductions, we could have a completely progressive system with reasonably low rates, and keep our spending levels the same.  I would love to see the TPC do a study on this. 

The main problem with the Republican plan is that it still allows obscenely wealthy folks to pay a ridiculously low rate.  It might make sense to remove the mortgage interest deduction on mortgages over X dollars, but not if that makes high wage earners (or even medium wage earners) pay a higher rate than someone with $10M (or $100M) in the bank. 

Taxing all income the same eliminates this.  Someone with $100M in the bank will pay a higher rate on realized gains than someone who makes $200k.  There would be no way to game your way out of paying taxes.  No Mitt Romneys paying %14 on tens of million in income.  In return we would get lower rates (Im guessing 33% or less, but again would need analysis to figure it out).

Would it be unreasonably punitive to implement that at one stroke, now applying that new rate structure to people who previously paid higher income taxes to buy capital that has already appreciated when the new system is put in place? I know that neither of us is enacting a new tax law, but am curious how you see a transition to such a system being conducted.

I don't think it's punitive in any way.  Can you explain a bit more?

At implementation, people would have unrealized gains that. had they realized them, would have been taxed at some preferable rate (and they'd made and held those investments with that tax system as the backdrop). At implementation of a new system, do they have to choose between realizing all those gains before the new system takes effect, to pay the "old" rate, vs. paying the higher rate not just on gains that arise after the new rates are put in place, but also on gains that predate it?
Title: Re: Republican Tax Plan 2017
Post by: starguru on November 07, 2017, 03:58:03 PM
Ah I see.  I don’t see that as particularly problematic.  After all wage earners have the same issue after rates change on them,  right?  Plus if investment income is taxed as regular income it would be subjected to the marginal rates, so the highest brackets would only be paid by the most wealthy.


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Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 07, 2017, 04:06:44 PM
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.
Anyone who is paying 39.6% on their checking account interest is not getting their marginal $90K of dividends at 0%.
Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 07, 2017, 04:14:08 PM
Ah I see.  I don’t see that as particularly problematic.  After all wage earners have the same issue after rates change on them,  right? 
So, imagine your employer decides that rather than paying you $2500/week, they're going to pay you $2000/week instead. I mean, $2000 is still quite a lot, and is still 6-figures, so you shouldn't really complain...

That's not a lot different from someone making a long-term investment in a company, which went on to create jobs and pay taxes itself, who will now see perhaps $60 in return after taxes per $100 of gross return instead of the investment they signed up for which would pay them $80 or $85 per $100 of gross return.

Sure, the government can change the rules anytime.

Investors can also choose to invest elsewhere or not invest if the rules of the game are changed arbitrarily, capriciously, and without regard to the fairness of the changes or the transition from system 1 to system 2.

Plus if investment income is taxed as regular income it would be subjected to the marginal rates, so the highest brackets would only be paid by the most wealthy.
Highest AGI is not tightly correlated with "most wealthy". It's very easy to have a temporarily high income year without being wealthy at all.
Title: Re: Republican Tax Plan 2017
Post by: VoteCthulu on November 07, 2017, 04:35:58 PM
There is also a moral justification regarding "double taxation", but I've never really understood that argument.
It's not a moral justification, it's just a fact that dividends have already been taxed at the corporate level. Companies don't pay taxes on wages and other expenses (other than social security and medicare, when applicaple), but they do pay the current corporate tax rates on dividend distributions. To tax that money again at full income tax rates would make the total tax rate far higher than that imposed on regular wages.

Whether this is good or bad is primarily an economic  judgement that I honestly don't know all the facts about, but it seems like a non-trivial argument.
Title: Re: Republican Tax Plan 2017
Post by: dragoncar on November 07, 2017, 06:01:47 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."

The federal government can deficit spend make up the taxation deficit by printing cash.  This creates inflation, which reduces the value of each dollar.  Thus, it's a wealth tax.  There are logistical problems to high inflation rates, of course.
Title: Re: Republican Tax Plan 2017
Post by: starguru on November 07, 2017, 06:55:58 PM
Ah I see.  I don’t see that as particularly problematic.  After all wage earners have the same issue after rates change on them,  right? 
So, imagine your employer decides that rather than paying you $2500/week, they're going to pay you $2000/week instead. I mean, $2000 is still quite a lot, and is still 6-figures, so you shouldn't really complain...

Not the same thing at all.  My point is if wage earners face tax rate changes without special consideration, why should those who get investment income have it any different?

Quote
That's not a lot different from someone making a long-term investment in a company, which went on to create jobs and pay taxes itself, who will now see perhaps $60 in return after taxes per $100 of gross return instead of the investment they signed up for which would pay them $80 or $85 per $100 of gross return.

If they made $100 off investments and got taxed $40 that means they made a ton of money off that investment.  The average saver with a respectable nest egg who is withdrawing 20,30,40k a year would not be taxed that much. 

Quote
Investors can also choose to invest elsewhere or not invest if the rules of the game are changed arbitrarily, capriciously, and without regard to the fairness of the changes or the transition from system 1 to system 2.

That's true.

Quote
Plus if investment income is taxed as regular income it would be subjected to the marginal rates, so the highest brackets would only be paid by the most wealthy.
Highest AGI is not tightly correlated with "most wealthy". It's very easy to have a temporarily high income year without being wealthy at all.

That's true too, but like I said, the average person who saves a "normal" amount for retirement wouldn't be paying that much at all, depending on how the brackets would work out.

At the end of the day, we have a system where ridiculously wealthy people pay relatively "little" taxes.  This is possible because they have income that is not taxed as earned income.  We could have a system that is completely progressive and has lower rates than today if we taxed all income at the same rate. 
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 07, 2017, 08:08:58 PM
Ah I see.  I don’t see that as particularly problematic.  After all wage earners have the same issue after rates change on them,  right? 
So, imagine your employer decides that rather than paying you $2500/week, they're going to pay you $2000/week instead. I mean, $2000 is still quite a lot, and is still 6-figures, so you shouldn't really complain...

Not the same thing at all.  My point is if wage earners face tax rate changes without special consideration, why should those who get investment income have it any different?

But the ordinary income tax changes apply to future income, rather than gains that have already occurred. I'd like to see how people reacted if Congress retroactively increased the taxes on prior years' ordinary income!
Title: Re: Republican Tax Plan 2017
Post by: jean on November 07, 2017, 08:20:46 PM
I spent some time looking at this.  All without children who take the standard deduction will get a tax cut.  I like this, because when I was a childless renter, the tax code felt pretty unfair to me.  I don't have kids, so I didn't really look into how they come out, but I think it is generally a little better unless you have a very large family.

Speaking only of California, everyone who itemizes and would still itemize under the new plan will see a tax increase, simply due to the fact that the change in brackets is not enough to offset the loss of the state tax deduction and the personal exemption(s) in itemizations.  If you itemized in 2017 and wouldn't under the new plan, it is a mixed bag.

The elimination of the AMT is an interesting trick. A lot fewer people would trigger the AMT with the loss of the SALT (state and local tax) deduction. Speaking of Californians, people (married filing joint) with AGIs between about $245k and $600k are almost sure to run into the AMT under current tax law due only to SALT and personal exemptions. The super wealthy trigger the AMT less frequently since they hit the highest brackets of the regular tax code and the AMT has a top rate of 28%. They need to claim a lot of deductions before they run into it. But, removing it will mostly benefit the really wealthy - they can now claim those significant deductions that would lower their rate.  It makes no sense to remove SALT deduction and eliminate the AMT at the same time.  It will only help the quite wealthy.

The loss of the estate take again only impacts the very wealthy.  They’re not changing the step-up basis (heirs can sell stocks without the earnings ever having been taxed).  Probably more things hidden in there. 

My taxes would go up, which isn't the worst thing. I believe in a progressive tax structure. I like that many lower/middle income people get a (small) break. But the bulk of the benefits go to extremely rich.  It seems to be taking from the top ~5% to give to the top 0.5%.  And also increasing the deficit.  It all seems really rushed. I am just waiting for DT to say "Nobody knew taxes could be so complicated!"  Thumbs down from me. 
Title: Re: Republican Tax Plan 2017
Post by: Rural on November 07, 2017, 08:36:50 PM
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.


Nothing to do with kids or staff. This is about graduate students on assistantships or fellowships - they will now have to pay tax on tuition remissions, usually at out of state rates.
Title: Re: Republican Tax Plan 2017
Post by: starguru on November 07, 2017, 08:39:02 PM
Ah I see.  I don’t see that as particularly problematic.  After all wage earners have the same issue after rates change on them,  right? 
So, imagine your employer decides that rather than paying you $2500/week, they're going to pay you $2000/week instead. I mean, $2000 is still quite a lot, and is still 6-figures, so you shouldn't really complain...

Not the same thing at all.  My point is if wage earners face tax rate changes without special consideration, why should those who get investment income have it any different?

But the ordinary income tax changes apply to future income, rather than gains that have already occurred. I'd like to see how people reacted if Congress retroactively increased the taxes on prior years' ordinary income!

I see your point but you can also look at it that gains aren’t real until actualized.  I also acknowledge that there would be other effects.  Doesn’t mean it won’t result in a better system for Everyone overall.


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Title: Re: Republican Tax Plan 2017
Post by: alexpkeaton on November 07, 2017, 09:22:02 PM
The federal government can deficit spend make up the taxation deficit by printing cash.  This creates inflation, which reduces the value of each dollar.  Thus, it's a wealth tax.  There are logistical problems to high inflation rates, of course.

Umm, only if you think the wealthy are keeping all their wealth in cash, which they don't. Their assets will increase in value with inflation. It's those who don't own assets who are hurt most by inflation: The poor.
Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 07, 2017, 09:40:23 PM
The federal government can deficit spend make up the taxation deficit by printing cash.  This creates inflation, which reduces the value of each dollar.  Thus, it's a wealth tax.  There are logistical problems to high inflation rates, of course.
Umm, only if you think the wealthy are keeping all their wealth in cash, which they don't. Their assets will increase in value with inflation. It's those who don't own assets who are hurt most by inflation: The poor.
Anyone with debt is helped by inflation/monetary expansion.

Borrow money now and pay it off with devalued money later.
Title: Re: Republican Tax Plan 2017
Post by: JLee on November 07, 2017, 09:44:26 PM
The federal government can deficit spend make up the taxation deficit by printing cash.  This creates inflation, which reduces the value of each dollar.  Thus, it's a wealth tax.  There are logistical problems to high inflation rates, of course.
Umm, only if you think the wealthy are keeping all their wealth in cash, which they don't. Their assets will increase in value with inflation. It's those who don't own assets who are hurt most by inflation: The poor.
Anyone with debt is helped by inflation/monetary expansion.

Borrow money now and pay it off with devalued money later.

If you're high income, sure.

If you're low income, you aren't going to be making all that much more after adjusting for inflation, so it is irrelevant.

https://www.advisorperspectives.com/dshort/updates/2017/09/19/u-s-household-incomes-a-50-year-perspective
Title: Re: Republican Tax Plan 2017
Post by: dragoncar on November 08, 2017, 12:13:34 AM
The federal government can deficit spend make up the taxation deficit by printing cash.  This creates inflation, which reduces the value of each dollar.  Thus, it's a wealth tax.  There are logistical problems to high inflation rates, of course.

Umm, only if you think the wealthy are keeping all their wealth in cash, which they don't. Their assets will increase in value with inflation. It's those who don't own assets who are hurt most by inflation: The poor.

Good point, I wonder how it works in countries that do have wealth tax.  Because I’m pretty sure the wealthy will find a way to avoid the tax anyways.  Do they really mark to market fine art and overseas assets?  They could always switch to a different currency too.  But inflation certainly works to tax cash holding
Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 08, 2017, 05:56:23 AM
Anyone with debt is helped by inflation/monetary expansion.

Borrow money now and pay it off with devalued money later.
If you're high income, sure.

If you're low income, you aren't going to be making all that much more after adjusting for inflation, so it is irrelevant.

https://www.advisorperspectives.com/dshort/updates/2017/09/19/u-s-household-incomes-a-50-year-perspective
If you're going to pay off the debt, it's relevant regardless of income. Only if you aren't going to pay off the debt is it irrelevant (and in which case you also might as well take out the debt).
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 08, 2017, 06:36:34 AM
I spent some time looking at this.  All without children who take the standard deduction will get a tax cut.  I like this, because when I was a childless renter, the tax code felt pretty unfair to me.  I don't have kids, so I didn't really look into how they come out, but I think it is generally a little better unless you have a very large family.

I felt the same way. I was a single renter in NYC and taxes were the worst. Now with a child, I will still get a substantial tax cut due to the increase in the child credit and the fact I max out my 401K.

Now, my state and local taxes will be equal to my federal taxes, hard to comprehend, infuriating, but a fact.

Quote
My taxes would go up, which isn't the worst thing. I believe in a progressive tax structure. I like that many lower/middle income people get a (small) break.

I see it this way - MFJ with 2 kids would pay 0% tax on first 55K of their income (24K standard deduction, 1600x2 child credit, 300x2 flex family credit) and then pay only $4200 for the max of $90000 for the 12% tax bracket. For many folks, their state and local taxes will be higher than their fed taxes. There must be many many families in that category since salaries outside of the costs are much lower. That is 4.5% federal tax rate without doing anything special, spending countless hours of doing taxes, going to H& R block, paying for Turbotax, etc etc. Seems like a pretty good deal to me.
Title: Re: Republican Tax Plan 2017
Post by: radram on November 08, 2017, 07:07:37 AM
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.
Anyone who is paying 39.6% on their checking account interest is not getting their marginal $90K of dividends at 0%.

That is true, but the dividend rate IS capped at 20% if you make more than $470,700. That is half the rate of their income.

What net worth is required to generate $470,700 in dividends if you are not working? Assuming the 20% rate is a cliff and not a stepping ladder like income tax rates are, it would take $26,150,000 earning a 1.8% dividend to reach the 20% step. And yes, the market gains would be stepped up in basis, and then transferred to your heirs tax free once you meet your untimely demise.

So someone with some $30,000,000 with no job pays half in taxes compared to an executive making $500,000 a year with a company with such bad accountants that they can not even figure out how to compensate him/her in a way that cuts the tax bill in half.

While I am sure few people would say boo-hoo to either of them, no way is this simple or fair.
Title: Re: Republican Tax Plan 2017
Post by: starguru on November 08, 2017, 07:17:38 AM
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.
Anyone who is paying 39.6% on their checking account interest is not getting their marginal $90K of dividends at 0%.

That is true, but the dividend rate IS capped at 20% if you make more than $470,700. That is half the rate of their income.

What net worth is required to generate $470,700 in dividends if you are not working? Assuming the 20% rate is a cliff and not a stepping ladder like income tax rates are, it would take $26,150,000 earning a 1.8% dividend to reach the 20% step. And yes, the market gains would be stepped up in basis, and then transferred to your heirs tax free once you meet your untimely demise.

So someone with some $30,000,000 with no job pays half in taxes compared to an executive making $500,000 a year with a company with such bad accountants that they can not even figure out how to compensate him/her in a way that cuts the tax bill in half.

While I am sure few people would say boo-hoo to either of them, no way is this simple or fair.

If the proposal is to tax all income as earned income, there would be no preferential treatment for dividends.  Someone getting 500k in dividend income in a year will pay the same as someone making 500k in wages.


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Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 08, 2017, 07:19:18 AM
The dividend rate IS capped at 20% if you make more than $470,700. That is half the rate of their income.
Small correction: it's capped at 23.8% (with the Obamacare surtax, assuming that's not repealed with this plan).
What net worth is required to generate $470,700 in dividends if you are not working? Assuming the 20% rate is a cliff and not a stepping ladder like income tax rates are, it would take $26,150,000 earning a 1.8% dividend to reach the 20% step. And yes, the market gains would be stepped up in basis, and then transferred to your heirs tax free once you meet your untimely demise.

So someone with some $30,000,000 with no job pays half in taxes compared to an executive making $500,000 a year with a company with such bad accountants that they can not even figure out how to compensate him/her in a way that cuts the tax bill in half.

While I am sure few people would say boo-hoo to either of them, no way is this simple or fair.
I'm well short of being in either circumstance, but I'm a lot closer to the second than the first. Obviously, the tax rate on the second matters more to the person than the first, on a utility of marginal dollars basis. That person is screwed harder in today's tax system AND in the new Republican plan (which, to be frank, is IMO just a bit of lipstick on the same old pig we already have)
Title: Re: Republican Tax Plan 2017
Post by: radram on November 08, 2017, 07:24:08 AM
If the proposal is to tax all income as earned income, there would be no preferential treatment for dividends.  Someone getting 500k in dividend income in a year will pay the same as someone making 500k in wages.


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Right. That would be simpler. That is not what we have, nor is it what is being proposed. Makes you wonder why that isn't the proposal, since one of the disclosed reasons for the tax code changes is simplicity. :)
Title: Re: Republican Tax Plan 2017
Post by: radram on November 08, 2017, 07:29:28 AM
The dividend rate IS capped at 20% if you make more than $470,700. That is half the rate of their income.
Small correction: it's capped at 23.8% (with the Obamacare surtax, assuming that's not repealed with this plan).
What net worth is required to generate $470,700 in dividends if you are not working? Assuming the 20% rate is a cliff and not a stepping ladder like income tax rates are, it would take $26,150,000 earning a 1.8% dividend to reach the 20% step. And yes, the market gains would be stepped up in basis, and then transferred to your heirs tax free once you meet your untimely demise.

So someone with some $30,000,000 with no job pays half in taxes compared to an executive making $500,000 a year with a company with such bad accountants that they can not even figure out how to compensate him/her in a way that cuts the tax bill in half.

While I am sure few people would say boo-hoo to either of them, no way is this simple or fair.
I'm well short of being in either circumstance, but I'm a lot closer to the second than the first. Obviously, the tax rate on the second matters more to the person than the first, on a utility of marginal dollars basis. That person is screwed harder in today's tax system AND in the new Republican plan (which, to be frank, is IMO just a bit of lipstick on the same old pig we already have)

Thank you for the clarification on the Obamacare surtax.

Yup. Same old pig, with different winners and losers.
Title: Re: Republican Tax Plan 2017
Post by: radram on November 08, 2017, 07:30:35 AM
New question.

Is the savers credit changed or eliminated? Sorry if this was already covered.
Title: Re: Republican Tax Plan 2017
Post by: GreenEggs on November 08, 2017, 08:29:13 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.

That's what I was wondering too.  That will allow for much more freedom to give before death to others, besides designated 501c3's. 

Personally, I'd rather be able to help folks directly.  As it is now large non-profits often have a well paid CEO skimming the donations (because he's "so smart he "could" make a lot more working in the private sector!") 

Large landowners would be free to give land parcels to individuals, instead of donating it to the government or churches. 

Title: Re: Republican Tax Plan 2017
Post by: StarBright on November 08, 2017, 09:32:55 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.


Nothing to do with kids or staff. This is about graduate students on assistantships or fellowships - they will now have to pay tax on tuition remissions, usually at out of state rates.

Yep. DH's friends who are still in grad programs are freaking out about this. Especially since their program discourages them from getting outside jobs. They have 10-15k stipends but if this goes through they will be expected to pay taxes on an additional 40k. I know more than one person  who is trying to speed up their dissertation because of this.

DH's department is also nervous about this. He works at an R2 and it isn't the sort of program that independently wealthy students choose - they have lots of smart but first generation grad students in his program. If this goes through there is real concern that they won't be able to maintain their enrollment.
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 08, 2017, 09:51:58 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.


Nothing to do with kids or staff. This is about graduate students on assistantships or fellowships - they will now have to pay tax on tuition remissions, usually at out of state rates.

Yep. DH's friends who are still in grad programs are freaking out about this. Especially since their program discourages them from getting outside jobs. They have 10-15k stipends but if this goes through they will be expected to pay taxes on an additional 40k. I know more than one person  who is trying to speed up their dissertation because of this.

DH's department is also nervous about this. He works at an R2 and it isn't the sort of program that independently wealthy students choose - they have lots of smart but first generation grad students in his program. If this goes through there is real concern that they won't be able to maintain their enrollment.

Yes, my point was about undergraduate tuition remissions. Grad school tuition remission is a different animal. I suspect that there are multiple ways to address PHD level tuition remission. Universities can eliminate tuition for PHD level programs which now have tuition remission, and charge just fees, for example. That is the European Model. So certain programs that apply tuition remission for all their grad students would simply not have tuition associate with it.

That is more difficult on the undergrad level where usually parents pay tuition and the "fairness" factor is completely different.



Title: Re: Republican Tax Plan 2017
Post by: FI by 2035 on November 08, 2017, 10:09:27 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?

http://www.napa-net.org/news/technical-competence/legislation/could-tax-reform-destroy-deferred-compensation/

The 457(b) goes away.

Does this include governmental 457(b) plans?  I'm having a hard time finding a lot of detail on this topic.  The tax deferred space between the 401k and 457(b) is a pretty big benefit of my job.  It would suck to lose it, but it's out of my control.
Title: Re: Republican Tax Plan 2017
Post by: WoodSpinner on November 08, 2017, 10:39:28 AM
Can anyone clarify the change on page 143 of the PDF above?

Quote
SEC. 1501. REPEAL OF SPECIAL RULE PERMITTING RE-CHARACTERIZATION OF ROTH IRA CONTRIBUTIONS AS TRADITIONAL IRA CONTRIBUTIONS.
18 (a) IN GENERAL.—Section 408A(d) is amended by
19 striking paragraph (6) and by redesignating paragraph
20 (7) as paragraph (6).

I believe you have to cross-reference it with the current tax code to make any sense of it: https://www.law.cornell.edu/uscode/text/26/408A

Paragraph (6) that is being struck out:

Quote
(6) Taxpayer may make adjustments before due date
(A) In general
Except as provided by the Secretary, if, on or before the due date for any taxable year, a taxpayer transfers in a trustee-to-trustee transfer any contribution to an individual retirement plan made during such taxable year from such plan to any other individual retirement plan, then, for purposes of this chapter, such contribution shall be treated as having been made to the transferee plan (and not the transferor plan).
(B) Special rules
(i) Transfer of earnings
Subparagraph (A) shall not apply to the transfer of any contribution unless such transfer is accompanied by any net income allocable to such contribution.
(ii) No deduction
Subparagraph (A) shall apply to the transfer of any contribution only to the extent no deduction was allowed with respect to the contribution to the transferor plan.

My real question is whether this affects a backdoor roth or a mega backdoor roth? I've never done either so I'm not quite clear if a Roth -> Traditional re-characterization is part of the process.

Not sure if others have commented on this but it is significant change, essentially it eliminates the ability to re-characterize (e.g. reverse a Roth Conversion). Nice strategy to have if the assets converted have gone down drastically. See Kitces Analysis (https://www.kitces.com/blog/tax-cuts-and-jobs-act-2018-house-gop-tax-reform-proposal/).

Not a deal breaker for me, but it was a nice part of my planned Roth Conversion strategy ....
Title: Re: Republican Tax Plan 2017
Post by: NorthernBlitz on November 08, 2017, 10:48:13 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.


Nothing to do with kids or staff. This is about graduate students on assistantships or fellowships - they will now have to pay tax on tuition remissions, usually at out of state rates.

There is a bit of an analogy to consumption taxes.

If you buy something on sale, you don't pay sales tax on the original price. Instead, you pay sales tax on the price you paid.

Tuition remission is kind of similar, where students are purchasing their access to education at a reduced price.
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 08, 2017, 11:10:38 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.


Nothing to do with kids or staff. This is about graduate students on assistantships or fellowships - they will now have to pay tax on tuition remissions, usually at out of state rates.

There is a bit of an analogy to consumption taxes.

If you buy something on sale, you don't pay sales tax on the original price. Instead, you pay sales tax on the price you paid.

Tuition remission is kind of similar, where students are purchasing their access to education at a reduced price.

Not a good analogy, since sales do not ADD to your income. In your analogy, you have a set amount of money to spend, and then you decide to spend it on a sale item. You keep more of what you already have. In your analogy, a scholarship would be the "coupon" you apply to get a lower price, and that currently is not taxed.
Title: Re: Republican Tax Plan 2017
Post by: alexpkeaton on November 08, 2017, 12:28:11 PM
It seems like it would be similar to the imputed income I pay tax on for my employer-provided life insurance. The income is reported on my W-2, but I don't never received any cash.
Title: Re: Republican Tax Plan 2017
Post by: MDM on November 08, 2017, 05:58:30 PM
New question.

Is the savers credit changed or eliminated? Sorry if this was already covered.
I think it stays, based on https://forum.mrmoneymustache.com/welcome-to-the-forum/republican-tax-plan-2017/msg1758754/#msg1758754.
Title: Re: Republican Tax Plan 2017
Post by: jean on November 08, 2017, 07:28:44 PM
I see it this way - MFJ with 2 kids would pay 0% tax on first 55K of their income (24K standard deduction, 1600x2 child credit, 300x2 flex family credit) and then pay only $4200 for the max of $90000 for the 12% tax bracket. For many folks, their state and local taxes will be higher than their fed taxes. There must be many many families in that category since salaries outside of the costs are much lower. That is 4.5% federal tax rate without doing anything special, spending countless hours of doing taxes, going to H& R block, paying for Turbotax, etc etc. Seems like a pretty good deal to me.

I don't quite follow the math, but I'll assume you are correct for MFJ with 2 kids.  I don't love what happens in the upper middle class brackets, but I could stomach it if it weren't for the deep cuts for the extremely wealthy.    (Also, for that situation, turbotax or spending hours is not necessary under the current tax plan.  Even itemizing is straightforward.)  So, good deal for you maybe, but that doesn't make it a good plan.

Business Insider did some examples at various income points for singles (http://singles) and MFJ+2 kids.
Single: http://www.businessinsider.com/trump-tax-plan-take-home-pay-2017-9
MJF+2kids: http://www.businessinsider.com/trump-tax-plan-family-take-home-pay-changes-2017-11

They didn't do the math with the latest plan unfortunately, but the indicated who it will hurt - those who itemize but aren't super wealthy: http://www.businessinsider.com/trump-tax-plan-raise-taxes-middle-income-families-2017-9
Title: Re: Republican Tax Plan 2017
Post by: Rural on November 08, 2017, 07:39:01 PM
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.


Nothing to do with kids or staff. This is about graduate students on assistantships or fellowships - they will now have to pay tax on tuition remissions, usually at out of state rates.

Yep. DH's friends who are still in grad programs are freaking out about this. Especially since their program discourages them from getting outside jobs. They have 10-15k stipends but if this goes through they will be expected to pay taxes on an additional 40k. I know more than one person  who is trying to speed up their dissertation because of this.

DH's department is also nervous about this. He works at an R2 and it isn't the sort of program that independently wealthy students choose - they have lots of smart but first generation grad students in his program. If this goes through there is real concern that they won't be able to maintain their enrollment.


Yes, my husband is at an R1; stipends are higher but outside employment is completely forbidden and the penalty is dismissal from the program if caught. They don't admit anyone without a support package, so perhaps they could just say "no tuition for the PhD program," I don't know.


Husband's stipend is not classed as earned income, so we're already paying the employer and employee parts of social security. Don't know what's going to happen, but I think it will be bad for STEM (because support is nearly universal).
Title: Re: Republican Tax Plan 2017
Post by: jean on November 08, 2017, 09:06:39 PM
Yes, my husband is at an R1; stipends are higher but outside employment is completely forbidden and the penalty is dismissal from the program if caught. They don't admit anyone without a support package, so perhaps they could just say "no tuition for the PhD program," I don't know.
Husband's stipend is not classed as earned income, so we're already paying the employer and employee parts of social security. Don't know what's going to happen, but I think it will be bad for STEM (because support is nearly universal).

If they went the "no tuition for the PhD program" route, departments and universities would lose money.   You don't pay tuition, but the advisor generally pays for it from his grants.  I suppose they could reclassify as fees?  Anyway, i really really doubt this will be in any final tax bill that passes - but I'd be understandably panicked too.

My main reason for replying is surprise that you pay both parts of SS on stipend. Usually grad students do not pay any SS (and of course don't earn SS credits).  Do you get to choose to earn SS if you pay SS?  My understanding is that you don't pay any SS, but you do pay regular federal taxes which they will not withhold from the stipend for you.
Title: Re: Republican Tax Plan 2017
Post by: ixtap on November 08, 2017, 09:17:45 PM
Yes, my husband is at an R1; stipends are higher but outside employment is completely forbidden and the penalty is dismissal from the program if caught. They don't admit anyone without a support package, so perhaps they could just say "no tuition for the PhD program," I don't know.
Husband's stipend is not classed as earned income, so we're already paying the employer and employee parts of social security. Don't know what's going to happen, but I think it will be bad for STEM (because support is nearly universal).

If they went the "no tuition for the PhD program" route, departments and universities would lose money.   You don't pay tuition, but the advisor generally pays for it from his grants.  I suppose they could reclassify as fees?  Anyway, i really really doubt this will be in any final tax bill that passes - but I'd be understandably panicked too.

My main reason for replying is surprise that you pay both parts of SS on stipend. Usually grad students do not pay any SS (and of course don't earn SS credits).  Do you get to choose to earn SS if you pay SS?  My understanding is that you don't pay any SS, but you do pay regular federal taxes which they will not withhold from the stipend for you.

This surprises me, as well. I did not pay SS, because I was not an employee. Also, since we were not employees, we did not receive health insurance, although as students we were required to have it. They insisted we would not want to be employees, because then we would have to pay FICA. No, the science PhDs didn't want to pay FICA, but then their advisors paid their health insurance out of their grants, as well as higher stipends.
Title: Re: Republican Tax Plan 2017
Post by: radram on November 09, 2017, 06:42:08 AM
New question.

Is the savers credit changed or eliminated? Sorry if this was already covered.
I think it stays, based on https://forum.mrmoneymustache.com/welcome-to-the-forum/republican-tax-plan-2017/msg1758754/#msg1758754.

Thanks for finding that.
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 09, 2017, 06:44:41 AM
It seems like it would be similar to the imputed income I pay tax on for my employer-provided life insurance. The income is reported on my W-2, but I don't never received any cash.

Exactly!!
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 09, 2017, 07:41:28 AM

I don't quite follow the math, but I'll assume you are correct for MFJ with 2 kids.  I don't love what happens in the upper middle class brackets, but I could stomach it if it weren't for the deep cuts for the extremely wealthy.    (Also, for that situation, turbotax or spending hours is not necessary under the current tax plan.  Even itemizing is straightforward.)  So, good deal for you maybe, but that doesn't make it a good plan.


Math:
Assume 90,000 income (to keep you in 12% bracket)
Minus    24,000 Standard deduction
Taxable  66,000 * 12%
Tax due  7,920
             Apply child credit x 2 (3,200) + family credit x2 (600) for total tax credit of 3,800.
Credits   3,800
Tax due  4,120 (7,920-3,800)

or         4.57%

The way Business Insider calculates taxes on 175K income is a bit disingenuous. They assume average itemized deduction according to IRS (from all tax returns). Red flag. They should have used the average of that income band, not average of all income bands.

Also, what is really fair tax? What is an income level at which you should not have to pay any taxes in order to offset the "tax cut" folks with 200K income are getting? I don't see any proposal for a fairer system? In Europe, for example, counties implement flat tax on all income - 10% or 15% tax that applies to everyone. Is that fair? Or is it better to have our tax system, but exclude all income up to 100K for families and 50K for individuals from all taxes?  Or should it be 120 for families? Where is the threshold for the tax system to be fair?

This is a very thorny question, but it is clear that the current system is not ideal. It is crazy to have to higher a consultant every year to figure out what taxes are owed. When I first started working, I pay way more tax than necessary due to not understanding the tax code and not having money to buy Turbotax. But folks that spend 400-500 dollars on tax accountants can save you 3K in taxes. Is that really fair? Is that really how a progressive tax system should work?
Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 09, 2017, 08:03:48 AM
This is a very thorny question, but it is clear that the current system is not ideal. It is crazy to have to [hire] a consultant every year to figure out what taxes are owed. When I first started working, I pay way more tax than necessary due to not understanding the tax code and not having money to buy Turbotax. But folks that spend 400-500 dollars on tax accountants can save you 3K in taxes. Is that really fair? Is that really how a progressive tax system should work?
Fairness doesn't play into compliance, IMO. People should comply with the laws and tax codes of the country, so if they are entitled by law/code to those $3K in savings and can achieve them by sending $400-500 (I wish I spent that little per year!!), then I think they should obviously do it.

Title: Re: Republican Tax Plan 2017
Post by: jean on November 09, 2017, 08:04:58 AM
Also, what is really fair tax? What is an income level at which you should not have to pay any taxes in order to offset the "tax cut" folks with 200K income are getting?
The 200k income group are not getting a tax cut if they itemize. I'm not really arguing whether this is a good or bad thing, it could be argued it is good.

However, I'm appalled at the repeal of the estate tax, not changing the step-up basis (heirs can sell inherited stocks without the earnings ever having been taxed), the repeal of the AMT, and other goodies for the very wealthy and certain types of business owners.  This seems blatantly unfair.  If they couple it with tax cuts for middle class families, they hope to sneak through these terrible policies that benefit the top 0.5%.
Title: Re: Republican Tax Plan 2017
Post by: clutchy on November 09, 2017, 12:40:24 PM
I've run through a couple of scenario's and the republican plan is a nightmare for my family. 


It's seems we're right in the sweet spot to get crushed. 

1. Pay high property taxes and state taxes (reduced)
2. don't get the child tax credit (increased but ineligible)
3. lose 4 personal exemptions (saved us $4k / yr.  gone.)
4. we itemize, but we'll have reduced itemizations due to #1 above. 

Our effective rate is a lot lower due to contributing to 401k's, HSA, dependent care etc...  which put us at a tolerable level. 


I think our tax is set to double.... :( 

you make plans based on current law and then all of that changes... super. 

So I get to pay increased taxes so the deficit can go up and the wealthy can more easily pass generational wealth?  BS....
Title: Re: Republican Tax Plan 2017
Post by: GreenEggs on November 09, 2017, 12:50:39 PM
Trump's making America great again, for Himself! 

 
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 09, 2017, 12:58:13 PM
If anybody finds the full text to the Senate bill, please post a link.  (once again, the media reports are dumbed down for the 80%, so we get just enough info to make them worthless).  :{(
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 09, 2017, 06:17:54 PM
Now I'm reading that the Senate hasn't even drafted a bill yet.  They have just released their two page "plan."   
Title: Re: Republican Tax Plan 2017
Post by: Rural on November 09, 2017, 06:19:40 PM
Husband's stipend is not classed as earned income, so we're already paying the employer and employee parts of social security. Don't know what's going to happen, but I think it will be bad for STEM (because support is nearly universal).
I'm going to echo the others and say that doesn't sound right. I don't pay FICA on my pay from the university and I don't know why you would be paying FICA on unearned income anyway.


I may have this wrong; haven't done his taxes yet. But he's on a research fellowship and the legalities are very different from my own assistantships from grad school. Nothing withheld but taxes will be owed in his case. Maybe he won't have to pay the SS - I was extrapolating from my own self-employment and had just assumed. I guess I'd better dig deeper. Regardless, we're saving for taxes as if he'ss pay it, so that's good anyway.

Edit: found it. Not subject to FICA because not wages. Thanks, all. He already has far more credits than the minimum for SS, so no great loss there.
Title: Re: Republican Tax Plan 2017
Post by: RangerOne on November 10, 2017, 09:30:02 AM
When they talk about removing SALT breaks in the Senate plan, this does not just impact high income tax states right? Because the local tax is what let's you deduct property tax. So killing that fucks Texas too. Since they make up for their lack of income tax with higher property tax. Or am I mixing this up and property tax deduction is preserved.

If the above is true then they are indiscriminately trying to shafts middle income home owners out of a tax break.
Title: Re: Republican Tax Plan 2017
Post by: Spitfire on November 10, 2017, 09:40:53 AM
No matter what they do to itemized deductions, people are losing out if they double the standard deduction and get rid of personal exemptions. A high standard deduction messes with mortgage interest, property taxes, and most of all (in my opinion) charitable contributions.
Title: Re: Republican Tax Plan 2017
Post by: jim555 on November 10, 2017, 10:39:32 AM
Wouldn't this tax plan require 60 votes in the Senate?  How are 8 Dems going to go along with it?  Seems DOA unless they pull some gymnastics.
Title: Re: Republican Tax Plan 2017
Post by: sol on November 10, 2017, 10:39:58 AM
When they talk about removing SALT breaks in the Senate plan, this does not just impact high income tax states right? Because the local tax is what let's you deduct property tax. So killing that fucks Texas too. Since they make up for their lack of income tax with higher property tax. Or am I mixing this up and property tax deduction is preserved.

The loss of SALT deductions would hit every state, but I think it would really only hit the very richest people because they've also raised the standard deduction to 24k.  We itemize property taxes and state taxes and mortgage interest (and charitable giving) for about 16k, plus we have 16k of exemptions, for 32k of tax-free income before we even start in with 401ks and our HSA.  Since the new plan would lose us the 16k of exemptions, the SALT deductions are suddenly useless because they total less than 24k anyway.  And that appears to be by design, because...

Around here, you'd need a mortgage worth well over a half million dollars to have your property tax and mortgage interest exceed the proposed $24k standard deduction, so the $500k mortgage deduction limit basically prevents anyone from itemizing (unless their charitable giving is tens of thousands of dollars per year). 

It's just a sneaky backdoor way to say "you can't itemize, everyone must take the standard deduction" without actually coming out and saying that. 
Title: Re: Republican Tax Plan 2017
Post by: Paul der Krake on November 10, 2017, 10:42:20 AM
Had a good chuckle reading this:
https://www.washingtonpost.com/business/economy/i-dont-feel-wealthy-the-upper-middle-class-is-worried-about-paying-for-the-tax-overhaul/2017/11/09/a5cf1acc-c55e-11e7-aae0-cb18a8c29c65_story.html
Title: Re: Republican Tax Plan 2017
Post by: Daisy on November 10, 2017, 10:48:06 AM
When they talk about removing SALT breaks in the Senate plan, this does not just impact high income tax states right? Because the local tax is what let's you deduct property tax. So killing that fucks Texas too. Since they make up for their lack of income tax with higher property tax. Or am I mixing this up and property tax deduction is preserved.

The loss of SALT deductions would hit every state, but I think it would really only hit the very richest people because they've also raised the standard deduction to 24k.  We itemize property taxes and state taxes and mortgage interest (and charitable giving) for about 16k, plus we have 16k of exemptions, for 32k of tax-free income before we even start in with 401ks and our HSA.  Since the new plan would lose us the 16k of exemptions, the SALT deductions are suddenly useless because they total less than 24k anyway.  And that appears to be by design, because...

Around here, you'd need a mortgage worth well over a half million dollars to have your property tax and mortgage interest exceed the proposed $24k standard deduction, so the $500k mortgage deduction limit basically prevents anyone from itemizing (unless their charitable giving is tens of thousands of dollars per year). 

It's just a sneaky backdoor way to say "you can't itemize, everyone must take the standard deduction" without actually coming out and saying that.

Why would you complain about not itemizing if the new standard deduction was actually more than what you were itemizing before?

Maybe this is the first step to simplify taxes. Once less people itemize, then they can go ahead and remove all sorts of deductions. Those that win with itemizing, in my opinion, are those with higher incomes and larger homes, as you state. They also have better tax lawyers and accountants to find these loopholes.

One time I was out to dinner with a group and one girl was a real estate agent and she was bragging how she was going to "write off" our meal out as a business expense. I thought that was pretty unfair.
Title: Re: Republican Tax Plan 2017
Post by: jim555 on November 10, 2017, 11:20:03 AM
Wouldn't this tax plan require 60 votes in the Senate?  How are 8 Dems going to go along with it?  Seems DOA unless they pull some gymnastics.
Nope, just a simple majority since it would be passed under the budget reconciliation rules as long as it is below the $1.5T limit
I thought the tax cuts would have to sunset at 10 years for it to pass a "Byrd bath".
Title: Re: Republican Tax Plan 2017
Post by: wenchsenior on November 10, 2017, 12:00:45 PM
Wouldn't this tax plan require 60 votes in the Senate?  How are 8 Dems going to go along with it?  Seems DOA unless they pull some gymnastics.
Nope, just a simple majority since it would be passed under the budget reconciliation rules as long as it is below the $1.5T limit
I thought the tax cuts would have to sunset at 10 years for it to pass a "Byrd bath".

I think the reasoning is similar to the tax cuts under W.  It's much harder to raise taxes than to cut them, so there's a decent chance that at the ten year mark at least some of these cuts will be made permanent by Congress, regardless of who is in power (as some were when the 10 year window on the Bush tax cuts expired).
Title: Re: Republican Tax Plan 2017
Post by: sol on November 10, 2017, 12:38:05 PM
Why would you complain about not itemizing if the new standard deduction was actually more than what you were itemizing before?

It's not more than I was itemizing before.  The new $24k standard deduction would be $8k less than the $32k of deductions and exemptions I'll claim this year.  I'm going to get taxed on $8,000 of extra income.
Title: Re: Republican Tax Plan 2017
Post by: Daisy on November 10, 2017, 12:42:38 PM
Why would you complain about not itemizing if the new standard deduction was actually more than what you were itemizing before?

It's not more than I was itemizing before.  The new $24k standard deduction would be $8k less than the $32k of deductions and exemptions I'll claim this year.  I'm going to get taxed on $8,000 of extra income.

Oh, OK.

Now that I have a paid off house the increased standard deduction is more beneficial to me than itemizing.
Title: Re: Republican Tax Plan 2017
Post by: ritz on November 10, 2017, 12:47:25 PM
If anybody finds the full text to the Senate bill, please post a link.  (once again, the media reports are dumbed down for the 80%, so we get just enough info to make them worthless).  :{(

The only place I've seen it so far is here: http://thehill.com/policy/finance/359598-read-senate-gops-tax-bill
Title: Re: Republican Tax Plan 2017
Post by: mousebandit on November 10, 2017, 12:53:48 PM
It also seems that non-reimbursed employee expenses are gone, which will hit the tradesmen hard.  Many of them, those that do civil construction in particular, travel extensively to the different job sites.   It's not just upper middle class who have benefited from itemizing. 

Does anyone know if the Senate plan still reclassified the number of years you had to live in your home before sellering to avoid capital gains tax?  That will hit house hackers, among others. 
Title: Re: Republican Tax Plan 2017
Post by: sol on November 10, 2017, 01:06:56 PM
It also seems that non-reimbursed employee expenses are gone, which will hit the tradesmen hard.  Many of them, those that do civil construction in particular, travel extensively to the different job sites.   It's not just upper middle class who have benefited from itemizing. 

Yea, they've targeted tradesman, and teachers, and graduate students, and small business owners.  It's really kind of amazing how bad this plan is for all of the traditional GOP constituencies.  They threw EVERYONE under the bus in order to fund tax breaks for the ultra-wealthy.

On the bright side, at least they didn't follow their blueprint from the healthcare debate and also steal from the poor at the same time.  They seem to have learned how bad the optics were on their plan to end medicaid to fund tax breaks for the rich, so this new tax plan mostly ignores the poor and instead steals from the middle class to fund tax breaks for the rich.  I wouldn't exactly call that progress, though.
Title: Re: Republican Tax Plan 2017
Post by: alexpkeaton on November 10, 2017, 01:30:11 PM
Maybe this is the first step to simplify taxes. Once less people itemize, then they can go ahead and remove all sorts of deductions. Those that win with itemizing, in my opinion, are those with higher incomes and larger homes, as you state. They also have better tax lawyers and accountants to find these loopholes.

I have a high income and a large mortgage (not a large home). My tax lawyer an accountants are...TurboTax. There's no "finding" loopholes. And the word "loopholes" itself is a misnomer. Really we're talking about carve-outs and deductions that were put there by design, not some workaround.

Quote
One time I was out to dinner with a group and one girl was a real estate agent and she was bragging how she was going to "write off" our meal out as a business expense. I thought that was pretty unfair.

It is unfair. It's called tax fraud.
Title: Re: Republican Tax Plan 2017
Post by: boarder42 on November 10, 2017, 01:34:21 PM
Why would you complain about not itemizing if the new standard deduction was actually more than what you were itemizing before?

It's not more than I was itemizing before.  The new $24k standard deduction would be $8k less than the $32k of deductions and exemptions I'll claim this year.  I'm going to get taxed on $8,000 of extra income.

while you're going to be taxed on extra income and have a higher AGI you get credits that offset the losses of the personal exemptions.
Title: Re: Republican Tax Plan 2017
Post by: Daisy on November 10, 2017, 01:49:00 PM
Maybe this is the first step to simplify taxes. Once less people itemize, then they can go ahead and remove all sorts of deductions. Those that win with itemizing, in my opinion, are those with higher incomes and larger homes, as you state. They also have better tax lawyers and accountants to find these loopholes.

I have a high income and a large mortgage (not a large home). My tax lawyer an accountants are...TurboTax. There's no "finding" loopholes. And the word "loopholes" itself is a misnomer. Really we're talking about carve-outs and deductions that were put there by design, not some workaround.

Quote
One time I was out to dinner with a group and one girl was a real estate agent and she was bragging how she was going to "write off" our meal out as a business expense. I thought that was pretty unfair.

It is unfair. It's called tax fraud.

Yes but TurboTax is not free. I have had to pay for premium TurboTax while working due to the software being able to handle all of these special carve outs. Hopefully now FIREd I can use a simpler version of TurboTax. Even better would be to truly have it on a postcard and not even have to pay for TurboTax.

I've always said I'd rather pay a little more taxes if if meant simplifying the system.

Yes I do love the 401k tax deductability and all of that, but that just makes everything so complicated having separate accounts and such. I'm all for tax simplification. I'm not sure that's what the Republicans are proposing, but for now the increased standard deduction does benefit me.

I still think if your itemized deductions are above $24k that means you make a high income and/or have a large house with large interest payments. I'm OK with that.

Edited to add: Yes my friend would probably be committing fraud calling it a business dinner when actually it was a group of friends getting together for dinner. But I think these special carve outs and deductions set the stage for fraud. I'd much rather have a larger standard deduction and then no one can benefit from these special carve outs. And more likely to get audited. Make it simpler and there's less chance for fraud.
Title: Re: Republican Tax Plan 2017
Post by: sol on November 10, 2017, 01:52:53 PM
while you're going to be taxed on extra income and have a higher AGI you get credits that offset the losses of the personal exemptions.

The tax credit would increase $200 per year, offsetting some of my losses.  The family credit is temporary, so I don't really count that because I feel like it's just subterfuge to confuse the issue.  It's not really part of their long term tax plan, it's just a temporary measure to cover up the losses people like me will feel.
Title: Re: Republican Tax Plan 2017
Post by: boarder42 on November 10, 2017, 01:59:30 PM
while you're going to be taxed on extra income and have a higher AGI you get credits that offset the losses of the personal exemptions.

The tax credit would increase $200 per year, offsetting some of my losses.  The family credit is temporary, so I don't really count that because I feel like it's just subterfuge to confuse the issue.  It's not really part of their long term tax plan, it's just a temporary measure to cover up the losses people like me will feel.

the tax credits i saw were an increase of 600 per year per child.
Title: Re: Republican Tax Plan 2017
Post by: sol on November 10, 2017, 02:17:56 PM
the tax credits i saw were an increase of 600 per year per child.

The tax credits I saw where raised from $1k per child to $1200 per child.  I would love for you to be right, because I have so little faith in democracy these days that I think they'll actually pass this turkey.  Source for your $600 number?
Title: Re: Republican Tax Plan 2017
Post by: MDM on November 10, 2017, 02:31:16 PM
the tax credits i saw were an increase of 600 per year per child.

The tax credits I saw where raised from $1k per child to $1200 per child.  I would love for you to be right, because I have so little faith in democracy these days that I think they'll actually pass this turkey.  Source for your $600 number?
Perhaps the text below.  That's the non-refundable part.  The refundable, I think, was not increased as much.

(1) IN GENERAL.—Section 24(a) is amended—
19 (A) by striking ‘‘qualifying child’’ and inserting
20 ‘‘dependent’’,
21 (B) by striking ‘‘for which the taxpayer is al22
lowed a deduction under section 151’’, and
23 (C) by striking ‘‘an amount equal to $1,000.’’
24 and inserting the following: ‘‘an amount equal to—
VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 PO 00000 Frm 00068 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X
November 2, 2017 (10:46 a.m.)
G:\M\15\BRADTX\BRADTX_045.XML
g:\VHLC\110217\110217.061.xml (679209|10)
69
1 ‘‘(1) in the case of a qualifying child, $1,600,
2 and
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 10, 2017, 03:12:00 PM
If anybody finds the full text to the Senate bill, please post a link.  (once again, the media reports are dumbed down for the 80%, so we get just enough info to make them worthless).  :{(

The only place I've seen it so far is here: http://thehill.com/policy/finance/359598-read-senate-gops-tax-bill

Thanks.  I just found the full .pdf link here:

https://www.finance.senate.gov/imo/media/doc/11.9.17%20Chairman%27s%20Mark.pdf

I've just started reading through it.  12% and 22.5% brackets directly replace the 15% and 25% brackets for 2018 (same thresholds), so this is a definite gain for lower earners (after adjusting for lost deductions/exemptions).
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 10, 2017, 04:12:10 PM
Senate bill, MFJ.  New 25% bracket ranges from $120K all the way to $290K.  (the old 28% bracket was $156K to $238K)  This is encouraging for the middle class, and looks to be much more favorable than the house bill.
Title: Re: Republican Tax Plan 2017
Post by: Viking Thor on November 10, 2017, 04:18:59 PM
People in high cola states will pay a lot more, myself among them. Where I live a regular 2000 square foot house is 18k year in property tax. Basically some republican congressmen in ny/nj/ca will throw their constituents under the bus and others will vote against.

The ones who throw their constituents under the bus probably have high paid consulting gigs lined up with republican think tanks or the Koch brothers if they lose and therefore willing to risk it and vote for a horrible deal for their district.

What is really frustrating is I am going to pay much more in tax so the Trump family and other rich will get a huge tax cut. I don't want to pay more tax but it would sting a lot less if it were going to poor people or to somehow benefit society.
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 10, 2017, 05:00:45 PM
thanks to @techacker980@gmail.com my credit score improved drastically. y'all should try him out.
he also hacks social networking apps of your patner to detect cheats

Tax cheats?
Title: Re: Republican Tax Plan 2017
Post by: frugalecon on November 11, 2017, 05:24:27 AM
People in high cola states will pay a lot more, myself among them. Where I live a regular 2000 square foot house is 18k year in property tax. Basically some republican congressmen in ny/nj/ca will throw their constituents under the bus and others will vote against.

The ones who throw their constituents under the bus probably have high paid consulting gigs lined up with republican think tanks or the Koch brothers if they lose and therefore willing to risk it and vote for a horrible deal for their district.

What is really frustrating is I am going to pay much more in tax so the Trump family and other rich will get a huge tax cut. I don't want to pay more tax but it would sting a lot less if it were going to poor people or to somehow benefit society.

I had the same thoughts, VT. But I am guessing that people below us in the income distribution will also get screwed, because the resulting deficits will be used as a pretext for slashing programs that benefit them.
Title: Re: Republican Tax Plan 2017
Post by: GoingConcern on November 11, 2017, 07:52:15 AM
I'm all for simplifying the tax code, limiting itemized deductions and lowering corporate taxes (assuming corporate loopholes were also limited but the senate plan of territorial system is ludicrous.)   But repealing the estate tax, taxing PHD students (looks like senate will repeal this) and lowering taxes for the top .1% shouldn't be part of the plan.  In fact, I think there should be some sort of Buffet rule where the highest earners should pay a certain %.

Raising taxes on the upper-middle class Americans and decreasing taxes on the richest Americans to increase our national debt isn't counterproductive.

In addition, some sort of spending reduction should be in place.  Start off with the military. 
Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 11, 2017, 08:26:29 AM
Raising taxes on the upper-middle class Americans and decreasing taxes on the richest Americans to increase our national debt isn't counterproductive.
I'm assuming you mean "is" here.
Title: Re: Republican Tax Plan 2017
Post by: GoingConcern on November 11, 2017, 08:29:27 AM
Raising taxes on the upper-middle class Americans and decreasing taxes on the richest Americans to increase our national debt isn't counterproductive.
I'm assuming you mean "is" here.

Yep.
Title: Re: Republican Tax Plan 2017
Post by: Rubyvroom on November 11, 2017, 08:38:48 AM
On the bright side, at least they didn't follow their blueprint from the healthcare debate and also steal from the poor at the same time.  They seem to have learned how bad the optics were on their plan to end medicaid to fund tax breaks for the rich, so this new tax plan mostly ignores the poor and instead steals from the middle class to fund tax breaks for the rich.  I wouldn't exactly call that progress, though.

I haven't read through all pages of this post so apologies if this is duplicating info, but from a nonprofit perspective we are very worried about the impact on elderly individuals and the poor. Eliminating the medical expense deduction, eliminating private bond funding, changing charitable donations and eliminating tax exemptions for the development and preservation of affordable housing will have far-reaching impacts on the senior living sector, hospitals and health systems, colleges and universities and other nonprofit organizations that utilize tax-exempt financing. These provisions blindsided many nonprofits, as they were included with no previous public debate. Here is a quick snippet from LeadingAge that discusses the negative impacts

http://www.leadingage.org/legislation/leadingage-statement-proposed-tax-cuts-and-jobs-act

I haven't diligently read through amendments to the tax plan so perhaps some of these areas are being re-worked, but one real life example is something my organization is working on right now. A nursing home has been struggling with a poor Medicaid reimbursement system for years and reimbursement has not kept pace with increased wages for care staff. We are working to refinance their tax-exempt bonds because the rising costs of care have created a cash flow issue whereby they haven't been able to make their debt payments. We've been working for months with the trustee bondholders to renegotiate a tax-exempt bond deal at an interest rate that would guarantee this site would be sustainable into the future, while decreasing risk to bondholders. We are now under the gun to complete this financing before the end of the year, or a very real outcome could be that this nursing home would have to shut its doors. This nursing home is in a very small rural community and many of these people would have no where to go. Everyone involved in this case is working diligently to close the deal before the end of the year, and I imagine we're not the only ones facing this situation.

From a less critical standpoint, we own two assisted living buildings that were financed via tax-exempt bonds back in 2010. The optional redemption dates are in 2018 and because rates are more favorable today than in 2010, we likely would have refinanced next year leaving us more money to reinvest into care staff wages and an aging infrastructure. If this tax plan passes, it completely limits our ability to refinance these properties, meaning less money available to pursue our mission.

I agree that they have fixed the optics of harming the poor, but unfortunately, directly or indirectly, they are still harming the poor. Those of us in the nonprofit sector are quite concerned.
Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 11, 2017, 08:46:55 AM
It may actually pump up charitable contributions in the last 6 weeks of 2017, but I agree if this passes, I'd expect to see a marginal reduction in charitable giving.

For our own account, we are going to make some of what would have been our 2018 donations in 2017 just to hedge against the possibility that this will pass as-is. (That seems unlikely to me, but since we have the cash and hedging is very inexpensive, we might as well hedge.)
Title: Re: Republican Tax Plan 2017
Post by: Rubyvroom on November 11, 2017, 08:53:02 AM
It may actually pump up charitable contributions in the last 6 weeks of 2017, but I agree if this passes, I'd expect to see a marginal reduction in charitable giving.

For our own account, we are going to make some of what would have been our 2018 donations in 2017 just to hedge against the possibility that this will pass as-is. (That seems unlikely to me, but since we have the cash and hedging is very inexpensive, we might as well hedge.)

Yeah I've looked at that too actually (beefing up 2017 contributions), through the "Let's talk about DAFs" thread on here. I admit I was rather uneducated on the topic. Yet another thing I've learned from these forums :)
Title: Re: Republican Tax Plan 2017
Post by: Daisy on November 11, 2017, 10:31:40 AM
I'm all for simplifying the tax code, limiting itemized deductions and lowering corporate taxes (assuming corporate loopholes were also limited but the senate plan of territorial system is ludicrous.)   But repealing the estate tax, taxing PHD students (looks like senate will repeal this) and lowering taxes for the top .1% shouldn't be part of the plan.  In fact, I think there should be some sort of Buffet rule where the highest earners should pay a certain %.

Raising taxes on the upper-middle class Americans and decreasing taxes on the richest Americans to increase our national debt isn't counterproductive.

In addition, some sort of spending reduction should be in place.  Start off with the military.

I am in almost complete agreement with your statements.

And those complaining about paying $18k in property taxes in their state and not being able to deduct that...I'd be complaining about the high tax in that state and trying to move away from that state or try to influence your state to reduce taxes rather than keeping another complicated deduction in federal income tax laws.
Title: Re: Republican Tax Plan 2017
Post by: Viking Thor on November 11, 2017, 11:10:04 AM
The taxes in NY/San Fran etc are high because costs are high- teachers, police, firefighters etc all need to be paid more. Also the high tax states have thriving economies and are already paying the lions share of federal taxes, so if we took your advice and left to take lower paying jobs in low tax states that would mean less money for the federal govt as well.

And Daisy you completely mischaracterized what I said, which was not to complain about the local property tax but rather the tax increase that is going to fund the Trumps and Kochs of the world.

In the only year that Trump's tax return is available, almost all of his tax was due to the AMT which will be eliminated. Since they are already eliminating most deductions taken by the middle class/upper middle class; there is no purpose to eliminating AMT other than allowing the mega rich to create and exploit loopholes so that they pay little to no tax. In fact mega rich people exploiting the system and paying very little tax was the reason the AMT was created in the first place.
Title: Re: Republican Tax Plan 2017
Post by: Daisy on November 11, 2017, 01:24:47 PM
The taxes in NY/San Fran etc are high because costs are high- teachers, police, firefighters etc all need to be paid more. Also the high tax states have thriving economies and are already paying the lions share of federal taxes, so if we took your advice and left to take lower paying jobs in low tax states that would mean less money for the federal govt as well.

And Daisy you completely mischaracterized what I said, which was not to complain about the local property tax but rather the tax increase that is going to fund the Trumps and Kochs of the world.

In the only year that Trump's tax return is available, almost all of his tax was due to the AMT which will be eliminated. Since they are already eliminating most deductions taken by the middle class/upper middle class; there is no purpose to eliminating AMT other than allowing the mega rich to create and exploit loopholes so that they pay little to no tax. In fact mega rich people exploiting the system and paying very little tax was the reason the AMT was created in the first place.

It sounds like you are getting a good value with your tax dollars in your state.

Maybe if people started moving around to lower tax states, eventually the economy would shift around and there would be better employment in other states too and the federal income tax income would be more stable across states.

I don't have a strong opinion on the rest of the tax package being proposed. I am happy with the increased standard deduction and less deductions overall. I wish the AMT would stay and the ultra rich wouldn't get a tax cut, that's for sure. But I am tired of all of the games we have to play and the intricate tax laws to understand to try to optimize our tax returns.

And I do love optimizing, so I see it as a game. But most people I talk to this stuff about off-forum have their eyes glaze over when you start talking about Roth conversion pipelines, 401ks, IRAs, DAFs, optimizing your income for ACA subsidies. The people really benefitting from all of this complication are the rich and smart people that keep on top of this stuff. I am very pro-simplification for fairness.
Title: Re: Republican Tax Plan 2017
Post by: maizeman on November 11, 2017, 03:20:31 PM
... the high tax states have thriving economies and are already paying the lions share of federal taxes...

I'm not convinced the above statement is true, so I decided to actually dig up some data on this. Figuring out what counts as a high tax state is complex. For example CA has an early high top state income tax rate, but it doesn't kick in until your income is $1M/year, so the average californian pays less in income tax than the average oreganian, despite the top tax bracket being lower in in OR.

Anyway, so I've decided to look at total state and local income and property tax collected per capita for classifying states as high or low tax and total federal income taxes paid per capita for classifying states as paying the lion's share of federal taxes or not. I've also controlled for variation in cost of living across states using data from here (https://www.bea.gov/iTable/iTable.cfm?reqid=70&step=1&isuri=1&acrdn=8#reqid=70&step=30&isuri=1&7022=101&7023=8&7024=non-industry&7033=-1&7025=0&7026=01000,02000,04000,05000,06000,08000,09000,10000,11000,12000,13000,15000,16000,17000,18000,19000,20000,21000,22000,23000,24000,25000,26000,27000,28000,29000,30000,31000,32000,33000,34000,35000,36000,37000,38000,39000,40000,41000,42000,44000,45000,46000,47000,48000,49000,50000,51000,53000,54000,55000,56000&7027=2015&7001=8101&7028=-1&7031=0&7040=-1&7083=levels&7029=101&7090=70). If you'd like to see the unadjusted chart, it's here (https://imgpile.com/i/nJbpnM).

(https://i.imgpile.com/nJbjda.png) (https://imgpile.com/i/nJbjda)

Ignore delaware, that's an artifact of so many US based companies making the state their legal/tax home, but I didn't want to take it out because then someone would ask where it was.

As you can see, there is actually is a small amount correlation between state tax burden and contribution to federal income tax. However, I should also point out that most of the strength of this relatively weak correlation strength comes from five states (MN, NJ, MA, CT, & NY), and you don't see much of a trend at all in the 44 remaining states (since we also have to throw out delaware).

Tying this back to the main topic of this thread, if the republicans really do repeal the SALT tax exemptions, states on the right hand side of the graph are going to move up, while states on the left hand side of the graph will move down (as a result of the expanded standard deduction). Whether that is better or worse (or more or less fair) is left as an exercise to the reader.

As part of pulling this data together, I also plotted the state and federal tax burden as a percent of state GDP. It's not directly relevant to the discussion above, but I'll link to it as well. (https://imgpile.com/i/nJd1UE) The only thing that jumped out at me was that states like Maine and Vermont which pay lower absolute levels of state income/property taxes have some of the highest state tax burdens relative to their state GDP.
Title: Re: Republican Tax Plan 2017
Post by: Viking Thor on November 11, 2017, 05:10:25 PM
I don't agree that there is not a correlation, it looks like there is from the chart (even though it's the wrong chart that you display).

It makes no sense to standardize for the cost off living, that's the point in the first place that NY etc have higher taxes partly because of the higher cost of living and therefore have higher wages and expenses and pay more federal tax. So the only relevant chart is the one you mentioned and linked to not the one displayed in the post. There does appear to be a pretty clear trend that blue states pay more in both local and federal taxes and that there is a strong correlation  between states having high local and federal tax payments.
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 11, 2017, 05:17:19 PM
... the high tax states have thriving economies and are already paying the lions share of federal taxes...

I'm not convinced the above statement is true, so I decided to actually dig up some data on this. Figuring out what counts as a high tax state is complex. For example CA has an early high top state income tax rate, but it doesn't kick in until your income is $1M/year, so the average californian pays less in income tax than the average oreganian, despite the top tax bracket being lower in in OR.

Anyway, so I've decided to look at total state and local income and property tax collected per capita for classifying states as high or low tax and total federal income taxes paid per capita for classifying states as paying the lion's share of federal taxes or not. I've also controlled for variation in cost of living across states using data from here (https://www.bea.gov/iTable/iTable.cfm?reqid=70&step=1&isuri=1&acrdn=8#reqid=70&step=30&isuri=1&7022=101&7023=8&7024=non-industry&7033=-1&7025=0&7026=01000,02000,04000,05000,06000,08000,09000,10000,11000,12000,13000,15000,16000,17000,18000,19000,20000,21000,22000,23000,24000,25000,26000,27000,28000,29000,30000,31000,32000,33000,34000,35000,36000,37000,38000,39000,40000,41000,42000,44000,45000,46000,47000,48000,49000,50000,51000,53000,54000,55000,56000&7027=2015&7001=8101&7028=-1&7031=0&7040=-1&7083=levels&7029=101&7090=70). 

As you can see, there is actually is a small amount correlation between state tax burden and contribution to federal income tax. However, I should also point out that most of the strength of this relatively weak correlation strength comes from five states (MN, NJ, MA, CT, & NY), and you don't see much of a trend at all in the 44 remaining states (since we also have to throw out delaware).

Controlling for the local cost of living seems like a strange choice, given that the tax brackets aren't similarly adjusted, and all the states use the same single currency that the federal government uses for expenditures. To my eye, the correlation looks stronger without that adjustment.

What was your source for the tax collections? A couple that struck me as unlikely on the federal side (AR and NE) in fact don't match the first article I pulled up (http://www.jsonline.com/story/money/business/2017/04/17/how-states-rank-per-capita-federal-taxes/100577824/).

Also, limiting the state and local taxes to income and property, rather than also including sales tax, has a pronounced effect on what this looks like (consider, as an example, that WA generally takes in a bit more than OR on a per capita total basis (http://www.taxpolicycenter.org/statistics/state-and-local-tax-revenue-capita), but the picture you paint, which disregards sales taxes, is very different). Of course, sales taxes are deductible as an alternative to income taxes, too. 
Title: Re: Republican Tax Plan 2017
Post by: maizeman on November 11, 2017, 05:46:43 PM
I don't agree that there is not a correlation, it looks like there is from the chart (even though it's the wrong chart that you display).

It makes no sense to standardize for the cost off living, that's the point in the first place that NY etc have higher taxes partly because of the higher cost of living and therefore have higher wages and expenses and pay more federal tax. So the only relevant chart is the one you mentioned and linked to not the one displayed in the post. There does appear to be a pretty clear trend that blue states pay more in both local and federal taxes and that there is a strong correlation  between states having high local and federal tax payments.

I'd certainly agree that -- all things being equal -- people in a city where costs of livings (and hence salaries) are twice as high will pay more in a progressive federal income tax system than people in a city where the cost of living (and hence salaries) are more reasonable. That's a different argument from the argument the economies are thriving in high tax states and thus they pay more in taxes, which is what I understood you to be saying in your previous post.

Also, note that I didn't say there wasn't a correlation, I said that the correlation wasn't that strong and that is was mostly the result of five states.

-Using data from every state but Deleware, there is a statistically significant correlation between federal tax paid per capita and state income/property tax paid per capita. However, the R^2 of the correlation is only 0.264

-Take out the five states I mentioned in my first post, and there is no statistically significant correlation between the two measures of tax burden in the remaining 44 states.

@Undecided, sure thing, I should have done a better job of documenting my sources in the original post but it was already getting rather long.

Federal tax revenue comes from Table 5 in this PDF: https://www.irs.gov/pub/irs-soi/15databk.pdf
State per capita income tax values: https://taxfoundation.org/individual-income-tax-collections-per-capita/
State per capita property tax values: https://taxfoundation.org/property-tax-per-capita-2017/
The federal data is from 2015, the state data is from 2014, which is not ideal.

Controlling for cost of living let me separate out the effects of cost of living:

The taxes in NY/San Fran etc are high because costs are high- teachers, police, firefighters etc all need to be paid more.

From the effects of differences in the actual strength of the economy between different states.
Title: Re: Republican Tax Plan 2017
Post by: maizeman on November 11, 2017, 06:14:06 PM
Also, limiting the state and local taxes to income and property, rather than also including sales tax, has a pronounced effect on what this looks like (consider, as an example, that WA generally takes in a bit more than OR on a per capita total basis (http://www.taxpolicycenter.org/statistics/state-and-local-tax-revenue-capita), but the picture you paint, which disregards sales taxes, is very different). Of course, sales taxes are deductible as an alternative to income taxes, too. 

Indeed. I can certainly see the arguments on either side about including sales tax. Generally sales tax deductions are going to be less useful for putting you above the filing threshold than income tax deductions (going back to the OR/WA example, despite bringing in more total revenue per head in Washington, a smaller proportion of Washington residents are able to itemize on their federal returns).

But you're right, adding in revenue raised by sales taxes does make the correlation a bit stronger.

(https://i.imgpile.com/nJdOWr.png) (https://imgpile.com/i/nJdOWr)

(Now we're up to a R^2 of 0.355 with every state by Delaware, and a still marginally statistically significant R^2 of 0.154 if we exclude the five high tax states from my first post.)

Source for sales tax data: https://taxfoundation.org/state-sales-tax-collections-per-capita-2017/
Title: Re: Republican Tax Plan 2017
Post by: Viking Thor on November 11, 2017, 06:56:24 PM
If we are talking about which states pay more in Federal Taxes, I don't see the point in altering the data to show a chart that doesn't actually say what they pay in Federal Taxes.

I said the high local tax states pay more in Federal taxes, this is clearly proven in the chart you linked to that shows the unaltered federal taxes paid.
Title: Re: Republican Tax Plan 2017
Post by: maizeman on November 11, 2017, 07:01:37 PM
Alright, if you're no longer trying to say that high tax states have thriving economies then I guess we're no longer in disagreement.
Title: Re: Republican Tax Plan 2017
Post by: Viking Thor on November 11, 2017, 07:24:00 PM
I think many of them do have thriving economies and high taxes, I'm not saying that high taxes is the reason their economies are doing well.

e.g In NYC area and SF Area taxes are super high as are wages/costs, they are connected because the Govt has to hire teachers, police, fire, etc and have to pay more for this than they would in a lower cost area.

Title: Re: Republican Tax Plan 2017
Post by: maizeman on November 11, 2017, 07:31:13 PM
Yup, and that's exactly the effect I'm trying to control for: It costs more tax dollars to provide the same services in SF or NYC than in the Twin Cities or Denver.
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 11, 2017, 07:46:22 PM
Alright, if you're no longer trying to say that high tax states have thriving economies then I guess we're no longer in disagreement.

I won't speak for Viking Thor (who would dare!), but what matters for any meaningful underlying question, I think, is whether the high state/local tax jurisdictions already pay relatively greater amounts into the federal income tax pool (the non-specific "lion's share" in Viking Thor's post). I think you've done a nice job demonstrating that they pay more, but I don't know what we'd call "the lion's share."

You've misapplied correlation analysis, though, as if the (meaningful) claim were that higher state and local taxes correlate with higher federal tax contributions, which adds in the noise of states where the residents do not pay high federal taxes in the first place. If the "high tax" states have indeed paid "the lion's share" of the federal income taxes, than that's the end of the question and the r^2 value of the analysis you did (with a mixed bag of correlations among low-tax states and states that don't contribute greater than average federal tax revenues) is totally irrelevant to the claim.

Also, given that most Americans pay quite modest income taxes, and that in any state it's likely that people who itemize are (very) disproportionately represented among the people who pay more than the mean federal income taxes, whether sales taxes are a major factor in having itemized deductions above the standard deduction seems like somewhat of a red herring. I'm presuming these issues are about this "lion's share" of the taxes, and the people who actually pay above the mean federal income taxes, with relatively rare exception, are going to be people who itemize---even in WA state, more than 4/5ths of households with incomes above $100k itemize). 
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 11, 2017, 07:53:16 PM
Yup, and that's exactly the effect I'm trying to control for: It costs more tax dollars to provide the same services in SF or NYC than in the Twin Cities or Denver.

Why is this relevant?

Your data shows (roughly) that high-tax states’ residents pay high federal taxes, as is, with the SALT deductions. Whether they do it with thriving economies or not doesn't even seem relevant .

Also, in some sense, within a country with one currency and freedom to relocate, in the longish term I think it would be relatively accurate to say that cost of living is a decent proxy for the strength of the economy, although nice weather certainly has an effect, too!
Title: Re: Republican Tax Plan 2017
Post by: maizeman on November 11, 2017, 08:01:12 PM
Yup, and that's exactly the effect I'm trying to control for: It costs more tax dollars to provide the same services in SF or NYC than in the Twin Cities or Denver.

Why is this relevant?

Your data shows (roughly) that high-tax states high federal taxes, as is, with the SALT deductions. Whether they do it with thriving economies or not doesn't even seem relevant .

Also, in some sense, within a country with one currency and freedom to relocate, in the longish term I think it would be relatively accurate to say that cost of living is a decent proxy for the strength of the economy, although nice weather certainly has an effect, too!

Alright, if you're no longer trying to say that high tax states have thriving economies then I guess we're no longer in disagreement.

I won't speak for Viking Thor (who would dare!), but what matters for any meaningful underlying question, I think, is whether the high state/local tax jurisdictions already pay relatively greater amounts into the federal income tax pool (the non-specific "lion's share" in Viking Thor's post). I think you've done a nice job demonstrating that they pay more, but I don't know what we'd call "the lion's share."

You've misapplied correlation analysis, though, as if the (meaningful) claim were that higher state and local taxes correlate with higher federal tax contributions, which adds in the noise of states where the residents do not pay high federal taxes in the first place. If the "high tax" states have indeed paid "the lion's share" of the federal income taxes, than that's the end of the question and the r^2 value of the analysis you did (with a mixed bag of correlations among low-tax states and states that don't contribute greater than average federal tax revenues) is totally irrelevant to the claim.

I think you are fundamentally misunderstanding which statement by Viking Thor I was originally disagreeing with.
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 11, 2017, 08:22:42 PM
Yup, and that's exactly the effect I'm trying to control for: It costs more tax dollars to provide the same services in SF or NYC than in the Twin Cities or Denver.

Why is this relevant?

Your data shows (roughly) that high-tax states high federal taxes, as is, with the SALT deductions. Whether they do it with thriving economies or not doesn't even seem relevant .

Also, in some sense, within a country with one currency and freedom to relocate, in the longish term I think it would be relatively accurate to say that cost of living is a decent proxy for the strength of the economy, although nice weather certainly has an effect, too!

Alright, if you're no longer trying to say that high tax states have thriving economies then I guess we're no longer in disagreement.

I won't speak for Viking Thor (who would dare!), but what matters for any meaningful underlying question, I think, is whether the high state/local tax jurisdictions already pay relatively greater amounts into the federal income tax pool (the non-specific "lion's share" in Viking Thor's post). I think you've done a nice job demonstrating that they pay more, but I don't know what we'd call "the lion's share."

You've misapplied correlation analysis, though, as if the (meaningful) claim were that higher state and local taxes correlate with higher federal tax contributions, which adds in the noise of states where the residents do not pay high federal taxes in the first place. If the "high tax" states have indeed paid "the lion's share" of the federal income taxes, than that's the end of the question and the r^2 value of the analysis you did (with a mixed bag of correlations among low-tax states and states that don't contribute greater than average federal tax revenues) is totally irrelevant to the claim.

I think you are fundamentally misunderstanding which statement by Viking Thor I was originally disagreeing with.

Sorry if I misunderstood, but the focus of your long post (reply 360) was clearly about the relationship between high state taxes and contributions to federal taxes, with only an unspoken, tangential relationship to the “thriving economy” point. There seem to be far more straightforward ways to address which states have thriving economies (regardless of what that means) than COLA-adjusting their contributions to federal income tax revenue.
Title: Re: Republican Tax Plan 2017
Post by: maizeman on November 11, 2017, 08:49:23 PM
Okay, let me try this one more time.

I read the part of Viking Thor's post that I quoted in #360 as an argument that there was, in fact, a causal relationship between states choosing to apply higher taxes to themselves, and improved economies that allowed them to pay more back to the federal government. I've run into people who do argue this point (essentially that higher tax states spend more on education and economic development and hence over time end up with much larger economies), so it didn't seem implausible that someone would hold such a view. I didn't think there was likely to actually be a big effect on economic health from state level taxes, and reading that post pushed me to do some comparisons that were not consistent with a link between how much tax a state choses to impose on itself and the contributions it makes back to the federal budget.

As far as I can tell, you're not interested in defending the model I'm arguing against, so I'm not actually sure what view it is that you think I hold and that you disagree with.
Title: Re: Republican Tax Plan 2017
Post by: sol on November 11, 2017, 08:58:19 PM
I'm not actually sure what view it is that you think I hold and that you disagree with.

You're a stranger on the internet, and therefore you must be wrong.  I'm not sure what you're wrong about, but I'm absolutely certain that you're wrong.

Next I will compare you to Hitler.
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 11, 2017, 09:22:10 PM
Okay, let me try this one more time.

I read the part of Viking Thor's post that I quoted in #360 as an argument that there was, in fact, a causal relationship between states choosing to apply higher taxes to themselves, and improved economies that allowed them to pay more back to the federal government. I've run into people who do argue this point (essentially that higher tax states spend more on education and economic development and hence over time end up with much larger economies), so it didn't seem implausible that someone would hold such a view. I didn't think there was likely to actually be a big effect on economic health from state level taxes, and reading that post pushed me to do some comparisons that were not consistent with a link between how much tax a state choses to impose on itself and the contributions it makes back to the federal budget.

As far as I can tell, you're not interested in defending the model I'm arguing against, so I'm not actually sure what view it is that you think I hold and that you disagree with.

I took Viking Thor’s post somewhat differently (as making the simpler claim that high-tax states already pay the lion’s share of federal taxes, notwithstanding SALT deductions), and then took your post as disputing that. Sorry for the misunderstanding (er, I mean, you’re just like Hitler ...).
Title: Re: Republican Tax Plan 2017
Post by: Psychstache on November 12, 2017, 06:46:16 AM
I'm not actually sure what view it is that you think I hold and that you disagree with.

You're a stranger on the internet, and therefore you must be wrong.  I'm not sure what you're wrong about, but I'm absolutely certain that you're wrong.

Next I will compare you to Hitler.
What a succinct summary of every comments page ever.

Sent from my Pixel using Tapatalk

Title: Re: Republican Tax Plan 2017
Post by: OurTown on November 13, 2017, 01:10:02 PM
401(k) tax treatment is not totally out of the woods yet.  It looks like Sen. Hatch offered an amendment to Rothify the over-50 catch up contributions.

People over 50 would no longer be able to make excess contributions to workplace retirement plans from their pretax earnings under an amendment that was filed by Senate Finance Chairman Orrin Hatch ahead of the tax markup Monday.

The amendment would raise the “catch up” contributions to retirement savings plans under section 401(k), 403(b) and 457(b) to $9,000, but require that they be Roth only. Currently, almost all employers offering 401(k) plans allow eligible workers age 50 and over to make additional contributions, which are capped $6,000 for 2017, on top of the standard $18,000 limit. 
Title: Re: Republican Tax Plan 2017
Post by: JLee on November 13, 2017, 07:38:30 PM
I'm all for simplifying the tax code, limiting itemized deductions and lowering corporate taxes (assuming corporate loopholes were also limited but the senate plan of territorial system is ludicrous.)   But repealing the estate tax, taxing PHD students (looks like senate will repeal this) and lowering taxes for the top .1% shouldn't be part of the plan.  In fact, I think there should be some sort of Buffet rule where the highest earners should pay a certain %.

Raising taxes on the upper-middle class Americans and decreasing taxes on the richest Americans to increase our national debt isn't counterproductive.

In addition, some sort of spending reduction should be in place.  Start off with the military.

I am in almost complete agreement with your statements.

And those complaining about paying $18k in property taxes in their state and not being able to deduct that...I'd be complaining about the high tax in that state and trying to move away from that state or try to influence your state to reduce taxes rather than keeping another complicated deduction in federal income tax laws.

We already are.

http://www.app.com/story/news/local/people/2017/01/04/more-people-left-new-jersey-2016-than-any-other-state/96156296/

Deducting tax is now complicated? I don't think you should have to use taxed dollars to pay taxes...but what do I know.
Title: Re: Republican Tax Plan 2017
Post by: maizeman on November 13, 2017, 08:09:14 PM
Deducting tax is now complicated? I don't think you should have to use taxed dollars to pay taxes...but what do I know.

Wouldn't this mean that one couldn't impose both a sales tax and an income tax? Or an income tax and an estate tax? Or a corporate income tax and a tax on dividends?
Title: Re: Republican Tax Plan 2017
Post by: sol on November 13, 2017, 08:24:01 PM
Deducting tax is now complicated? I don't think you should have to use taxed dollars to pay taxes...but what do I know.

Wouldn't this mean that one couldn't impose both a sales tax and an income tax? Or an income tax and an estate tax? Or a corporate income tax and a tax on dividends?

The key distinction here is that we don't usually tax money, we tax transactions.  All money has been taxed before.  But the government normally only taxes money when it moves or changes hands (property taxes being the obvious exception, and the least philosophically defensible form of taxation that we still use that I can think of).  We tax income because the employer is transferring money to the employee.  We tax sales because the individual is transferring money to a business.  Government facilitates and protects these transactions, so it takes a cut of the transaction.

But why does it make sense to charge someone money just to OWN something.  Not to use it, or sell it, or give it away or invest it or anything.  Property taxes are basically rent you have to pay to the government because government owns everything and you own nothing.  It makes the whole concept of "ownership" into a joke.  We should all admit that a property deed is just a fancy lease.
Title: Re: Republican Tax Plan 2017
Post by: sol on November 13, 2017, 08:34:11 PM
What is the standard deduction all about, anyway? Wouldn’t it be just as logical to say that everyone may only itemise? Why are deductions and the personal exemptions phased out at higher incomes?

I think the idea behind the standard deduction is that we all need some amount of money just to survive, and taxes shouldn't prevent you from surviving.  So we exempt the first chunk of income, up to the minimum that we think is necessary for survival.

We use the standard deduction instead of making everyone itemize because not everyone has anything to itemize, and those people still need to have some income exempted so that they can survive.

Deductions and exemptions are phased out at higher incomes as a sneaky way of raising the marginal rate on that upper income.  Those people have more than enough to survive, so we tax their surplus at a higher rate in order to allow all the poor people to not have to pay taxes on the income they need to survive.
Title: Re: Republican Tax Plan 2017
Post by: freya on November 13, 2017, 08:39:00 PM
And those complaining about paying $18k in property taxes in their state and not being able to deduct that...I'd be complaining about the high tax in that state and trying to move away from that state or try to influence your state to reduce taxes rather than keeping another complicated deduction in federal income tax laws.

We already are.

http://www.app.com/story/news/local/people/2017/01/04/more-people-left-new-jersey-2016-than-any-other-state/96156296/

Deducting tax is now complicated? I don't think you should have to use taxed dollars to pay taxes...but what do I know.

Even without the loss of the SALT deduction, the highest-tax states are eventually going to have reduce their tangled bureaucracies and lower their entitlement spending to stay solvent.  New York is suffering from loss of mid to high income residents as well.  The state just put through a small (1%) tax cut for the middle income bracket, because of this very issue. 

One more cut like that will balance out the federal tax increase I'd get hit with if the GOP tax bill passes in its current form.




Title: Re: Republican Tax Plan 2017
Post by: maizeman on November 13, 2017, 08:40:25 PM
Deducting tax is now complicated? I don't think you should have to use taxed dollars to pay taxes...but what do I know.

Wouldn't this mean that one couldn't impose both a sales tax and an income tax? Or an income tax and an estate tax? Or a corporate income tax and a tax on dividends?

What is the standard deduction all about, anyway? Wouldn’t it be just as logical to say that everyone may only itemise? Why are deductions and the personal exemptions phased out at higher incomes?

It’s all arbitrary. There’s no cohesive philosophy to it.

In order: I'm not sure, but I've always assumed the argument was making life simpler for IRS audits because more people's tax returns will be easier to verify. Absolutely just as logical, although it'd also be just as logical to just say no one can itemize and we'd get rid of the whole argument over what is and isn't deductible once and for all. Because our congressional reps are so afraid to raise tax RATES that they resort to weird tricks to raise total taxes paid, even if it creates an incredibly messy tax code and means that the actual marginal tax rates sometimes go down instead of up as people make more money.

@sol I do wonder if views about property taxes would be different if more people owned their homes free and clear without a mortgage. With a mortgage you have to write a check every month or lose your house anyway so it's harder to get too upset about the government also taking a piece of that check. Without a mortgage the inability to really own real estate probably becomes more clear.
Title: Re: Republican Tax Plan 2017
Post by: JLee on November 13, 2017, 08:56:17 PM
Deducting tax is now complicated? I don't think you should have to use taxed dollars to pay taxes...but what do I know.

Wouldn't this mean that one couldn't impose both a sales tax and an income tax? Or an income tax and an estate tax? Or a corporate income tax and a tax on dividends?

What is the standard deduction all about, anyway? Wouldn’t it be just as logical to say that everyone may only itemise? Why are deductions and the personal exemptions phased out at higher incomes?

It’s all arbitrary. There’s no cohesive philosophy to it.

In order: I'm not sure, but I've always assumed the argument was making life simpler for IRS audits because more people's tax returns will be easier to verify. Absolutely just as logical, although it'd also be just as logical to just say no one can itemize and we'd get rid of the whole argument over what is and isn't deductible once and for all. Because our congressional reps are so afraid to raise tax RATES that they resort to weird tricks to raise total taxes paid, even if it creates an incredibly messy tax code and means that the actual marginal tax rates sometimes go down instead of up as people make more money.

@sol I do wonder if views about property taxes would be different if more people owned their homes free and clear without a mortgage. With a mortgage you have to write a check every month or lose your house anyway so it's harder to get too upset about the government also taking a piece of that check. Without a mortgage the inability to really own real estate probably becomes more clear.

The average property tax bill in New Jersey is 9% of income (http://www.app.com/story/news/investigations/data/2017/08/03/new-jersey-property-tax-percent-income/528684001/).  I think people notice that whether they're already writing a check or not...
Title: Re: Republican Tax Plan 2017
Post by: maizeman on November 13, 2017, 09:33:33 PM
That is indeed strikingly high.

It's not quite as bad as it sounds since that website is comparing average residential property taxes to median income. This introduces two sources of bias:
1) Things like household incomes and property values have a long right tail in their distributions, so averages will be significantly higher than medians. Comparing either median income to median property tax or average income to average property tax is going to be a fairer comparison and make the numbers look a little less frightening.
2) About 60% of NJ residents own their homes. Renters tend to be poorer than home owners, so the ratio of the median residential property tax rate to the median income of households that own a home would be less frightening than when renters are included on the income side.

To be clear, I've no doubt that NJ property taxes really are ridiculously high, I'm just pointing out a couple of reasons why they're not quite as bad as some people might think from the numbers in that link.
Title: Re: Republican Tax Plan 2017
Post by: JLee on November 13, 2017, 09:38:02 PM
That is indeed strikingly high.

It's not quite as bad as it sounds since that website is comparing average residential property taxes to median income. This introduces two sources of bias:
1) Things like household incomes and property values have a long right tail in their distributions, so averages will be significantly higher than medians. Comparing either median income to median property tax or average income to average property tax is going to be a fairer comparison and make the numbers look a little less frightening.
2) About 60% of NJ residents own their homes. Renters tend to be poorer than home owners, so the ratio of the median residential property tax rate to the median income of households that own a home would be less frightening than when renters are included on the income side.

To be clear, I've no doubt that NJ property taxes really are ridiculously high, I'm just pointing out a couple of reasons why they're not quite as bad as some people might think from the numbers in that link.

In my county:

Median Annual Property Tax Payment: $9,373
Median Household Income: $81,708
Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 14, 2017, 06:04:30 AM
That is indeed strikingly high.

It's not quite as bad as it sounds since that website is comparing average residential property taxes to median income. This introduces two sources of bias:
1) Things like household incomes and property values have a long right tail in their distributions, so averages will be significantly higher than medians. Comparing either median income to median property tax or average income to average property tax is going to be a fairer comparison and make the numbers look a little less frightening.
2) About 60% of NJ residents own their homes. Renters tend to be poorer than home owners, so the ratio of the median residential property tax rate to the median income of households that own a home would be less frightening than when renters are included on the income side.

To be clear, I've no doubt that NJ property taxes really are ridiculously high, I'm just pointing out a couple of reasons why they're not quite as bad as some people might think from the numbers in that link.
There's a likely third source of bias, which is taking property tax bills and dividing them by income, without regard to the fact that there are many multi-family and apartment buildings where one bill represents many doors. If the "study" doesn't mention that they controlled for that, I'd assume they didn't.
Title: Re: Republican Tax Plan 2017
Post by: maizeman on November 14, 2017, 06:06:32 AM
Yikes I didn't even think of that, good point sokoloff!
Title: Re: Republican Tax Plan 2017
Post by: DarkandStormy on November 14, 2017, 07:33:18 AM
http://www.washingtonexaminer.com/steven-mnuchin-shifts-says-its-very-hard-not-to-cut-taxes-for-wealthy/article/2637899

Quote
Steven Mnuchin shifts, says it's 'very hard' not to cut taxes for wealthy

Whoops!

http://www.cnn.com/2017/11/10/politics/mcconnell-new-york-times-tax-plan/index.html

Quote
Senate Majority Leader Mitch McConnell said Friday that he "misspoke" when he had previously said nobody in the middle class would get a tax increase under the new GOP plan, according to The New York Times.
Title: Re: Republican Tax Plan 2017
Post by: maizeman on November 14, 2017, 07:39:50 AM
It's not hard at all. You just have to add a tax bracket that is higher than current brackets. It can start at extremely high levels if you like. After all the current plan already has a tax rate that doesn't kick in until you hit a million dollars.

12%, 25%, 35% and 45% brackets would do the trick just fine.
Title: Re: Republican Tax Plan 2017
Post by: OurTown on November 14, 2017, 07:43:04 AM
On the property tax issue, the federal government cannot levy a property tax on real property, only the states can.  That is because the state (not the U.S.) is the allodial owner of all real property within its borders.  This system goes all the way back to William the Conqueror in 1066.  In a very real sense, if you own real property in fee simple absolute you are, in fact, merely holding that property as a tenant on behalf of the state.  Your property tax paid to the state, or its municipal subsidiaries, is in some sense a form of rent that you and your heirs will pay in perpetuity.  This is also why the state has the right of eminent domain to condemn your property and put a highway through your front yard.
Title: Re: Republican Tax Plan 2017
Post by: dandarc on November 14, 2017, 07:46:56 AM
This is also why the state has the right of eminent domain to condemn your property and put a highway through your front yard.
Anything that cuts down the amount of yard to mow is OK by me.
Title: Re: Republican Tax Plan 2017
Post by: CCCA on November 14, 2017, 11:19:22 AM
This seems like a biggie in the Senate's version of the tax plan:
https://www.wsj.com/articles/americas-fund-companies-argue-proposed-tax-change-will-cost-investors-1510679698


According to this article, they want to change the rules about which lots you are allowed to sell if you have multiple tax lots.  They want to use the FIFO - first in and first out rule so you'd always have to sell the oldest first even if you could sell a newer one for a tax loss.  Generally it sucks because it prevents you from minimizing your taxes.


Understandably the fund companies are opposed to this because it hurts the average investors.
Title: Re: Republican Tax Plan 2017
Post by: clutchy on November 14, 2017, 11:38:37 AM
I don't know if people have noticed but AMT is getting repealed as well. 

You really have to be making some pretty decent cash to get hit with AMT. 


Really when we're talking about these cuts there a few bread crumbs for the peasants but the upper middle class is going to get majorly effed. 

The wealthy and uber wealthy will dance their way to trickle down. 

Title: Re: Republican Tax Plan 2017
Post by: BFGirl on November 14, 2017, 12:41:56 PM
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?

http://www.napa-net.org/news/technical-competence/legislation/could-tax-reform-destroy-deferred-compensation/

The 457(b) goes away.


SAD!

Well that sucks.   I was about to participate in this for the first time, so this will definitely screw me on my tax planning.
Title: Re: Republican Tax Plan 2017
Post by: mm1970 on November 14, 2017, 01:21:52 PM
I don't know if people have noticed but AMT is getting repealed as well. 

You really have to be making some pretty decent cash to get hit with AMT. 


Really when we're talking about these cuts there a few bread crumbs for the peasants but the upper middle class is going to get majorly effed. 

The wealthy and uber wealthy will dance their way to trickle down.

Married filing jointly, AMT starts at around $84,000, and the higher tax rate at around $150k.  I'm not sure how you define "decent cash" though for a 2-income couple.  I know when I was discussing the AMT with one of our directors (single income family) he said "be careful about your stock, if you don't exercise correctly you'll get hit with AMT."  And I said "dude, we have paid the AMT every year for a long long time."

But as he's never been a 2-income couple - even though he has a high income - he didn't realize that it takes effect so early (esp. in a high tax state like CA).

So, I haven't run the numbers, but I'm guessing with the tax increase + AMT, it's gonna be a bit of a wash for us.  Most likely we'll be paying more because we live in CA.
Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 14, 2017, 01:55:39 PM
This seems like a biggie in the Senate's version of the tax plan:
https://www.wsj.com/articles/americas-fund-companies-argue-proposed-tax-change-will-cost-investors-1510679698

According to this article, they want to change the rules about which lots you are allowed to sell if you have multiple tax lots.  They want to use the FIFO - first in and first out rule so you'd always have to sell the oldest first even if you could sell a newer one for a tax loss.  Generally it sucks because it prevents you from minimizing your taxes.

Understandably the fund companies are opposed to this because it hurts the average investors.
This is ridiculous, but I suspect it just means that investors in taxable accounts will just need to manage multiple accounts to substantially get around the issue, as presumably lot selection will not cross accounts. Lots of paperwork and aggravation to get an effect similar to today with no practical advantage to the government.
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 14, 2017, 02:14:46 PM
Here we go again..... (repeal of ACA individual mandate)

https://www.msn.com/en-us/news/politics/mcconnell-senate-tax-bill-will-include-repeal-of-obamacare-mandate/ar-BBEY1Tn?li=AA5a8k&ocid=spartanntp

I'm guessing this would take a form similar to what was attempted earlier this year (no penalty for no insurance, but a delay for adding coverage).  Technically, under reconciliation, I don't thing they can eliminate the mandate but they can reduce the fines to zero.  Is that correct?
Title: Re: Republican Tax Plan 2017
Post by: secondcor521 on November 14, 2017, 02:33:14 PM
I'm guessing this would take a form similar to what was attempted earlier this year (no penalty for no insurance, but a delay for adding coverage).  Technically, under reconciliation, I don't thing they can eliminate the mandate but they can reduce the fines to zero.  Is that correct?

I'm no expert, but I think that under the Senate rules, to use reconciliation, the bill has to be budget related.  I think it would be fairly easy to argue that eliminating the mandate is budget related, since it would save $338M (I think that was the number I saw) over 10 years.  So I think they could eliminate the mandate as a matter of Senate rules.

However, I do think that eliminating the mandate makes it politically more difficult to get a tax bill passed quickly.  I think that is why the suggestion hasn't gained much steam yet from what I have heard.
Title: Re: Republican Tax Plan 2017
Post by: clutchy on November 14, 2017, 02:49:08 PM
I don't know if people have noticed but AMT is getting repealed as well. 

You really have to be making some pretty decent cash to get hit with AMT. 


Really when we're talking about these cuts there a few bread crumbs for the peasants but the upper middle class is going to get majorly effed. 

The wealthy and uber wealthy will dance their way to trickle down.

Married filing jointly, AMT starts at around $84,000, and the higher tax rate at around $150k.  I'm not sure how you define "decent cash" though for a 2-income couple.  I know when I was discussing the AMT with one of our directors (single income family) he said "be careful about your stock, if you don't exercise correctly you'll get hit with AMT."  And I said "dude, we have paid the AMT every year for a long long time."

But as he's never been a 2-income couple - even though he has a high income - he didn't realize that it takes effect so early (esp. in a high tax state like CA).

So, I haven't run the numbers, but I'm guessing with the tax increase + AMT, it's gonna be a bit of a wash for us.  Most likely we'll be paying more because we live in CA.

Interesting.  We're above that threshold and have never paid AMT.  The complexities of tax...
Title: Re: Republican Tax Plan 2017
Post by: ZiziPB on November 14, 2017, 02:54:46 PM
Seems like Republicans are shooting themselves in the foot with the ACA mandate repeal.  I think it's going to make it extremely difficult to pass the tax bill with that included.  Not that I'm upset about it.  Better the devil you know...
Title: Re: Republican Tax Plan 2017
Post by: Ocinfo on November 14, 2017, 02:57:26 PM
This seems like a biggie in the Senate's version of the tax plan:
https://www.wsj.com/articles/americas-fund-companies-argue-proposed-tax-change-will-cost-investors-1510679698

According to this article, they want to change the rules about which lots you are allowed to sell if you have multiple tax lots.  They want to use the FIFO - first in and first out rule so you'd always have to sell the oldest first even if you could sell a newer one for a tax loss.  Generally it sucks because it prevents you from minimizing your taxes.

Understandably the fund companies are opposed to this because it hurts the average investors.
This is ridiculous, but I suspect it just means that investors in taxable accounts will just need to manage multiple accounts to substantially get around the issue, as presumably lot selection will not cross accounts. Lots of paperwork and aggravation to get an effect similar to today with no practical advantage to the government.

It’s just part of how they are gaming the system by trying to shift as much tax revenue into the 10 year planning horizon. Those with enough money/time to structure in new complicated ways will be fine but most will be slightly worse off. I keep seeing things that likely make the tax code more complicated (e.g., the 25% pass through rate that’ll be a boon for lawyers and accountants).


Sent from my iPhone using Tapatalk
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 14, 2017, 03:00:51 PM
I'm guessing this would take a form similar to what was attempted earlier this year (no penalty for no insurance, but a delay for adding coverage).  Technically, under reconciliation, I don't thing they can eliminate the mandate but they can reduce the fines to zero.  Is that correct?

I'm no expert, but I think that under the Senate rules, to use reconciliation, the bill has to be budget related.  I think it would be fairly easy to argue that eliminating the mandate is budget related, since it would save $338M (I think that was the number I saw) over 10 years.  So I think they could eliminate the mandate as a matter of Senate rules.

However, I do think that eliminating the mandate makes it politically more difficult to get a tax bill passed quickly.  I think that is why the suggestion hasn't gained much steam yet from what I have heard.

Based upon the link, it has not only gained steam but appears to be "full steam ahead!"  If/when this winds up in the final approved Senate bill, having the repeal in there will make it even more difficult for house members to vote against it.  This may be part of the play at this point.
Title: Re: Republican Tax Plan 2017
Post by: sol on November 14, 2017, 06:39:30 PM
Married filing jointly, AMT starts at around $84,000, and the higher tax rate at around $150k.

We make more than that and have never even come close to paying the AMT.  Did you mean $150k after mortgage interest and property taxes and state and local taxes and personal and dependent exemptions and HSA contributions and FSA contributions and charitable giving and maxing out 401k and 457b accounts?  Yea, if you're banking $150k in take-home pay after all of that, you probably need to be paying AMT because you're making approximately double that much. 
Title: Re: Republican Tax Plan 2017
Post by: mm1970 on November 14, 2017, 08:06:46 PM
Married filing jointly, AMT starts at around $84,000, and the higher tax rate at around $150k.

We make more than that and have never even come close to paying the AMT.  Did you mean $150k after mortgage interest and property taxes and state and local taxes and personal and dependent exemptions and HSA contributions and FSA contributions and charitable giving and maxing out 401k and 457b accounts?  Yea, if you're banking $150k in take-home pay after all of that, you probably need to be paying AMT because you're making approximately double that much.
I mean probably more like $84k after all of those deductions (that's the 26% tax rate), but then many of those deductions stop counting.  I believe (thanks google) that the 28% AMT rate hits at around $150k, after all of those deductions.

So, if you've got two 40-something engineers (even though my own pay is crap), and you live in CA with a very high mortgage interest and high state tax, it doesn't really matter because many of those deductions don't count.  Turbo tax does all that math for you - put in the deductions for state tax, mortgage interest, childcare, charitable donations, etc. and then...you click the "check AMT" box and it says "just kidding!  You really owe this amount."  So yes, I have mortgage deductions and state tax deductions and even childcare deductions, but I'm pretty sure I shouldn't even bother with the FSA, because I do the paperwork but we end up paying it back anyway.

State tax deductions, for example, are not allowed per AMT.  We are taxed at 9.3%.  That's a big chunk.

https://en.wikipedia.org/wiki/Alternative_minimum_tax

My coworker said "I never click that box", so I guess maybe there's an out??
Title: Re: Republican Tax Plan 2017
Post by: MDM on November 14, 2017, 09:01:00 PM
My coworker said "I never click that box", so I guess maybe there's an out??
Uh, no.

Or, perhaps your coworker is secretly hoping for the ultimate retirement plan: all food, clothing, and shelter paid for by the government.  The interior decor is a bit spartan, though, unless one likes iron bars.

More to the point, there are so many moving parts to the AMT that making generic "if you make X you will (or won't) have to pay AMT" statements is a fool's errand.
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 14, 2017, 09:13:37 PM
I don't know if people have noticed but AMT is getting repealed as well. 

You really have to be making some pretty decent cash to get hit with AMT. 


Really when we're talking about these cuts there a few bread crumbs for the peasants but the upper middle class is going to get majorly effed. 

The wealthy and uber wealthy will dance their way to trickle down.

Married filing jointly, AMT starts at around $84,000, and the higher tax rate at around $150k.  I'm not sure how you define "decent cash" though for a 2-income couple.  I know when I was discussing the AMT with one of our directors (single income family) he said "be careful about your stock, if you don't exercise correctly you'll get hit with AMT."  And I said "dude, we have paid the AMT every year for a long long time."

But as he's never been a 2-income couple - even though he has a high income - he didn't realize that it takes effect so early (esp. in a high tax state like CA).

So, I haven't run the numbers, but I'm guessing with the tax increase + AMT, it's gonna be a bit of a wash for us.  Most likely we'll be paying more because we live in CA.

Interesting.  We're above that threshold and have never paid AMT.  The complexities of tax...

Well, I don't know if it's complex---it just means that you paid more than would have been due under the AMT.
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 14, 2017, 09:31:37 PM
Married filing jointly, AMT starts at around $84,000, and the higher tax rate at around $150k.

Did you mean $150k after mortgage interest and property taxes and state and local taxes and personal and dependent exemptions and HSA contributions and FSA contributions and charitable giving and maxing out 401k and 457b accounts? 

It is all such a hodge podge. I'm just looking at your list above, thinking "allowed under AMT, disallowed, disallowed, may be phased out, comes off the top, comes off the top, allowed under AMT, and comes off the top," and thinking the hacked-together nature of it is all so silly. I paid AMT in plenty of years where I had no itemized deductions other than state income taxes and charitable contributions (which are "allowed" for the AMT anyway, so it was really attributable to the state taxes). I think up to 10% of my federal income tax bill has come from the AMT addition in some years; this year it will be about 0.7%, so maybe I'm getting to the end of my AMT years regardless of whether it's killed off.
Title: Re: Republican Tax Plan 2017
Post by: dragoncar on November 15, 2017, 12:25:38 AM
Married filing jointly, AMT starts at around $84,000, and the higher tax rate at around $150k.

We make more than that and have never even come close to paying the AMT.  Did you mean $150k after mortgage interest and property taxes and state and local taxes and personal and dependent exemptions and HSA contributions and FSA contributions and charitable giving and maxing out 401k and 457b accounts?  Yea, if you're banking $150k in take-home pay after all of that, you probably need to be paying AMT because you're making approximately double that much.

AMT is a sort of phase-in, so "starting" around $84k doesn't mean that much unless you have a LOT of deductions
Title: Re: Republican Tax Plan 2017
Post by: mm1970 on November 15, 2017, 08:20:52 AM
My coworker said "I never click that box", so I guess maybe there's an out??
Uh, no.

Or, perhaps your coworker is secretly hoping for the ultimate retirement plan: all food, clothing, and shelter paid for by the government.  The interior decor is a bit spartan, though, unless one likes iron bars.

More to the point, there are so many moving parts to the AMT that making generic "if you make X you will (or won't) have to pay AMT" statements is a fool's errand.
I was joking.  I think it's interesting that you have to actively "check" a box to calculation if you should pay the AMT.

It's good that Turbo tax does it for you because there are so many rules as to what's allowed and what's not allowed as a deduction under the AMT.

We don't pay "much" I don't think.  A couple of thousand extra.
Title: Re: Republican Tax Plan 2017
Post by: SpareChange on November 15, 2017, 08:26:56 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?

http://www.napa-net.org/news/technical-competence/legislation/could-tax-reform-destroy-deferred-compensation/

The 457(b) goes away.


SAD!

Well that sucks.   I was about to participate in this for the first time, so this will definitely screw me on my tax planning.

Same. This Friday's check will be the first deduction lol. 
Title: Re: Republican Tax Plan 2017
Post by: Wilson Hall on November 15, 2017, 08:44:13 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?

http://www.napa-net.org/news/technical-competence/legislation/could-tax-reform-destroy-deferred-compensation/

The 457(b) goes away.


SAD!

Well that sucks.   I was about to participate in this for the first time, so this will definitely screw me on my tax planning.

Same. This Friday's check will be the first deduction lol.

Okay, I am confused. First I read that the 457 will be treated like a 401k or 403b, meaning that any withdrawals before age 59.5 will be subjected to a 10% penalty in addition to taxes. Now I'm seeing that the 457 may be done away with altogether after 2017. Which is it?

I have a small (<$10k) 457(b) from my previous employer. Should I cash it out before the end of the year, just in case?
Title: Re: Republican Tax Plan 2017
Post by: DarkandStormy on November 15, 2017, 09:18:31 AM
https://twitter.com/TopherSpiro/status/930522616980484097

Quote
Tax bill will repeal the individual mandate:
- 13 million more uninsured
- $1,990 premium tax
- Insurer exodus from markets
ALL TO PAY FOR TAX CUTS FOR CORPORATIONS AND MILLIONAIRES
Title: Re: Republican Tax Plan 2017
Post by: boarder42 on November 15, 2017, 10:42:18 AM
https://twitter.com/TopherSpiro/status/930522616980484097

Quote
Tax bill will repeal the individual mandate:
- 13 million more uninsured
- $1,990 premium tax
- Insurer exodus from markets
ALL TO PAY FOR TAX CUTS FOR CORPORATIONS AND MILLIONAIRES

i dont get the constant quote about how many will be uninsured. of course there will be more uninsured b/c people will choose no insurance.  why is the number of people covered even part of this conversation.
Title: Re: Republican Tax Plan 2017
Post by: Saving4Fire on November 15, 2017, 10:57:42 AM
Tuesday night the Senate GOP quietly added language to sunset individual tax cuts, but keep the corp tax cuts permanent:

Quote
Senate Republicans released a massive heap of changes to their tax bill Tuesday night, including tweaks to proposed individual tax cuts and to the way startup employees get paid.

Sen. Orrin Hatch, the Republican chair of the Senate Finance Committee, released a new version of the legislation that, significantly, would sunset individual tax cuts after 2025. That means the proposed tax cuts for Americans would end in 2026, after which the tax brackets would revert to today's levels absent new legislation from Congress.

Other changes to the individual side of taxes, like the repeal of the alternative minimum tax and the increased standard deduction, would also expire after 2025.

While the individual changes would be temporary, cuts to the corporate tax rate would be permanent in the bill. Hatch said in a statement accompanying the updated bill that the bill aimed to provide certainty for American businesses.

Full Story (http://www.businessinsider.com/trump-gop-tax-plan-senate-bill-individual-rate-cut-2017-11)


Details in the link.  As noted earlier, they'd also repeal the individual mandate.
Title: Re: Republican Tax Plan 2017
Post by: sherr on November 15, 2017, 11:18:33 AM
https://twitter.com/TopherSpiro/status/930522616980484097

Quote
Tax bill will repeal the individual mandate:
- 13 million more uninsured
- $1,990 premium tax
- Insurer exodus from markets
ALL TO PAY FOR TAX CUTS FOR CORPORATIONS AND MILLIONAIRES

i dont get the constant quote about how many will be uninsured. of course there will be more uninsured b/c people will choose no insurance.  why is the number of people covered even part of this conversation.

Well, it's people who think they don't need insurance. But they could be wrong; car accidents can happen to anyone. So having them insured is better for society than not. Ideally everyone would be covered by something. Going 13 Million people in the wrong direction is a big deal in its own right, never mind the secondary effects like the intentional sabotage / collapse of the insurance marketplaces.
Title: Re: Republican Tax Plan 2017
Post by: boarder42 on November 15, 2017, 11:24:12 AM
https://twitter.com/TopherSpiro/status/930522616980484097

Quote
Tax bill will repeal the individual mandate:
- 13 million more uninsured
- $1,990 premium tax
- Insurer exodus from markets
ALL TO PAY FOR TAX CUTS FOR CORPORATIONS AND MILLIONAIRES

i dont get the constant quote about how many will be uninsured. of course there will be more uninsured b/c people will choose no insurance.  why is the number of people covered even part of this conversation.

Well, it's people who think they don't need insurance. But they could be wrong; car accidents can happen to anyone. So having them insured is better for society than not. Ideally everyone would be covered by something. Going 13 Million people in the wrong direction is a big deal in its own right, never mind the secondary effects like the intentional sabotage / collapse of the insurance marketplaces.

No just no. Counting those insured is just looking at the wrong Target but then again this entire debate on who pays for it is the wrong Target. Cost cost cost. Then it won't be a burden.
Title: Re: Republican Tax Plan 2017
Post by: sherr on November 15, 2017, 11:48:52 AM
https://twitter.com/TopherSpiro/status/930522616980484097

Quote
Tax bill will repeal the individual mandate:
- 13 million more uninsured
- $1,990 premium tax
- Insurer exodus from markets
ALL TO PAY FOR TAX CUTS FOR CORPORATIONS AND MILLIONAIRES

i dont get the constant quote about how many will be uninsured. of course there will be more uninsured b/c people will choose no insurance.  why is the number of people covered even part of this conversation.

Well, it's people who think they don't need insurance. But they could be wrong; car accidents can happen to anyone. So having them insured is better for society than not. Ideally everyone would be covered by something. Going 13 Million people in the wrong direction is a big deal in its own right, never mind the secondary effects like the intentional sabotage / collapse of the insurance marketplaces.

No just no. Counting those insured is just looking at the wrong Target but then again this entire debate on who pays for it is the wrong Target. Cost cost cost. Then it won't be a burden.

That's fine, then Republicans should use their majority-everywhere to work on the cost problem instead of sabotaging the existing system, no?

But of course a practical examination of human nature tells us that there will always be some people who think they don't need insurance, regardless of the cost. Young people tend to assume they'll live forever and all that. And regardless of where the best solution is, "number of uninsured" is still a useful metric to track.

So, yes just yes?
Title: Re: Republican Tax Plan 2017
Post by: Saving4Fire on November 15, 2017, 11:49:24 AM
https://twitter.com/TopherSpiro/status/930522616980484097

Quote
Tax bill will repeal the individual mandate:
- 13 million more uninsured
- $1,990 premium tax
- Insurer exodus from markets
ALL TO PAY FOR TAX CUTS FOR CORPORATIONS AND MILLIONAIRES

i dont get the constant quote about how many will be uninsured. of course there will be more uninsured b/c people will choose no insurance.  why is the number of people covered even part of this conversation.


Removing the mandate would likely wreck the market (http://money.cnn.com/2017/11/15/news/economy/obamacare-individual-mandate/index.html) which would make insurance unaffordable for millions and the reason why the number is so big.  You can call that "a choice", but it's a crappy one.
Title: Re: Republican Tax Plan 2017
Post by: jean on November 15, 2017, 11:52:11 AM

Okay, I am confused. First I read that the 457 will be treated like a 401k or 403b, meaning that any withdrawals before age 59.5 will be subjected to a 10% penalty in addition to taxes. Now I'm seeing that the 457 may be done away with altogether after 2017. Which is it?

I have a small (<$10k) 457(b) from my previous employer. Should I cash it out before the end of the year, just in case?

My understanding:
House bill - eliminates non-governmental (i.e. those held by non-profits for highly compensated employees) 457(b)s, but no changes to governmental 457bs
Senate bill - basically as you state, treated like a 403b/401k and if you have access to both, you can contribute 18,500 total combined (rather than current law, allowing 18,500 to each account type)

Final bill - ???? No one knows

If you cash out the 457b, you'll need to pay taxes.  If you planned on using that money for something other than retirement, you could cash it out (if one of these bills passes).  But I would just leave it there for retirement and treat it as a 401k.  You can get the money out through Roth conversions / SEPP.
Title: Re: Republican Tax Plan 2017
Post by: desertadapted on November 15, 2017, 01:14:18 PM
According to Forbes, the Senate bill destroys 457(b)'s by imposing an $18,000 aggregate cap on 401(a)/457(b) (now it's $18,000 in each), and by imposing the 10% early withdrawal penalty (at 59 1/2) on 457(b)'s.  Yet another way that the current tax plan is going to substantially increase my tax liability and jack up my FIRE plans in order to pay for tax cuts for corporations.  So stoked about that.
https://www.forbes.com/sites/ashleaebeling/2017/11/10/the-senate-401k-grab/#78bb03136360
Title: Re: Republican Tax Plan 2017
Post by: OurTown on November 15, 2017, 02:10:41 PM
Shorter version of the Republican Tax Plan:  it's a big middle finger to the millionaire next door types. 
Title: Re: Republican Tax Plan 2017
Post by: Saving4Fire on November 15, 2017, 02:33:13 PM
Shorter version of the Republican Tax Plan:  it's a big middle finger to the millionaire next door types.

In the last 40 years the top %0.01 have milked the lower and middle class in this country dry.   It's the upper middle class's turn.
Title: Re: Republican Tax Plan 2017
Post by: DarkandStormy on November 15, 2017, 02:55:50 PM
(https://pbs.twimg.com/media/DOsm5TaX4AQKmxf.jpg)

This looks like a pile of shit.
Title: Re: Republican Tax Plan 2017
Post by: jean on November 15, 2017, 04:25:09 PM
If nothing is passed before the end of 2017, what happens?  Can they pass in early 2018 and have it go into effect for all of 2018, even though the year already started? 

I wish they would have taken more time if they wanted to make such huge overhauls to the tax code.  I'm a bit concerned whether I should change anything with my spouse's 457b contributions (takes ~2 months for a change to run through payroll).  I'm not changing anything, but I'm curious. 
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 15, 2017, 04:27:36 PM
(https://pbs.twimg.com/media/DOsm5TaX4AQKmxf.jpg)

This looks like a pile of shit.

Not sure where you found that, but it is more a pile of extreme opinions based upon emotion than any kind of factual analysis. 
Title: Re: Republican Tax Plan 2017
Post by: boarder42 on November 15, 2017, 04:42:02 PM
If nothing is passed before the end of 2017, what happens?  Can they pass in early 2018 and have it go into effect for all of 2018, even though the year already started? 

I wish they would have taken more time if they wanted to make such huge overhauls to the tax code.  I'm a bit concerned whether I should change anything with my spouse's 457b contributions (takes ~2 months for a change to run through payroll).  I'm not changing anything, but I'm curious.

Yes they can
Title: Re: Republican Tax Plan 2017
Post by: frugalecon on November 15, 2017, 05:29:26 PM
If nothing is passed before the end of 2017, what happens?  Can they pass in early 2018 and have it go into effect for all of 2018, even though the year already started? 

I wish they would have taken more time if they wanted to make such huge overhauls to the tax code.  I'm a bit concerned whether I should change anything with my spouse's 457b contributions (takes ~2 months for a change to run through payroll).  I'm not changing anything, but I'm curious.

Yes they can

Even if nothing passes in 2017, I am considering accelerating planned charitable contributions into 2017 for exactly this reason. I worry that elimination of SALT deductibility will effectively negate the tax deductibility of charitable contributions for me, and I have committed to a multi-year gift for a charity.
Title: Re: Republican Tax Plan 2017
Post by: DarkandStormy on November 15, 2017, 05:32:51 PM
(https://pbs.twimg.com/media/DOsm5TaX4AQKmxf.jpg)

This looks like a pile of shit.

Not sure where you found that, but it is more a pile of extreme opinions based upon emotion than any kind of factual analysis.

What's opinion? It's pulled from the CBO.
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 15, 2017, 05:54:33 PM
(https://pbs.twimg.com/media/DOsm5TaX4AQKmxf.jpg)

This looks like a pile of shit.

Not sure where you found that, but it is more a pile of extreme opinions based upon emotion than any kind of factual analysis.

What's opinion? It's pulled from the CBO.

LOL.  Link??  Just because that mentioned CBO and JCT it doesn't mean that the bullets presented are accurate.  Have you read the draft bills for the House and Senate and ran the new brackets through any projections?  I have, and can assure you that while I'm not a big fan of a lot of what is in the bills, those "facts" are mostly hyperbole, exaggerations and just plain mis-information.  Where on earth did you find that?
Title: Re: Republican Tax Plan 2017
Post by: inline five on November 15, 2017, 05:57:38 PM
I think if they dropped the estate tax part they could get it. I don't know why they are so focused on it. Maybe because Trump is pushing for it (hmmm?!?).

Our healthcare system is unaffordable for even minor things, we still haven't actually addressed that issue.

I am saddened that they are anti-SALT but allow you to deduct property tax. That seems counter intuitive. I know why they are doing it (blue states have higher local taxes), but again I'd think they'd have more votes if they do both.

I would personally prefer tax simplification over a tax reduction for starters.
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 15, 2017, 07:50:05 PM

I would personally prefer tax simplification over a tax reduction for starters.

You would rather pay the same amount of taxes, but save an hour at filing time versus paying less taxes?  Really?
Title: Re: Republican Tax Plan 2017
Post by: dragoncar on November 15, 2017, 08:15:49 PM

I would personally prefer tax simplification over a tax reduction for starters.

You would rather pay the same amount of taxes, but save an hour at filing time versus paying less taxes?  Really?

I'd rather be rich than stupid
Title: Re: Republican Tax Plan 2017
Post by: jean on November 15, 2017, 09:37:23 PM
Even if nothing passes in 2017, I am considering accelerating planned charitable contributions into 2017 for exactly this reason. I worry that elimination of SALT deductibility will effectively negate the tax deductibility of charitable contributions for me, and I have committed to a multi-year gift for a charity.

I'm looking into Donor Advised Fund for 2017.  I won't be surprised if they are very popular this year.
Title: Re: Republican Tax Plan 2017
Post by: inline five on November 15, 2017, 10:09:03 PM

I would personally prefer tax simplification over a tax reduction for starters.

You would rather pay the same amount of taxes, but save an hour at filing time versus paying less taxes?  Really?

I spend countless hours putting my taxes together. I have significant write offs due to traveling and taking an M&IE rate vs what the company pays me. It's quite tedious and the record keeping is immense.

So yes, I would much rather take a standard deduction and just be done with it. It's a great place to start for 95% of US households.

Let's revisit the whole tax cuts when we're running deficits later.
Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 15, 2017, 11:07:09 PM
You would rather pay the same amount of taxes, but save an hour at filing time versus paying less taxes?  Really?
I spend countless hours putting my taxes together. I have significant write offs due to traveling and taking an M&IE rate vs what the company pays me. It's quite tedious and the record keeping is immense.

So yes, I would much rather take a standard deduction and just be done with it. It's a great place to start for 95% of US households.
You're allowed to do that now if you'd "much rather" do it.
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 15, 2017, 11:23:59 PM

I would personally prefer tax simplification over a tax reduction for starters.

You would rather pay the same amount of taxes, but save an hour at filing time versus paying less taxes?  Really?

I spend countless hours putting my taxes together. I have significant write offs due to traveling and taking an M&IE rate vs what the company pays me. It's quite tedious and the record keeping is immense.

So yes, I would much rather take a standard deduction and just be done with it. It's a great place to start for 95% of US households.

Let's revisit the whole tax cuts when we're running deficits later.

We're running deficits right now!  We'll run them in 2018.  Pretty sure we'll run them forever.  So, when exactly do you want to revisit??
Title: Re: Republican Tax Plan 2017
Post by: dresden on November 16, 2017, 05:14:50 AM
This article is interesting and confirms something almost all of us already knew:

https://www.cnbc.com/2017/11/15/ceos-raise-doubts-about-gary-cohns-top-argument-for-cutting-the-corporate-tax-rate-right-in-front-of-him.html

We all know how it works - CEOs will either pass the tax savings on immediately to shareholders via a dividend or buy-back or they will invest the money to raise profits in the future- maybe robotics technology investment.   A small percentage of that will actually generate US jobs.

As for tax cut, I would get a tax cut under the house plan and an increase under the senate plan.

"Getting rid of loopholes for special interest" = tax the hell out of the middle class and upper middle class living in high cost areas.

Considering the size of our deficit and growing wealth disparity, upper middle class probably should get a tax increase and the wealthy an even bigger increase.   The changes to Inheritance tax, pass through rate and to a lesser extent AMT primarily benefit the super wealthy.



Title: Re: Republican Tax Plan 2017
Post by: EscapeVelocity2020 on November 16, 2017, 07:03:57 AM
Considering the size of our deficit and growing wealth disparity, upper middle class probably should get a tax increase and the wealthy an even bigger increase.   The changes to Inheritance tax, pass through rate and to a lesser extent AMT primarily benefit the super wealthy.

This is all so obvious, and yet the majority does nothing about it.  http://fortune.com/2017/11/14/credit-suisse-millionaires-millennials-inequality/

Quote
The richest 1% now owns more than half of all the world’s household wealth, according to analysts at Credit Suisse. And they say inequality is only going to get worse over the coming years, with millennials having a particularly tough time.
Title: Re: Republican Tax Plan 2017
Post by: DarkandStormy on November 16, 2017, 08:08:54 AM
LOL.  Link??  Just because that mentioned CBO and JCT it doesn't mean that the bullets presented are accurate.  Have you read the draft bills for the House and Senate and ran the new brackets through any projections?  I have, and can assure you that while I'm not a big fan of a lot of what is in the bills, those "facts" are mostly hyperbole, exaggerations and just plain mis-information.  Where on earth did you find that?

https://finance.yahoo.com/news/cbo-house-gop-tax-plan-triggers-25-billion-medicare-cuts-195501778.html

Quote
The effects of this sequestration order would trigger automatic cuts to various programs, including Medicare. According to the CBO, this could be as much as 4% for Medicare, which amounts to $25 billion in 2018.

A bunch of sources cite "4% reduction in Medicare."

https://docs.google.com/spreadsheets/d/1h8m6juta8WvGN384htGIFMDsg0wjXlQaSN9ASye4G2I/edit#gid=0

Ernie Tedeschi, former US Treasury economist, pulled this together.

(https://pbs.twimg.com/media/DOqw8BcV4AA-grv.jpg)

^This is 2027.

Quote
But last night, Orrin Hatch took a hatchet to his party’s tax legislation, and ended up achieving the seemingly impossible: The Utah senator found a way to keep the plan’s giant corporate tax cuts permanent, make its middle-class tax cuts more generous (in the near term), and cut the overall cost of tax package to $0 in 2028.

Hatch’s trick: Phase out (virtually) every tax cut that doesn’t benefit corporations in 2026, while also throwing 13 million people off of health insurance. The upshot of this is that, next year, almost no middle-income families lose out from the bill, and most upper-middle-class households come out ahead.

http://nymag.com/daily/intelligencer/2017/11/new-gop-tax-cut-plan-raises-taxes-on-almost-everyone-by-2027.html

http://www.cnn.com/2017/11/15/politics/individual-mandate-tax-reform/index.html

Quote
Roughly 4 million fewer people would be covered in the first year the repeal would take effect, the Congressional Budget Office said last week, rising to 13 million by 2027, as compared to current law.
Premiums would also rise by about 10% in most years of the decade, CBO said.

(https://pbs.twimg.com/media/DOqyfjpUQAEZPon.jpg)

Tedeschi is using the model from @PolicyBrains.

Quote
The provision that will have the most catastrophic effect on disabled people is the removal of the deduction for out-of-pocket medical expenses. Currently, if your out-of-pocket medical expenses exceed 10 percent of your adjusted gross income, you can deduct that from your tax bill. In the Jobs and Tax Cuts Bill, that provision is excised completely.

Quote
Another provision that specifically affects disabled people is the elimination of a tax credit granted to businesses to comply with the Americans with Disabilities Act, or ADA. Businesses that, for example, wish to build a ramp, hire a sign language interpreter, or make their website more accessible can no longer claim this exemption.

Quote
Tax credits for adoption and for disabled and retired people would be eliminated.

https://www.thedailybeast.com/the-gops-tax-bill-is-a-war-on-disabled-people

https://www.brookings.edu/blog/up-front/2017/11/03/9-things-to-know-about-the-house-gop-tax-plan/

Quote
Former students won’t be able to deduct student loan interest.

Quote
The House tax bill eliminates the $2,500 tax deduction for student-loan interest, the $2,000 Lifetime Learning Credit, and an income exemption from paying income taxes on employer-provided funds for post-secondary education. Several of the provisions will even raise tuition costs.

https://www.thenation.com/article/the-gop-tax-bill-is-bad-for-students/

http://money.cnn.com/2017/11/02/pf/taxes/alimony-gop-tax-plan-deduction/index.html

Quote
One tax break on the chopping block in the House Republicans' tax reform bill -- alimony payments.

Quote
The cuts in individual tax rates, the bump in the standard deduction and the larger child tax credit, among other things — all these would end at the end of 2025, as would proposed tax cuts for "pass-through" entities — businesses that pay taxes through the individual income tax code. However, many changes on the corporate side, which are centered on a rate cut from 35 to 20 percent, would remain permanent, as would the proposed elimination of the individual mandate penalty.

https://www.npr.org/2017/11/15/564323858/senate-plan-now-makes-individual-tax-cuts-temporary-keeps-corporate-cuts-permane

Quote
The Tax Policy Center (TPC) estimates of the Trump and congressional Republican framework show that in 2027 (when key features of the plan are in full effect):

-The top 1 percent of households (those with incomes above $912,100) would get 80 percent of the framework’s net tax cuts (see Figure 1), or more than $200,000 annually (an 8.7 percent boost in after-tax income), on average.

-The top 0.1 percent of households (those with incomes above $5.1 million) would get 40 percent of the framework’s net tax cuts, or more than $1 million annually (a 9.7 percent boost in after-tax income), on average.

-Meanwhile, the bottom 80 percent of the population would get less just 13 percent of the tax cuts and see a less than 0.5 percent increase in after-tax income, on average.

https://www.cbpp.org/research/federal-tax/big-six-tax-framework-provides-windfall-to-high-income-households-with-working

Quote
The House GOP plan would eliminate the estate tax, under which people who give money or assets such as real estate or stocks to their children or other heir when they die have to pay a 40% tax. Currently, the tax only applies to estates larger than $5.49 million, but the House plan would double that threshold to over $10 million. Then, the plan would phase out the tax completely after six years.

Trump has touted the repeal as a perk for farmers and small businesses owners. An analysis by The Washington Post, however, found that only 5,500 estates out of about 3 million will pay any estate tax in 2017. And within that 5,500, only about 80 are farms or small businesses.

http://www.businessinsider.com/trump-tax-plan-rich-people-benefits-2017-11/#higher-income-taxpayers-will-get-the-largest-tax-cuts-1

Quote
Hidden among massive corporate tax breaks and the other items on their long standing wish list is a curious provision allowing families to open 529 educational savings accounts for "unborn children" – essentially college plans for fetuses.

https://www.cnbc.com/2017/11/14/gop-tax-bill-is-no-place-to-address-rights-of-the-unborn-commentary.html

Enough sources for you?

Just because you don't like the facts doesn't mean they aren't facts.

This tax plan is a pile of shit designed solely to help the top 0.1% of this country.  Period.
Title: Re: Republican Tax Plan 2017
Post by: desertadapted on November 16, 2017, 10:04:39 AM
@darkandstormy
And this one:
https://www.washingtonpost.com/news/wonk/wp/2017/11/16/senate-tax-bill-cuts-taxes-of-wealthy-and-hikes-taxes-of-families-earning-under-75000-over-a-decade/?hpid=hp_hp-top-table-main_senatetax-1125a%3Ahomepage%2Fstory&utm_term=.2625337459ea

The tax bill Senate Republicans are championing would give large tax cuts to millionaires while raising taxes on American families earning $10,000 to $75,000 over the next decade, according to a report released Thursday by the Joint Committee on Taxation, Congress' official nonpartisan analysts.
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 16, 2017, 11:33:58 AM
Enough sources for you?

Just because you don't like the facts doesn't mean they aren't facts.

This tax plan is a pile of shit designed solely to help the top 0.1% of this country.  Period.

Yep, that's much more than expected.  Thanks for the most thorough response.  Do you know where the "elimination of capital gains taxes for rich kids" comes from?
Title: Re: Republican Tax Plan 2017
Post by: RangerOne on November 16, 2017, 11:37:16 AM
For a family of with 1 or more child in California the amount we are getting fucked by either bill is easy to calculate. And it all comes down to the complete elimination of a tax break for home owners.

Currently even dwelling entirely in the 15% tax bracket, a median priced home purchase at $500k in a place like San Diego roughly results in:

First Year Deductions:
$20k mortgage interest
$6k property taxes
$4k cali income tax: Assuming around $120k income

That is on top of personal exemptions for a family of 4 so add:
$16k

So a family of 4 buying a new home gets to write off $46k. By today's calculation that is a rough $17k advantage over taking a standard deduction. Even if all the extra 17k break is in the 15% bracket that is still $2500 dollars back in my pocket or about $212 dollars a month. That is a really big break off the cost to carry a home. Its nearly $350 dollars off a month if you are saving all the money form the 25% bracket...

Get ride of personal exemptions and SALT and I am basically left with roughly $30k in standard deduction with kids, assuming I don't get phased out of the child tax credit. So they are effectively asking me to pay an extra $200 a month and lose my home buying subsidy, to fund tax breaks for business that wont bump my pay just because of the tax break, and to multi-millionaires.

The notation that everyone will get more pay because business pay less tax is utter bullshit. No business is going to simply raise pay because they got a tax break. That decision is based entirely on other factors. The tax break will just send stocks further up as earnings get a nice bump. Who will most fortune 500 pay? Their workers or their investors? I don't think this question is hard to answer.

...
Title: Re: Republican Tax Plan 2017
Post by: RangerOne on November 16, 2017, 11:43:01 AM

I would personally prefer tax simplification over a tax reduction for starters.

You would rather pay the same amount of taxes, but save an hour at filing time versus paying less taxes?  Really?

I spend countless hours putting my taxes together. I have significant write offs due to traveling and taking an M&IE rate vs what the company pays me. It's quite tedious and the record keeping is immense.

So yes, I would much rather take a standard deduction and just be done with it. It's a great place to start for 95% of US households.

Let's revisit the whole tax cuts when we're running deficits later.

No one wants to do weeks worth of tax work. But if the alternative is a $5k a year tax increase, I don't want simplification...

There is a value proposition here. I am willing to suffer complex taxes if it offers me more money in my pocket. If you are not losing anything to move to a simple standard then of course that less tax BS will sound like the best option.
Title: Re: Republican Tax Plan 2017
Post by: ZiziPB on November 16, 2017, 11:51:01 AM
We're one step closer: The House passed it.
Title: Re: Republican Tax Plan 2017
Post by: Kevin on November 16, 2017, 11:52:23 AM
For a family of with 1 or more child in California the amount we are getting fucked by either bill is easy to calculate. And it all comes down to the complete elimination of a tax break for home owners.

Currently even dwelling entirely in the 15% tax bracket, a median priced home purchase at $500k in a place like San Diego roughly results in:

First Year Deductions:
$20k mortgage interest
$6k property taxes
$4k cali income tax: Assuming around $120k income

That is on top of personal exemptions for a family of 4 so add:
$16k

So a family of 4 buying a new home gets to write off $46k. By today's calculation that is a rough $17k advantage over taking a standard deduction. Even if all the extra 17k break is in the 15% bracket that is still $2500 dollars back in my pocket or about $212 dollars a month. That is a really big break off the cost to carry a home. Its nearly $350 dollars off a month if you are saving all the money form the 25% bracket...

Get ride of personal exemptions and SALT and I am basically left with roughly $30k in standard deduction with kids, assuming I don't get phased out of the child tax credit. So they are effectively asking me to pay an extra $200 a month and lose my home buying subsidy, to fund tax breaks for business that wont bump my pay just because of the tax break, and to multi-millionaires.

The notation that everyone will get more pay because business pay less tax is utter bullshit. No business is going to simply raise pay because they got a tax break. That decision is based entirely on other factors. The tax break will just send stocks further up as earnings get a nice bump. Who will most fortune 500 pay? Their workers or their investors? I don't think this question is hard to answer.

...

Its way worse than that. They have now successfully removed a majority of buyers who can purchase $500k houses. Housing prices will drop everywhere as a result. Will leave lots underwater.
Title: Re: Republican Tax Plan 2017
Post by: Kevin on November 16, 2017, 11:55:20 AM
Also FUCK the GOP, in particular fuck section 1402 of the proposed tax code. How does changing the tax free sale of a house after 2 years to 5 years help the middle class? News flash, it doesn't. I am one of those middle class families who purchased a house that needed a lot of TLC. My wife and I slow flipped the house while living in it and are now getting ready to sell. Unfortunately, if this goes into law, we will either have to wait 3 more years or sell and pay taxes on the ~$50k in profits we are forecast to make. That would be around $8k in taxes, all so we can fund the 0.01% and repeal the estate tax.

Fuck that and fuck the GOP.

Quote
SEC. 1402. EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL RESIDENCE.
(a) Requirement That Residence Be Principal Residence For 5 Years During 8-Year Period.—Subsection (a) of section 121 is amended—
(1) by striking “5-year period” and inserting “8-year period”, and
(2) by striking “2 years” and inserting “5 years”.

https://www.congress.gov/bill/115th-congress/house-bill/1/text#toc-H7A8ADDE279B541D890C20C759B82ABD3
Title: Re: Republican Tax Plan 2017
Post by: protostache on November 16, 2017, 12:00:46 PM
The 4% reduction in Medicare that people are talking about is because of PAYGO, which is what lead to the sequester back in 2013/2014. Medicaid, Social Security, and the USPS are all exempt but basically every other program gets an across the board cut. Medicare is special in so far as it is only subject to a 4% maximum cut.

Vox explainer on how it works (https://www.vox.com/policy-and-politics/2017/11/14/16651184/gop-tax-bill-medicare-cut-paygo).
Title: Re: Republican Tax Plan 2017
Post by: DarkandStormy on November 16, 2017, 12:01:01 PM
http://www.cnn.com/2017/11/16/politics/house-tax-plan-vote/index.html

House plan passes, 227-205.
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 16, 2017, 12:15:29 PM
Enough sources for you?

Just because you don't like the facts doesn't mean they aren't facts.

This tax plan is a pile of shit designed solely to help the top 0.1% of this country.  Period.

Yep, that's much more than expected.  Thanks for the most thorough response.  Do you know where the "elimination of capital gains taxes for rich kids" comes from?

I think "elimination' is the wrong word, assuming this means preservation of the stepped-up basis at death, but repealing the estate tax is sort of like repealing the current tax that takes the place of (or more than takes the place of) capital gains taxes for those stepped-up basis assets that are included in a taxable estate.
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 16, 2017, 12:19:57 PM
I see a reasonable chance that the Senate passes their bill with only 50 votes and the house winds up just having to approve the Senate bill (instead of developing a combined bill in committee).
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 16, 2017, 12:20:43 PM
Enough sources for you?

Just because you don't like the facts doesn't mean they aren't facts.

This tax plan is a pile of shit designed solely to help the top 0.1% of this country.  Period.

Yep, that's much more than expected.  Thanks for the most thorough response.  Do you know where the "elimination of capital gains taxes for rich kids" comes from?

I think "elimination' is the wrong word, assuming this means preservation of the stepped-up basis at death, but repealing the estate tax is sort of like repealing the current tax that takes the place of (or more than takes the place of) capital gains taxes for those stepped-up basis assets that are included in a taxable estate.

Thanks.  That makes perfect sense.
Title: Re: Republican Tax Plan 2017
Post by: BFGirl on November 16, 2017, 12:21:33 PM
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?

Are the 457b changes applicable to governmental entities?  I'm having a hard time figuring this out.
http://www.napa-net.org/news/technical-competence/legislation/could-tax-reform-destroy-deferred-compensation/

The 457(b) goes away.


SAD!

Well that sucks.   I was about to participate in this for the first time, so this will definitely screw me on my tax planning.

Same. This Friday's check will be the first deduction lol.

Okay, I am confused. First I read that the 457 will be treated like a 401k or 403b, meaning that any withdrawals before age 59.5 will be subjected to a 10% penalty in addition to taxes. Now I'm seeing that the 457 may be done away with altogether after 2017. Which is it?

I have a small (<$10k) 457(b) from my previous employer. Should I cash it out before the end of the year, just in case?

Do the 457b changes apply to governmental entities?  I'm having a hard time figuring it out
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 16, 2017, 12:22:53 PM
The 4% reduction in Medicare that people are talking about is because of PAYGO, which is what lead to the sequester back in 2013/2014. Medicaid, Social Security, and the USPS are all exempt but basically every other program gets an across the board cut. Medicare is special in so far as it is only subject to a 4% maximum cut.

Vox explainer on how it works (https://www.vox.com/policy-and-politics/2017/11/14/16651184/gop-tax-bill-medicare-cut-paygo).

So, will the $1.5T over ten years actually increase the debt; or will it just force sequestration of an additional $1.5T in expenditures?
Title: Re: Republican Tax Plan 2017
Post by: DarkandStormy on November 16, 2017, 12:24:38 PM
Enough sources for you?

Just because you don't like the facts doesn't mean they aren't facts.

This tax plan is a pile of shit designed solely to help the top 0.1% of this country.  Period.

Yep, that's much more than expected.  Thanks for the most thorough response.  Do you know where the "elimination of capital gains taxes for rich kids" comes from?

Quote
House Republicans will maintain the "step-up" in basis, which allows heirs to receive assets at the market value on the day the original owner died.

Beneficiaries save on capital gains taxes if they were to sell the asset immediately after inheriting it.

https://www.cnbc.com/2017/11/03/the-good-the-bad-and-the-money-what-the-gop-tax-plan-means-for-you.html

So your parent is a rich billionaire who dies and passes along to you $1 billion in invested assets.  You could sell immediately upon inheriting it and pay no tax on it.
Title: Re: Republican Tax Plan 2017
Post by: Saving4Fire on November 16, 2017, 12:25:42 PM
The 4% reduction in Medicare that people are talking about is because of PAYGO, which is what lead to the sequester back in 2013/2014. Medicaid, Social Security, and the USPS are all exempt but basically every other program gets an across the board cut. Medicare is special in so far as it is only subject to a 4% maximum cut.

Vox explainer on how it works (https://www.vox.com/policy-and-politics/2017/11/14/16651184/gop-tax-bill-medicare-cut-paygo).

So, will the $1.5T over ten years actually increase the debt; or will it just force sequestration of an additional $1.5T in expenditures?

That 1.5T is roughly $4,600 in debt for every man woman and child in the USA.
Title: Re: Republican Tax Plan 2017
Post by: DarkandStormy on November 16, 2017, 12:58:16 PM
The 4% reduction in Medicare that people are talking about is because of PAYGO, which is what lead to the sequester back in 2013/2014. Medicaid, Social Security, and the USPS are all exempt but basically every other program gets an across the board cut. Medicare is special in so far as it is only subject to a 4% maximum cut.

Vox explainer on how it works (https://www.vox.com/policy-and-politics/2017/11/14/16651184/gop-tax-bill-medicare-cut-paygo).

So, will the $1.5T over ten years actually increase the debt; or will it just force sequestration of an additional $1.5T in expenditures?

That 1.5T is roughly $4,600 in debt for every man woman and child in the USA.

http://www.usdebtclock.org/

We're coming up on $20.5 trillion.  That's nearly $63k per citizen.

I thought Republicans wanted to "balance the budget?" LMAO
Title: Re: Republican Tax Plan 2017
Post by: marty998 on November 16, 2017, 01:19:19 PM
Also FUCK the GOP, in particular fuck section 1402 of the proposed tax code. How does changing the tax free sale of a house after 2 years to 5 years help the middle class? News flash, it doesn't. I am one of those middle class families who purchased a house that needed a lot of TLC. My wife and I slow flipped the house while living in it and are now getting ready to sell. Unfortunately, if this goes into law, we will either have to wait 3 more years or sell and pay taxes on the ~$50k in profits we are forecast to make. That would be around $8k in taxes, all so we can fund the 0.01% and repeal the estate tax.

Fuck that and fuck the GOP.

Quote
SEC. 1402. EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL RESIDENCE.
(a) Requirement That Residence Be Principal Residence For 5 Years During 8-Year Period.—Subsection (a) of section 121 is amended—
(1) by striking “5-year period” and inserting “8-year period”, and
(2) by striking “2 years” and inserting “5 years”.

https://www.congress.gov/bill/115th-congress/house-bill/1/text#toc-H7A8ADDE279B541D890C20C759B82ABD3

Not normally one to support the GOP but to be fair you haven't really purchased this home with the intention of it being your home. Sounds like you've purchased it to earn a profit before moving onto the next deal. I don't see any problem with you being taxed on the gain.
Title: Re: Republican Tax Plan 2017
Post by: TexasRunner on November 16, 2017, 01:32:16 PM
Also FUCK the GOP, in particular fuck section 1402 of the proposed tax code. How does changing the tax free sale of a house after 2 years to 5 years help the middle class? News flash, it doesn't. I am one of those middle class families who purchased a house that needed a lot of TLC. My wife and I slow flipped the house while living in it and are now getting ready to sell. Unfortunately, if this goes into law, we will either have to wait 3 more years or sell and pay taxes on the ~$50k in profits we are forecast to make. That would be around $8k in taxes, all so we can fund the 0.01% and repeal the estate tax.

Fuck that and fuck the GOP.

Quote
SEC. 1402. EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL RESIDENCE.
(a) Requirement That Residence Be Principal Residence For 5 Years During 8-Year Period.—Subsection (a) of section 121 is amended—
(1) by striking “5-year period” and inserting “8-year period”, and
(2) by striking “2 years” and inserting “5 years”.

https://www.congress.gov/bill/115th-congress/house-bill/1/text#toc-H7A8ADDE279B541D890C20C759B82ABD3

Not normally one to support the GOP but to be fair you haven't really purchased this home with the intention of it being your home. Sounds like you've purchased it to earn a profit before moving onto the next deal. I don't see any problem with you being taxed on the gain.

/\
YUP.

My wife and I did the same thing with our last residence.  Purchased at 98k in 2014 and sold for 135k in 2017.  3 years and 37k in gains, some market and some our improvements.  Was that income?  Well its sitting in VTSAX now so you tell me.  Can't live in an index stock.

You can't tell me that you didn't buy that house with making a profit in mind.

(It was also nice when changing houses to have the liquidity and negotiating leverage that cash provides).
Title: Re: Republican Tax Plan 2017
Post by: RangerOne on November 16, 2017, 01:33:16 PM
We're one step closer: The House passed it.

I am concerned this is a likely result. Its such a significant sum of cash I have to assume it will be an impact. For someone buying an average $750k home with a jumbo loan making under $200k they are probably loosing close to $500 a month...

To a degree if a GOP law maker pulled me assigned and explained that this was all an elaborate scheme to simply take tax related distortions out of the housing market I would almost be okay with.

But it extremely frustrating for those trying to make reasonable long term decisions while they decide whether or not to rip off a band-aid and let a slew of homeowners bleed out.
Title: Re: Republican Tax Plan 2017
Post by: Kevin on November 16, 2017, 02:13:25 PM
Also FUCK the GOP, in particular fuck section 1402 of the proposed tax code. How does changing the tax free sale of a house after 2 years to 5 years help the middle class? News flash, it doesn't. I am one of those middle class families who purchased a house that needed a lot of TLC. My wife and I slow flipped the house while living in it and are now getting ready to sell. Unfortunately, if this goes into law, we will either have to wait 3 more years or sell and pay taxes on the ~$50k in profits we are forecast to make. That would be around $8k in taxes, all so we can fund the 0.01% and repeal the estate tax.

Fuck that and fuck the GOP.

Quote
SEC. 1402. EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL RESIDENCE.
(a) Requirement That Residence Be Principal Residence For 5 Years During 8-Year Period.—Subsection (a) of section 121 is amended—
(1) by striking “5-year period” and inserting “8-year period”, and
(2) by striking “2 years” and inserting “5 years”.

https://www.congress.gov/bill/115th-congress/house-bill/1/text#toc-H7A8ADDE279B541D890C20C759B82ABD3

Not normally one to support the GOP but to be fair you haven't really purchased this home with the intention of it being your home. Sounds like you've purchased it to earn a profit before moving onto the next deal. I don't see any problem with you being taxed on the gain.

/\
YUP.

My wife and I did the same thing with our last residence.  Purchased at 98k in 2014 and sold for 135k in 2017.  3 years and 37k in gains, some market and some our improvements.  Was that income?  Well its sitting in VTSAX now so you tell me.  Can't live in an index stock.

You can't tell me that you didn't buy that house with making a profit in mind.

(It was also nice when changing houses to have the liquidity and negotiating leverage that cash provides).

We absolutely bought it with a profit and a two year flip in mind. What irks me is that the rug is being pulled out from under our feet. What I am getting at is that we are solid middle class and this is a tax that impacts middle class and upper middle class moreso than anyone else. I really doubt the rich are slow flipping and renovating their houses they live in for a such modest profits. But do you know who is, the middle class. This is a great wealth building exercise and now that ladder has been pulled up.

What I don't get is that my wife and I took the risk, purchased in a transitional neighborhood, put in sweat equity, hired local workers and tradesmen, stimulated manufacturing and commerce (a reno is a lot of materials) and our reward is to have the tax laws changed within months of us cashing out.

You might look at my example and say, boo-hoo, you have to pay taxes, but all this is is essentially one more way they are destroying the middle class. Thousands of people went from poor to rich via the live in and flip after 2 years method but now its almost certainly gone.
Title: Re: Republican Tax Plan 2017
Post by: secondcor521 on November 16, 2017, 02:15:27 PM
I see a reasonable chance that the Senate passes their bill with only 50 votes and the house winds up just having to approve the Senate bill (instead of developing a combined bill in committee).

I thought they could still use reconciliation even if the bill went to a conference committee...?

Meaning, they could pass two different versions; the House version that passed earlier today and whatever the Senate passes with 50+tie votes, then reconcile the bills in committee, then pass the committee version with 50+tie votes in the Senate (and presumably ~220 in the House).  No?  Yes?
Title: Re: Republican Tax Plan 2017
Post by: jean on November 16, 2017, 02:26:12 PM
Enough sources for you?

Just because you don't like the facts doesn't mean they aren't facts.

This tax plan is a pile of shit designed solely to help the top 0.1% of this country.  Period.

Yep, that's much more than expected.  Thanks for the most thorough response.  Do you know where the "elimination of capital gains taxes for rich kids" comes from?

Quote
House Republicans will maintain the "step-up" in basis, which allows heirs to receive assets at the market value on the day the original owner died.

Beneficiaries save on capital gains taxes if they were to sell the asset immediately after inheriting it.

https://www.cnbc.com/2017/11/03/the-good-the-bad-and-the-money-what-the-gop-tax-plan-means-for-you.html

So your parent is a rich billionaire who dies and passes along to you $1 billion in invested assets.  You could sell immediately upon inheriting it and pay no tax on it.
Even if the rich billionaire parent only paid 0.5 billion for the invested assets int he first place, meaning the growth on the investments is never taxed. not for parent, or heir. 
Title: Re: Republican Tax Plan 2017
Post by: DarkandStormy on November 16, 2017, 02:27:28 PM
Quote
“You’re rewriting a tax code for a generation, and you are doing it in 10 days, and then to be dismantling health care without any debate at all could have unintended consequences,” Rep. Peter King (R-NY), who voted against the House bill, said. “In [1986] it took two years to put together a tax reform bill; they’re doing it in 10 days.”

Quote
The House’s bill fails to hew to crucial Senate budget rules — making the proposal untenable in the upper chamber. Members seem to be aware of this dilemma.

“My must-changes are I just want the math to work,” Rep. David Schweikert (R-AZ) said of bringing the House and Senate bills together.

The math solutions in the Senate have proved politically difficult.

Quote
The Senate bill leaves many of the deductions the House repeals untouched, and instead repeals Obamacare’s individual mandate, phases in the corporate tax cut, increases the child tax credit, fully repeals the state and local tax deduction, keeps the seven tax brackets — instead of the House’s four — and sunsets almost all of the tax relief for individual Americans by 2025.

Quote
Repealing the individual mandate, Senate Majority Leader Mitch McConnell explained to a room full of CEOs, “would raise $330 billion over the next 10 years [which] would provide us, for example, the opportunity … to make permanent the corporate tax rate.”

But repealing the mandate only raises as much money as it does because it would cause 13 million people to lose, or withdraw from, their individual market health plans and Medicaid, both of which are federally subsidized.

Quote
As a result, about 57% of all filers are worse off in 2027 under the modification versus the original Senate TCJA, as written. In some income groups, like the $50K-$75K band, it's close to 80%

Fuck.  The.  G. O. P.
Title: Re: Republican Tax Plan 2017
Post by: sherr on November 16, 2017, 02:30:27 PM
I see a reasonable chance that the Senate passes their bill with only 50 votes and the house winds up just having to approve the Senate bill (instead of developing a combined bill in committee).

I thought they could still use reconciliation even if the bill went to a conference committee...?

Meaning, they could pass two different versions; the House version that passed earlier today and whatever the Senate passes with 50+tie votes, then reconcile the bills in committee, then pass the committee version with 50+tie votes in the Senate (and presumably ~220 in the House).  No?  Yes?

It's not a question of whether that's possible, is a question of whether that's feasible. If they only barely eked out a 50+tie vote the first time with their ideal bill then it's not likely they'll be able to pass it the second time after a bunch of compromise changes. If the House just passes the Senate version they don't have to worry about that.
Title: Re: Republican Tax Plan 2017
Post by: Paul der Krake on November 16, 2017, 02:34:54 PM
I don't feel bad one bit for DIY house flippers, no reason why their "wealth building" isn't taxed the same way as other businesses, just like I won't feel sorry for myself if my favorite loopholes (backdoor and megabackdoor Roth) get eliminated with no warning. I could understand the outrage if it had gone from 2 to 20 years, but 2 to 5 is a reasonable measure.

Housing isn't special.
Title: Re: Republican Tax Plan 2017
Post by: inline five on November 16, 2017, 02:38:31 PM
You would rather pay the same amount of taxes, but save an hour at filing time versus paying less taxes?  Really?
I spend countless hours putting my taxes together. I have significant write offs due to traveling and taking an M&IE rate vs what the company pays me. It's quite tedious and the record keeping is immense.

So yes, I would much rather take a standard deduction and just be done with it. It's a great place to start for 95% of US households.
You're allowed to do that now if you'd "much rather" do it.

No I said I would like a standard deduction over a tax reduction at this point. As long as it's fairly equal I'm cool with that.

Title: Re: Republican Tax Plan 2017
Post by: sherr on November 16, 2017, 02:38:59 PM
Not normally one to support the GOP but to be fair you haven't really purchased this home with the intention of it being your home. Sounds like you've purchased it to earn a profit before moving onto the next deal. I don't see any problem with you being taxed on the gain.

/\
YUP.

My wife and I did the same thing with our last residence.  Purchased at 98k in 2014 and sold for 135k in 2017.  3 years and 37k in gains, some market and some our improvements.  Was that income?  Well its sitting in VTSAX now so you tell me.  Can't live in an index stock.

You can't tell me that you didn't buy that house with making a profit in mind.

(It was also nice when changing houses to have the liquidity and negotiating leverage that cash provides).

I don't really agree. They're living in it, aren't they? Who are we to say it's not their "home"? I've been living in my home for 6+ years and have no plan to move and I "bought it with making a profit in mind". Why wouldn't I?

And besides all that, it's generally considered rude to change the rules after someone's already made decisions based on the current rules. Which is why they have such a big push to get the tax bill passed before the end-of-year; it would be completely awful to change the rules mid-year after people have already been making decisions. The Republicans could easily have a phase-in period for this rule if they cared to.
Title: Re: Republican Tax Plan 2017
Post by: inline five on November 16, 2017, 02:43:58 PM
Also FUCK the GOP, in particular fuck section 1402 of the proposed tax code. How does changing the tax free sale of a house after 2 years to 5 years help the middle class? News flash, it doesn't. I am one of those middle class families who purchased a house that needed a lot of TLC. My wife and I slow flipped the house while living in it and are now getting ready to sell. Unfortunately, if this goes into law, we will either have to wait 3 more years or sell and pay taxes on the ~$50k in profits we are forecast to make. That would be around $8k in taxes, all so we can fund the 0.01% and repeal the estate tax.

Fuck that and fuck the GOP.

Quote
SEC. 1402. EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL RESIDENCE.
(a) Requirement That Residence Be Principal Residence For 5 Years During 8-Year Period.—Subsection (a) of section 121 is amended—
(1) by striking “5-year period” and inserting “8-year period”, and
(2) by striking “2 years” and inserting “5 years”.

https://www.congress.gov/bill/115th-congress/house-bill/1/text#toc-H7A8ADDE279B541D890C20C759B82ABD3

The flip side of this is why should others pay more to subsidize your home purchase.
Title: Re: Republican Tax Plan 2017
Post by: Kevin on November 16, 2017, 03:02:06 PM
Also FUCK the GOP, in particular fuck section 1402 of the proposed tax code. How does changing the tax free sale of a house after 2 years to 5 years help the middle class? News flash, it doesn't. I am one of those middle class families who purchased a house that needed a lot of TLC. My wife and I slow flipped the house while living in it and are now getting ready to sell. Unfortunately, if this goes into law, we will either have to wait 3 more years or sell and pay taxes on the ~$50k in profits we are forecast to make. That would be around $8k in taxes, all so we can fund the 0.01% and repeal the estate tax.

Fuck that and fuck the GOP.

Quote
SEC. 1402. EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL RESIDENCE.
(a) Requirement That Residence Be Principal Residence For 5 Years During 8-Year Period.—Subsection (a) of section 121 is amended—
(1) by striking “5-year period” and inserting “8-year period”, and
(2) by striking “2 years” and inserting “5 years”.

https://www.congress.gov/bill/115th-congress/house-bill/1/text#toc-H7A8ADDE279B541D890C20C759B82ABD3

The flip side of this is why should others pay more to subsidize your home purchase.

Solid logic. While we are at it, lets eliminate the 401k deduction, mortgage deduction and any child care deduction. Because why should anyone else have to subsidize that. Or maybe its because the government, when it was sane and rational, wanted to encourage things that were beneficial for its people rather than the tiny minority who hold all the wealth. This GOP tax bill is bought and paid for by the 0.01%.
Title: Re: Republican Tax Plan 2017
Post by: inline five on November 16, 2017, 03:16:28 PM
Also FUCK the GOP, in particular fuck section 1402 of the proposed tax code. How does changing the tax free sale of a house after 2 years to 5 years help the middle class? News flash, it doesn't. I am one of those middle class families who purchased a house that needed a lot of TLC. My wife and I slow flipped the house while living in it and are now getting ready to sell. Unfortunately, if this goes into law, we will either have to wait 3 more years or sell and pay taxes on the ~$50k in profits we are forecast to make. That would be around $8k in taxes, all so we can fund the 0.01% and repeal the estate tax.

Fuck that and fuck the GOP.

Quote
SEC. 1402. EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL RESIDENCE.
(a) Requirement That Residence Be Principal Residence For 5 Years During 8-Year Period.—Subsection (a) of section 121 is amended—
(1) by striking “5-year period” and inserting “8-year period”, and
(2) by striking “2 years” and inserting “5 years”.

https://www.congress.gov/bill/115th-congress/house-bill/1/text#toc-H7A8ADDE279B541D890C20C759B82ABD3

The flip side of this is why should others pay more to subsidize your home purchase.

Solid logic. While we are at it, lets eliminate the 401k deduction, mortgage deduction and any child care deduction. Because why should anyone else have to subsidize that. Or maybe its because the government, when it was sane and rational, wanted to encourage things that were beneficial for its people rather than the tiny minority who hold all the wealth. This GOP tax bill is bought and paid for by the 0.01%.

We have no issues with population growth in fact if anything it's too fast.

Vast majority of people would actually be better off in Roth accounts, so it actually encourages the wrong behavior.

Government has never been good at allocating assets, which is why socialism doesn't really work. If you want to do something that benefits the people you would keep taxes and other barriers to wealth low on the poor and middle class. This would allow the money to flow in the most efficient manner possible.

Th elimination of the estate tax benefits one segment of the population and the rest of us will be paying for it.

I'm fine reducing Corp profits I would've actually liked to see it even lower but you can't have everything.
Title: Re: Republican Tax Plan 2017
Post by: Kevin on November 16, 2017, 03:22:13 PM
Also FUCK the GOP, in particular fuck section 1402 of the proposed tax code. How does changing the tax free sale of a house after 2 years to 5 years help the middle class? News flash, it doesn't. I am one of those middle class families who purchased a house that needed a lot of TLC. My wife and I slow flipped the house while living in it and are now getting ready to sell. Unfortunately, if this goes into law, we will either have to wait 3 more years or sell and pay taxes on the ~$50k in profits we are forecast to make. That would be around $8k in taxes, all so we can fund the 0.01% and repeal the estate tax.

Fuck that and fuck the GOP.

Quote
SEC. 1402. EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL RESIDENCE.
(a) Requirement That Residence Be Principal Residence For 5 Years During 8-Year Period.—Subsection (a) of section 121 is amended—
(1) by striking “5-year period” and inserting “8-year period”, and
(2) by striking “2 years” and inserting “5 years”.

https://www.congress.gov/bill/115th-congress/house-bill/1/text#toc-H7A8ADDE279B541D890C20C759B82ABD3

The flip side of this is why should others pay more to subsidize your home purchase.

Solid logic. While we are at it, lets eliminate the 401k deduction, mortgage deduction and any child care deduction. Because why should anyone else have to subsidize that. Or maybe its because the government, when it was sane and rational, wanted to encourage things that were beneficial for its people rather than the tiny minority who hold all the wealth. This GOP tax bill is bought and paid for by the 0.01%.

We have no issues with population growth in fact if anything it's too fast.

Vast majority of people would actually be better off in Roth accounts, so it actually encourages the wrong behavior.

Government has never been good at allocating assets, which is why socialism doesn't really work. If you want to do something that benefits the people you would keep taxes and other barriers to wealth low on the poor and middle class. This would allow the money to flow in the most efficient manner possible.

Th elimination of the estate tax benefits one segment of the population and the rest of us will be paying for it.

I'm fine reducing Corp profits I would've actually liked to see it even lower but you can't have everything.

Hence the reason for me bitching up a storm in this thread :P

My taxes (at least for the year I will sell this house) will be insanely higher. And to hear those GOP congressmen say that they are helping the middle class is nauseating. They are ensuring they have donors come election time, nothing more. Also, Trump and his family could save more than $1 billion under House tax bill.

https://www.nbcnews.com/politics/first-read/trump-his-family-could-save-more-1-billion-under-house-n821491

But good thing we closed that 2 year house tax loophole! All those middle class folk were making way to much money exploiting it by improving their neighborhoods.
Title: Re: Republican Tax Plan 2017
Post by: CCCA on November 16, 2017, 03:23:57 PM
Not normally one to support the GOP but to be fair you haven't really purchased this home with the intention of it being your home. Sounds like you've purchased it to earn a profit before moving onto the next deal. I don't see any problem with you being taxed on the gain.

/\
YUP.

My wife and I did the same thing with our last residence.  Purchased at 98k in 2014 and sold for 135k in 2017.  3 years and 37k in gains, some market and some our improvements.  Was that income?  Well its sitting in VTSAX now so you tell me.  Can't live in an index stock.

You can't tell me that you didn't buy that house with making a profit in mind.

(It was also nice when changing houses to have the liquidity and negotiating leverage that cash provides).

I don't really agree. They're living in it, aren't they? Who are we to say it's not their "home"? I've been living in my home for 6+ years and have no plan to move and I "bought it with making a profit in mind". Why wouldn't I?

And besides all that, it's generally considered rude to change the rules after someone's already made decisions based on the current rules. Which is why they have such a big push to get the tax bill passed before the end-of-year; it would be completely awful to change the rules mid-year after people have already been making decisions. The Republicans could easily have a phase-in period for this rule if they cared to.


Well my undersatnding is that the mortgage deduction limits are only for new mortgages going forward so basically everyone is grandfathered in who already owns.  It's clear that they can decide not to change the rules after someone has made important decisions based on the current rules.  Not saying they should or not, but they can.
Title: Re: Republican Tax Plan 2017
Post by: inline five on November 16, 2017, 03:26:13 PM
Also FUCK the GOP, in particular fuck section 1402 of the proposed tax code. How does changing the tax free sale of a house after 2 years to 5 years help the middle class? News flash, it doesn't. I am one of those middle class families who purchased a house that needed a lot of TLC. My wife and I slow flipped the house while living in it and are now getting ready to sell. Unfortunately, if this goes into law, we will either have to wait 3 more years or sell and pay taxes on the ~$50k in profits we are forecast to make. That would be around $8k in taxes, all so we can fund the 0.01% and repeal the estate tax.

Fuck that and fuck the GOP.

Quote
SEC. 1402. EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL RESIDENCE.
(a) Requirement That Residence Be Principal Residence For 5 Years During 8-Year Period.—Subsection (a) of section 121 is amended—
(1) by striking “5-year period” and inserting “8-year period”, and
(2) by striking “2 years” and inserting “5 years”.

https://www.congress.gov/bill/115th-congress/house-bill/1/text#toc-H7A8ADDE279B541D890C20C759B82ABD3

The flip side of this is why should others pay more to subsidize your home purchase.

Solid logic. While we are at it, lets eliminate the 401k deduction, mortgage deduction and any child care deduction. Because why should anyone else have to subsidize that. Or maybe its because the government, when it was sane and rational, wanted to encourage things that were beneficial for its people rather than the tiny minority who hold all the wealth. This GOP tax bill is bought and paid for by the 0.01%.

We have no issues with population growth in fact if anything it's too fast.

Vast majority of people would actually be better off in Roth accounts, so it actually encourages the wrong behavior.

Government has never been good at allocating assets, which is why socialism doesn't really work. If you want to do something that benefits the people you would keep taxes and other barriers to wealth low on the poor and middle class. This would allow the money to flow in the most efficient manner possible.

Th elimination of the estate tax benefits one segment of the population and the rest of us will be paying for it.

I'm fine reducing Corp profits I would've actually liked to see it even lower but you can't have everything.

Hence the reason for me bitching up a storm in this thread :P

My taxes (at least for the year I will sell this house) will be insanely higher. And to hear those GOP congressmen say that they are helping the middle class is nauseating. They are ensuring they have donors come election time, nothing more. Also, Trump and his family could save more than $1 billion under House tax bill.

https://www.nbcnews.com/politics/first-read/trump-his-family-could-save-more-1-billion-under-house-n821491

But good thing we closed that 2 year house tax loophole! All those middle class folk were making way to much money exploiting it by improving their neighborhoods.

Well they are closing lots of loopholes so don't take offense to just one.

The idea had it been executed correctly was to simplify the taxes, get rid of a bunch of side items, and just use a standard deduction for most people.

Th idea sounded nice but it's clear it became a ruse to get rid of the estate tax. Most lawmakers are fairly wealthy so it will benefit them in a more disproportionate way.

It would be funny if the D's won the next election round and brought it back.
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 16, 2017, 03:27:08 PM
I see a reasonable chance that the Senate passes their bill with only 50 votes and the house winds up just having to approve the Senate bill (instead of developing a combined bill in committee).

I thought they could still use reconciliation even if the bill went to a conference committee...?

Meaning, they could pass two different versions; the House version that passed earlier today and whatever the Senate passes with 50+tie votes, then reconcile the bills in committee, then pass the committee version with 50+tie votes in the Senate (and presumably ~220 in the House).  No?  Yes?

It's not a question of whether that's possible, is a question of whether that's feasible. If they only barely eked out a 50+tie vote the first time with their ideal bill then it's not likely they'll be able to pass it the second time after a bunch of compromise changes. If the House just passes the Senate version they don't have to worry about that.

Yes.  This is exactly what I was suggesting.  I wouldn't be shocked if the Ron Johnson Senate defection is just an orchestrated charade to make this look even closer and dissuade other Senators from trying to pile on changes.  I think he'll vote yes if necessary to get it passed.
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 16, 2017, 03:45:52 PM
I don't feel bad one bit for DIY house flippers, no reason why their "wealth building" isn't taxed the same way as other businesses, just like I won't feel sorry for myself if my favorite loopholes (backdoor and megabackdoor Roth) get eliminated with no warning. I could understand the outrage if it had gone from 2 to 20 years, but 2 to 5 is a reasonable measure.

Housing isn't special.

Tuition credit for graduate assistants is in-kind income, so one might ask why it shouldn't be taxed, but I still "feel sorry" for people who started graduate programs with a very reasonable expectation that they'd have some particular financial consequence, only to have it changed while they still need more years to complete their programs.
Title: Re: Republican Tax Plan 2017
Post by: inline five on November 16, 2017, 04:25:52 PM
If you are basing purchase or career changes of hundreds of thousands of dollars, is saving a couple hundred a month at most really how you should be evaluating it?!

It's pretty ridiculous to pretend that you would've gotten a $700k mortgage to save $200/month but now that you can't deduct it, all bets are off. Yeah ok whatever.
Title: Re: Republican Tax Plan 2017
Post by: GreenEggs on November 16, 2017, 04:39:42 PM
Is the 1031 exchange staying? 
Title: Re: Republican Tax Plan 2017
Post by: Debts_of_Despair on November 16, 2017, 04:44:37 PM
DINC here with no mortgage, moderate property taxes, have state income tax, and maxing out two pre-tax retirement accounts.  I would consider this a pretty average MMM household.  We will save about $1,800 in taxes under the House plan.  Why is everyone so outraged?  What am I missing?
Title: Re: Republican Tax Plan 2017
Post by: JLee on November 16, 2017, 04:45:53 PM
DINC here with no mortgage, moderate property taxes, have state income tax, and maxing out two pre-tax retirement accounts.  I would consider this a pretty average MMM household.  We will save about $1,800 in taxes under the House plan.  Why is everyone so outraged?  What am I missing?

Until 2025, when all your tax breaks disappear to continue to fund the permanent corporate cuts?
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 16, 2017, 04:50:35 PM
DINC here with no mortgage, moderate property taxes, have state income tax, and maxing out two pre-tax retirement accounts.  I would consider this a pretty average MMM household.  We will save about $1,800 in taxes under the House plan.  Why is everyone so outraged?  What am I missing?

Well put.  I've ran my numbers under both bills, and I save money.  I think there has been way too much focus on what is being eliminated and not enough people seeing how the bracket changes offset the losses.
Title: Re: Republican Tax Plan 2017
Post by: Debts_of_Despair on November 16, 2017, 04:51:09 PM
Until 2025, when all your tax breaks disappear to continue to fund the permanent corporate cuts?

I believe that is in the Senate bill only.
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 16, 2017, 04:53:52 PM
DINC here with no mortgage, moderate property taxes, have state income tax, and maxing out two pre-tax retirement accounts.  I would consider this a pretty average MMM household.  We will save about $1,800 in taxes under the House plan.  Why is everyone so outraged?  What am I missing?

Until 2025, when all your tax breaks disappear to continue to fund the permanent corporate cuts?

This is business as usual under reconciliation.  Typically, everything would sunset, but by making the individual mandate change permanent, I think they can offset the added deficits from the corporate rate cuts beyond ten years; thus making them "permanent."  Permanent is an awful word in this context, because nothing is permanent in Washington.  After 8 years of lower rates, there should be no issue with gaining bipartisan votes to then make the individual rates permanent.  The same would likely not be true for the corporate cuts.  This is exactly what happened with the Bush tax cuts.
Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 16, 2017, 05:11:31 PM
If you are basing purchase or career changes of hundreds of thousands of dollars, is saving a couple hundred a month at most really how you should be evaluating it?!

It's pretty ridiculous to pretend that you would've gotten a $700k mortgage to save $200/month but now that you can't deduct it, all bets are off. Yeah ok whatever.
$700K mortgage, 30-year at 4% has about $27K in first year interest and (around here) $10K in property taxes. You need $16K in gross monthly income to keep your front-end total housing cost ratio to 28%. $16K * 12 is $192K per year gross income. That's going to put most people into the 28% bracket today. If the only deductions you had today were the $37K above, minus the $12.7K MFJ standard deduction, you're deducting an additional $14.3K at 28% or $4K using pretty bare minimum assumptions. $333/mo against a total housing cost of $4500 is a ~7.5% (after-tax) discount. Invest $265 per month at 6% (over-crediting the fact that interest goes down as you pay down the principal) and in 30 years, it's a quarter-million bucks difference vs not being able to deduct it.

I would imagine that most people care about a 7.5% discount on their greatest single expense, even if they don't realize that it's a quarter-million dollar difference over 30 years. Even seemingly small differences applied regularly over a long period can be financial life changers.
Title: Re: Republican Tax Plan 2017
Post by: mousebandit on November 16, 2017, 05:18:11 PM
Kevin, there are a few different exceptions to the rules for how long you live in the house to be able to claim the tax exemption.  Under some circumstances you can prorate the exemption.  With only about $50k in profits, you would be well under half of the $500k mfj exemption limit.  So, if you fit a loophole, and live there half of the required period, say 2-1/2 years, you could. claim up to half of the mfj limit.  It doesn't necessarily work for everyone, but see if you can make it work for you. 
Title: Re: Republican Tax Plan 2017
Post by: dragoncar on November 16, 2017, 08:27:09 PM
If you are basing purchase or career changes of hundreds of thousands of dollars, is saving a couple hundred a month at most really how you should be evaluating it?!

It's pretty ridiculous to pretend that you would've gotten a $700k mortgage to save $200/month but now that you can't deduct it, all bets are off. Yeah ok whatever.

Most of us around here do a "buy vs. rent" calculation, and deductibility of mortgage can be a deciding factor.  Removal or reduction of this deduction can definitely make "rent" come out on top.
Title: Re: Republican Tax Plan 2017
Post by: inline five on November 16, 2017, 09:44:54 PM
If you are basing purchase or career changes of hundreds of thousands of dollars, is saving a couple hundred a month at most really how you should be evaluating it?!

It's pretty ridiculous to pretend that you would've gotten a $700k mortgage to save $200/month but now that you can't deduct it, all bets are off. Yeah ok whatever.
$700K mortgage, 30-year at 4% has about $27K in first year interest and (around here) $10K in property taxes. You need $16K in gross monthly income to keep your front-end total housing cost ratio to 28%. $16K * 12 is $192K per year gross income. That's going to put most people into the 28% bracket today. If the only deductions you had today were the $37K above, minus the $12.7K MFJ standard deduction, you're deducting an additional $14.3K at 28% or $4K using pretty bare minimum assumptions. $333/mo against a total housing cost of $4500 is a ~7.5% (after-tax) discount. Invest $265 per month at 6% (over-crediting the fact that interest goes down as you pay down the principal) and in 30 years, it's a quarter-million bucks difference vs not being able to deduct it.

I would imagine that most people care about a 7.5% discount on their greatest single expense, even if they don't realize that it's a quarter-million dollar difference over 30 years. Even seemingly small differences applied regularly over a long period can be financial life changers.

That's quite an impressive calculation but completely glosses over my point. That fictional person isn't going to not buy a house with $192k in income over $300/month.

This assumes no interest credit (credit up to $500k in tax plan IIRC) and remember you can still deduct property taxes.

Also std deduction goes to $24k not $12k.

And $250k in 30 years is $100k in todays dollars.
Title: Re: Republican Tax Plan 2017
Post by: surfhb on November 16, 2017, 09:51:24 PM
Don't worry....the democrats will control congress in 2-4 years and everything will be switched.   Rinse and repeat as always while people are glued to their fucking phones whining about Weinsten and NFL players taking knees. 
Title: Re: Republican Tax Plan 2017
Post by: inline five on November 16, 2017, 09:52:13 PM
If you are basing purchase or career changes of hundreds of thousands of dollars, is saving a couple hundred a month at most really how you should be evaluating it?!

It's pretty ridiculous to pretend that you would've gotten a $700k mortgage to save $200/month but now that you can't deduct it, all bets are off. Yeah ok whatever.

Most of us around here do a "buy vs. rent" calculation, and deductibility of mortgage can be a deciding factor.  Removal or reduction of this deduction can definitely make "rent" come out on top.

Again if you are on the fence over such a huge purchase over just a few hundred bucks then maybe you shouldn't make it. You don't make a half million plus purchase because you're saving $200/month in taxes...you make it because you want to keep your housing costs stable and use inflated dollars over time to pay down the fixed rate loan.

In 30 years inflation more than double most folks salaries alone, if they keep renting forever they'll see continued increasing rents.

Remember you still can deduct up to $500k and the standard deduction goes to $24k.

How many middle class Americans are taking out jumbo loans?

This mortgage write off benefitted the wealthiest Americans not the middle class. Time to close it altogether IMO.
Title: Re: Republican Tax Plan 2017
Post by: dragoncar on November 16, 2017, 11:40:44 PM
If you are basing purchase or career changes of hundreds of thousands of dollars, is saving a couple hundred a month at most really how you should be evaluating it?!

It's pretty ridiculous to pretend that you would've gotten a $700k mortgage to save $200/month but now that you can't deduct it, all bets are off. Yeah ok whatever.

Most of us around here do a "buy vs. rent" calculation, and deductibility of mortgage can be a deciding factor.  Removal or reduction of this deduction can definitely make "rent" come out on top.

Again if you are on the fence over such a huge purchase over just a few hundred bucks then maybe you shouldn't make it. You don't make a half million plus purchase because you're saving $200/month in taxes...you make it because you want to keep your housing costs stable and use inflated dollars over time to pay down the fixed rate loan.

In 30 years inflation more than double most folks salaries alone, if they keep renting forever they'll see continued increasing rents.

Remember you still can deduct up to $500k and the standard deduction goes to $24k.

How many middle class Americans are taking out jumbo loans?

This mortgage write off benefitted the wealthiest Americans not the middle class. Time to close it altogether IMO.

Ok give me the $200/mo then

You remind me of the cashier who shorted me a nickel because he didn’t have a nickel.  He scoffed that I wanted my full change back.  It’s only five cents!  I told him, if it’s such a small amount you can make it a dime
Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 17, 2017, 05:53:07 AM
Most of us around here do a "buy vs. rent" calculation, and deductibility of mortgage can be a deciding factor.  Removal or reduction of this deduction can definitely make "rent" come out on top.
Again if you are on the fence over such a huge purchase over just a few hundred bucks then maybe you shouldn't make it. You don't make a half million plus purchase because you're saving $200/month in taxes...
At some point on the spectrum, that $200/mo is going to make the difference in marginal behavior. Maybe someone's not on the fence today, but the removal of that $200/mo puts them on the fence where you say they shouldn't make the purchase.

It seems your claim that you don't make such a major decision over $200/mo in after tax results is roughly equivalent to saying that someone shouldn't take job A over job B because job A pays $3500/year more. Of course you don't consider that one fact in isolation, but it's also more than just a tie-breaker for most people.

Behavior of home buyers on the margin is what determines the market clearing price. Take some percentage of buyers out of some segment of the market and those prices will come down and the sales slow. Whether that's a good or bad thing depends in part on your philosophy and in part on the realities of the specific sub-market you're examining.
Title: Re: Republican Tax Plan 2017
Post by: simonsez on November 17, 2017, 07:01:19 AM
Maybe you're rich if $200/month is something to scoff at?

Wait, sorry! Wrong thread!
Title: Re: Republican Tax Plan 2017
Post by: mustache you a question on November 17, 2017, 08:03:47 AM
I have a story to tell about this plan that should make people mad, but I'm not sure people care where I live...

About a month ago I had the opportunity to attend a speech/town hall with one of the Senators who represent my state (Ben Sasse).  He gave a 30 minute speech and did a Q/A session afterwards.  In his speech, he talked about the bond market and why debt threatens this country, basically saying that once the interest on treasury bonds rise it's going to cost a bunch more money to service the country's debt and that's why we need to cut spending on entitlements related items.  I thought it was BS but he was able to articulate his side very well and I came out of it with more respect for him than I had before.

Flash forward to today, he is in favor of a tax plan that increases the debt (the very thing he warned against).  The thing that makes me so angry about all of this is that this man, who is supposed to hold high moral values was able to lie in front of 300 or so of his constituents and not flinch.

Sorry for the rant.
Title: Re: Republican Tax Plan 2017
Post by: DarkandStormy on November 17, 2017, 08:29:45 AM
http://www.newsweek.com/republican-tax-bill-gives-private-plane-owners-tax-break-714381

(https://pbs.twimg.com/media/DOyQseQX0AIDfiO.jpg)

(https://pbs.twimg.com/media/DOyQtrGXUAEoeYQ.jpg)

The GOP, ladies and gents.  Tax breaks for corporate jet owners.  Paid for via the middle class and adding $1.5 trillion to the national debt.

Again...Fuck the GOP.
Title: Re: Republican Tax Plan 2017
Post by: starguru on November 17, 2017, 08:42:09 AM
http://www.newsweek.com/republican-tax-bill-gives-private-plane-owners-tax-break-714381

(https://pbs.twimg.com/media/DOyQseQX0AIDfiO.jpg)

(https://pbs.twimg.com/media/DOyQtrGXUAEoeYQ.jpg)

The GOP, ladies and gents.  Tax breaks for corporate jet owners.  Paid for via the middle class and adding $1.5 trillion to the national debt.

Again...Fuck the GOP.

That's the thing that really grinds my gears.  I could understand cutting tax breaks that upper middle class or even middle class people get (401k, SALT, etc).  What I can't fathom is how they want to raise taxes on middle/upper middle/working rich, but at the same time NOT increase taxes on the most wealthy people. 
Title: Re: Republican Tax Plan 2017
Post by: sol on November 17, 2017, 08:47:40 AM
Back on page 7 of this thread I wrote:

On the bright side, at least they didn't follow their blueprint from the healthcare debate and also steal from the poor at the same time.  They seem to have learned how bad the optics were on their plan to end medicaid to fund tax breaks for the rich, so this new tax plan mostly ignores the poor and instead steals from the middle class to fund tax breaks for the rich.  I wouldn't exactly call that progress, though.

and now I have to take it all back.  The new tax plan crushes medicare and the ACA exchanges in order to fund tax cuts for billionaires, EXACTLY like their health care proposal did earlier this year. 

I thought maybe they had learned from that experience that you don't ride a supposed wave of populism into office and then immediately start fucking with poor people in order to give goodies to billionaires.  That's the exact opposite of populism.  Whatever happened to draining the swamp?
Title: Re: Republican Tax Plan 2017
Post by: Clean Shaven on November 17, 2017, 08:53:47 AM


  Whatever happened to draining the swamp?

It was bullshit from day one. Unfortunately not everyone saw that last November, and many still believe it.

Title: Re: Republican Tax Plan 2017
Post by: talltexan on November 17, 2017, 08:56:48 AM
Enough sources for you?

Just because you don't like the facts doesn't mean they aren't facts.

This tax plan is a pile of shit designed solely to help the top 0.1% of this country.  Period.

Yep, that's much more than expected.  Thanks for the most thorough response.  Do you know where the "elimination of capital gains taxes for rich kids" comes from?

That comes from keeping the "step up" in basis that occurs when estates go through probate, but raising the threshold for Federal estate taxes to $22 million.
Title: Re: Republican Tax Plan 2017
Post by: sherr on November 17, 2017, 08:57:34 AM
Vast majority of people would actually be better off in Roth accounts, so it actually encourages the wrong behavior.

Well that's a pretty bold sourceless assumption. How do you figure?

To decide which is better you have to compare your current marginal tax rate (the discount you'd get for Traditional) with your retirement average tax rate (the discount you'd get for Roth). So assuming the US median household income of $59k for our retiree, that means (according to current tax rates) their average retirement tax rate would be 10.34 percent (assuming married filing jointly and standard deduction).

Traditional accounts are almost certainly better for everyone in the 15% bracket or higher. The 10% bracket is only break-even. The only people for whom Roth accounts are clearly better is the people who would be paying a 0% marginal rate, which is basically no one since if you are making that little income you don't have a lot to spare for retirement saving. The vast majority of people would be somewhere between worse-off and vastly-worse-off with Roth accounts, and removing the choice from the population is clearly worse than allowing people to choose based on their plans / assumptions.
Title: Re: Republican Tax Plan 2017
Post by: Boll weevil on November 17, 2017, 09:01:05 AM
Saw this chart this morning.

https://www.yahoo.com/finance/news/house-just-passed-1-5-trillion-tax-bill-thats-brutal-poor-people-194334563.html

I'm guessing a lot of FIREs end up in that red box.
Title: Re: Republican Tax Plan 2017
Post by: inline five on November 17, 2017, 09:13:17 AM
http://www.newsweek.com/republican-tax-bill-gives-private-plane-owners-tax-break-714381

(https://pbs.twimg.com/media/DOyQseQX0AIDfiO.jpg)

(https://pbs.twimg.com/media/DOyQtrGXUAEoeYQ.jpg)

The GOP, ladies and gents.  Tax breaks for corporate jet owners.  Paid for via the middle class and adding $1.5 trillion to the national debt.

Again...Fuck the GOP.

That's for the 91K operators like Netjets and Flexjet. The IRS actually lost that case in court a couple years ago, this just codifies it into law.

What was happening is the IRS wanted to collect ticket taxes on someone using their own airplane, kind of like if the local govt charged you a taxi fare for driving your personal car.
Title: Re: Republican Tax Plan 2017
Post by: inline five on November 17, 2017, 09:16:37 AM
Vast majority of people would actually be better off in Roth accounts, so it actually encourages the wrong behavior.

Well that's a pretty bold sourceless assumption. How do you figure?

To decide which is better you have to compare your current marginal tax rate (the discount you'd get for Traditional) with your retirement average tax rate (the discount you'd get for Roth). So assuming the US median household income of $59k for our retiree, that means (according to current tax rates) their average retirement tax rate would be 10.34 percent (assuming married filing jointly and standard deduction).

Traditional accounts are almost certainly better for everyone in the 15% bracket or higher. The 10% bracket is only break-even. The only people for whom Roth accounts are clearly better is the people who would be paying a 0% marginal rate, which is basically no one since if you are making that little income you don't have a lot to spare for retirement saving. The vast majority of people would be somewhere between worse-off and vastly-worse-off with Roth accounts, and removing the choice from the population is clearly worse than allowing people to choose based on their plans / assumptions.

It's not that simple because many things in retirement are based on taxable income. The lower your taxable income the more benefit you can take advantage of.

For the 1% of people like us yes the Trad might make more sense as we plan to retire early then convert the trad to Roth in a low tax bracket but we are NOT typical.
Title: Re: Republican Tax Plan 2017
Post by: DarkandStormy on November 17, 2017, 09:20:33 AM
https://www.cbsnews.com/news/senate-gop-tax-reform-shouting-match-sherrod-brown-orrin-hatch/

Those Republicans get a little testy when you call them out on their shit.
Title: Re: Republican Tax Plan 2017
Post by: secondcor521 on November 17, 2017, 09:30:46 AM
Regarding the tax break for private aircraft, I searched the text of the Senate bill here:

https://www.finance.senate.gov/imo/media/doc/11.9.17%20Chairman's%20Mark.pdf

And couldn't find "private aircraft" in there.  Looked for just "aircraft" and found 19 references, none of which matched the text in the Newsweek article.  I wonder if Topher Spiro and Newsweek are accurate, or if I'm just searching the wrong bill.  The above was the first Google link for "Senate tax bill text" and appears to be from the Senate Finance Committee, who I believe is responsible for the tax bill on the Senate side of things.

Title: Re: Republican Tax Plan 2017
Post by: sherr on November 17, 2017, 09:30:51 AM
Vast majority of people would actually be better off in Roth accounts, so it actually encourages the wrong behavior.

Well that's a pretty bold sourceless assumption. How do you figure?

To decide which is better you have to compare your current marginal tax rate (the discount you'd get for Traditional) with your retirement average tax rate (the discount you'd get for Roth). So assuming the US median household income of $59k for our retiree, that means (according to current tax rates) their average retirement tax rate would be 10.34 percent (assuming married filing jointly and standard deduction).

Traditional accounts are almost certainly better for everyone in the 15% bracket or higher. The 10% bracket is only break-even. The only people for whom Roth accounts are clearly better is the people who would be paying a 0% marginal rate, which is basically no one since if you are making that little income you don't have a lot to spare for retirement saving. The vast majority of people would be somewhere between worse-off and vastly-worse-off with Roth accounts, and removing the choice from the population is clearly worse than allowing people to choose based on their plans / assumptions.

It's not that simple because many things in retirement are based on taxable income. The lower your taxable income the more benefit you can take advantage of.

For the 1% of people like us yes the Trad might make more sense as we plan to retire early then convert the trad to Roth in a low tax bracket but we are NOT typical.

Still no numbers or sources I see. Okay.

I don't disagree that that's a consideration, but a 5% (for 15%-bracketers) discount on your entire retirement income is a pretty big difference to overcome. Never mind the 15% discount for 25%-bracketers. And that's even with me generously assuming that retirees will be "earning" the median US household income; most won't, expenses tend to be less in retirement (the biggie is that a lot of retirees have a paid-for house and / or retire to lower cost-of-living areas when they're not shackled to their job locations anymore). The less they "earn" the more imbalanced it is in favor of Traditional accounts.

And again, having the choice of which account you want to put money into based on your own plans / assumptions is obviously better than having that choice removed. You'd have to do an awful lot of mental gymnastics to explain how a force-everyone-to-use-Roth plan would be "better for the vast majority of people".
Title: Re: Republican Tax Plan 2017
Post by: OurTown on November 17, 2017, 09:32:48 AM
So the rate reductions and doubling the standard deduction will sunset for individuals in 2026 under the Senate plan.  Maybe we can all FIRE by 2026 so we can avoid the worst of the increase!
Title: Re: Republican Tax Plan 2017
Post by: caffeine on November 17, 2017, 09:33:54 AM
State tax will no longer be deductible under the tax plan. This would effectively tax the hell out of wealthy Californians who wouldn't be able to deduct their state income tax.
Title: Re: Republican Tax Plan 2017
Post by: inline five on November 17, 2017, 09:46:29 AM
State tax will no longer be deductible under the tax plan. This would effectively tax the hell out of wealthy Californians who wouldn't be able to deduct their state income tax.

I would guess states would then just change to a property only tax.
Title: Re: Republican Tax Plan 2017
Post by: caffeine on November 17, 2017, 09:47:27 AM
State tax will no longer be deductible under the tax plan. This would effectively tax the hell out of wealthy Californians who wouldn't be able to deduct their state income tax.

I would guess states would then just change to a property only tax.

I'm not sure that's even deductible in this plan.
Title: Re: Republican Tax Plan 2017
Post by: inline five on November 17, 2017, 09:48:43 AM
State tax will no longer be deductible under the tax plan. This would effectively tax the hell out of wealthy Californians who wouldn't be able to deduct their state income tax.

I would guess states would then just change to a property only tax.

I'm not sure that's even deductible in this plan.

Pretty sure it is. Income isn't but property is. At least the one from the House was like that. If they eliminate both I'm all for it. I would much rather see an elimination of both because all that would happen is states would then convert to property tax only which doesn't really help anything.
Title: Re: Republican Tax Plan 2017
Post by: MDM on November 17, 2017, 10:19:16 AM
To decide which is better you have to compare your current marginal tax rate (the discount you'd get for Traditional) with your retirement average tax rate (the discount you'd get for Roth).
That is not correct.

For any given year's choice of traditional vs. Roth (and assuming the traditional contribution would be deductible), comparing the contribution amount's marginal saving rate vs. the expected marginal tax rate on withdrawal amounts based on that contribution is correct.

E.g., see https://www.kitces.com/blog/understanding-marginal-tax-rate-vs-effective-tax-rate-and-when-to-use-each/ and https://www.bogleheads.org/wiki/Traditional_versus_Roth.
Title: Re: Republican Tax Plan 2017
Post by: Scortius on November 17, 2017, 10:20:11 AM
State tax will no longer be deductible under the tax plan. This would effectively tax the hell out of wealthy Californians who wouldn't be able to deduct their state income tax.

I would guess states would then just change to a property only tax.

I'm not sure that's even deductible in this plan.

Pretty sure it is. Income isn't but property is. At least the one from the House was like that. If they eliminate both I'm all for it. I would much rather see an elimination of both because all that would happen is states would then convert to property tax only which doesn't really help anything.

It is not. The Senate plan eliminates all State tax exemptions. Don't make the mistake of looking at the House plan, it's designed to be much nicer to middle-income folks because it doesn't have to abide by the $1.5T Byrd rule.  The Senate plan is going to squeeze much tighter to get under the $1.5T cap, and that's the one that they're going to have to stick to if they want it to stay permanent.
Title: Re: Republican Tax Plan 2017
Post by: inline five on November 17, 2017, 10:26:44 AM
State tax will no longer be deductible under the tax plan. This would effectively tax the hell out of wealthy Californians who wouldn't be able to deduct their state income tax.

I would guess states would then just change to a property only tax.

I'm not sure that's even deductible in this plan.

Pretty sure it is. Income isn't but property is. At least the one from the House was like that. If they eliminate both I'm all for it. I would much rather see an elimination of both because all that would happen is states would then convert to property tax only which doesn't really help anything.

It is not. The Senate plan eliminates all State tax exemptions. Don't make the mistake of looking at the House plan, it's designed to be much nicer to middle-income folks because it doesn't have to abide by the $1.5T Byrd rule.  The Senate plan is going to squeeze much tighter to get under the $1.5T cap, and that's the one that they're going to have to stick to if they want it to stay permanent.

Well to be fair not being able to deduct income and property taxes will hit higher earning folks more, not the middle.
Title: Re: Republican Tax Plan 2017
Post by: sherr on November 17, 2017, 10:55:05 AM
To decide which is better you have to compare your current marginal tax rate (the discount you'd get for Traditional) with your retirement average tax rate (the discount you'd get for Roth).
That is not correct.

For any given year's choice of traditional vs. Roth (and assuming the traditional contribution would be deductible), comparing the contribution amount's marginal saving rate vs. the expected marginal tax rate on withdrawal amounts based on that contribution is correct.

E.g., see https://www.kitces.com/blog/understanding-marginal-tax-rate-vs-effective-tax-rate-and-when-to-use-each/ and https://www.bogleheads.org/wiki/Traditional_versus_Roth.

Sort of.

Quote
The reason to use marginal tax rates in this decision is that you can make the decision separately for every dollar you invest. If the next dollar you invest will be taxed at 25% now and 25% when you retire, then the tax situation is break-even.

So the first $12.7k you are choosing between your current marginal rate and the 0% retirement marginal rate (standard deduction). Obviously Traditional is better than Roth if your current marginal rate is > 0.
For the next $18.65k you are choosing between your current marginal rate and the 10% retirement marginal rate. Obviously Traditional is break-even if your current marginal rate is 10%, and better if it's more.
For the next $57.25k you are choosing between your current marginal rate and the 15% retirement marginal rate. Obviously Roth is better if your current marginal rate is 10% or less, it's break-even at 15%, and Traditional is better if your current marginal rate is 25% or more.
Etc.

Or, the short (slightly estimated) way to say that is that you're choosing between your current marginal rate and your average retirement rate. If you want to split your contribution between Traditional and Roth then by all means, break it down dollar-by-dollar. If you just want to know which account is "better for the vast majority of people" then you can use average. But no matter what you can't just look at the marginal rate on the last dollar and make decisions based on that alone (well, you can if you want to make bad choices and pay too much in taxes).
Title: Re: Republican Tax Plan 2017
Post by: sherr on November 17, 2017, 11:07:37 AM
It is not. The Senate plan eliminates all State tax exemptions. Don't make the mistake of looking at the House plan, it's designed to be much nicer to middle-income folks because it doesn't have to abide by the $1.5T Byrd rule.  The Senate plan is going to squeeze much tighter to get under the $1.5T cap, and that's the one that they're going to have to stick to if they want it to stay permanent.
Or they could, I don't know, work with Democrats to come up with a bill that is able to pass by invoking cloture instead.

Given that "bi-partisan compromise" is a dirty word to the current Republican party, no, they cannot.
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 17, 2017, 12:00:21 PM

Quote

No one wants to do weeks worth of tax work. But if the alternative is a $5k a year tax increase, I don't want simplification...

There is a value proposition here. I am willing to suffer complex taxes if it offers me more money in my pocket. If you are not losing anything to move to a simple standard then of course that less tax BS will sound like the best option.

Are you a high earning family? It seems to always be the case for people who compain about actual middle class getting a tax break. Because for our family, this law would result in a $2500 tax break while taking all of 20 min to prepare the tax return. But again, we live in 750 sq ft, all of 4 people.
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 17, 2017, 12:13:52 PM
DINC here with no mortgage, moderate property taxes, have state income tax, and maxing out two pre-tax retirement accounts.  I would consider this a pretty average MMM household.  We will save about $1,800 in taxes under the House plan.  Why is everyone so outraged?  What am I missing?

Well put.  I've ran my numbers under both bills, and I save money.  I think there has been way too much focus on what is being eliminated and not enough people seeing how the bracket changes offset the losses.

I wonder the same thing -  we will save on taxes, and we make around 150K and that is with one person currently not eligible for 401K!!
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 17, 2017, 12:18:50 PM
Saw this chart this morning.

https://www.yahoo.com/finance/news/house-just-passed-1-5-trillion-tax-bill-thats-brutal-poor-people-194334563.html

I'm guessing a lot of FIREs end up in that red box.

This is called - "How to lie with statistics"...Economy projections beyond a 2-3 yr period are useless, and even those are crap usually. 10 -20 year period are just hilarious. Yahoo News progressive sledgehammer falls on anything that is not pure socialism.

Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 17, 2017, 12:22:08 PM

Quote

Well to be fair not being able to deduct income and property taxes will hit higher earning folks more, not the middle.

No one on  this topic is fair. Everyone evaluates through their own biases. And no one is willing to state what a "fair" tax system according to them would be. The hypocrisy.
Title: Re: Republican Tax Plan 2017
Post by: DarkandStormy on November 17, 2017, 12:22:53 PM
Saw this chart this morning.

https://www.yahoo.com/finance/news/house-just-passed-1-5-trillion-tax-bill-thats-brutal-poor-people-194334563.html

I'm guessing a lot of FIREs end up in that red box.

This is called - "How to lie with statistics"...Economy projections beyond a 2-3 yr period are useless, and even those are crap usually. 10 -20 year period are just hilarious. Yahoo News progressive sledgehammer falls on anything that is not pure socialism.

Are...are you intentionally being obtuse?

Quote
The Joint Committee on Taxation, Congress’s nonpartisan scorekeeper in tax matters, released its evaluation of the House GOP’s tax bill

Progressive and LIBRUHLS are only releasing what the JCT and CBO - both NON PARTISAN - are pulling together and publishing.

Take your issue up with them, not Yahoo Finance or liberals.
Title: Re: Republican Tax Plan 2017
Post by: MDM on November 17, 2017, 12:24:31 PM
To decide which is better you have to compare your current marginal tax rate (the discount you'd get for Traditional) with your retirement average tax rate (the discount you'd get for Roth).
That is not correct.

For any given year's choice of traditional vs. Roth (and assuming the traditional contribution would be deductible), comparing the contribution amount's marginal saving rate vs. the expected marginal tax rate on withdrawal amounts based on that contribution is correct.

E.g., see https://www.kitces.com/blog/understanding-marginal-tax-rate-vs-effective-tax-rate-and-when-to-use-each/ and https://www.bogleheads.org/wiki/Traditional_versus_Roth.
So the first $12.7k you are choosing between your current marginal rate and the 0% retirement marginal rate (standard deduction). Obviously Traditional is better than Roth if your current marginal rate is > 0.
For the next $18.65k you are choosing between your current marginal rate and the 10% retirement marginal rate. Obviously Traditional is break-even if your current marginal rate is 10%, and better if it's more.
For the next $57.25k you are choosing between your current marginal rate and the 15% retirement marginal rate. Obviously Roth is better if your current marginal rate is 10% or less, it's break-even at 15%, and Traditional is better if your current marginal rate is 25% or more.
Etc.

Or, the short (slightly estimated) way to say that is that you're choosing between your current marginal rate and your average retirement rate. If you want to split your contribution between Traditional and Roth then by all means, break it down dollar-by-dollar. If you just want to know which account is "better for the vast majority of people" then you can use average. But no matter what you can't just look at the marginal rate on the last dollar and make decisions based on that alone (well, you can if you want to make bad choices and pay too much in taxes).

Don't know if you were misled by something you read, but there are some subtle but important points you may be missing.

Last one first: of course one "can't just look at the marginal rate on the last dollar and make decisions based on that alone."  No argument there, but that isn't the suggested comparison.

One needs to look at the marginal rate (https://www.bogleheads.org/wiki/Marginal_tax_rate) on "amounts".  E.g., if one doesn't wish to split an annual 401k or IRA contribution, the contribution amount would be $18K or $5.5K (or the >50 amount) respectively.  Similarly, one might use a 4%/yr withdrawal ratio on the projected balance of this year's traditional contribution to get the withdrawal amount that goes in the denominator for the marginal calculation. Say, 4% of $18K returning 5% real for 30 years would be an extra $3100.  The withdrawal marginal rate is [(tax including the $3100) - (tax without the $3100)]/$3100.

Using (tax including the $3100)/(total income) could cause one to make bad choices and pay too much in taxes.

Consider this example:
Someone saving 15% on a traditional contribution this year.  Regardless of whether that contribution is made, the person will pay a 25% marginal rate when withdrawing from traditional accounts, but the effective rate will be 11%.

Should the person contribute to traditional or Roth this year?
Title: Re: Republican Tax Plan 2017
Post by: GoingConcern on November 17, 2017, 12:57:19 PM
If you are basing purchase or career changes of hundreds of thousands of dollars, is saving a couple hundred a month at most really how you should be evaluating it?!

It's pretty ridiculous to pretend that you would've gotten a $700k mortgage to save $200/month but now that you can't deduct it, all bets are off. Yeah ok whatever.

Most of us around here do a "buy vs. rent" calculation, and deductibility of mortgage can be a deciding factor.  Removal or reduction of this deduction can definitely make "rent" come out on top.

Again if you are on the fence over such a huge purchase over just a few hundred bucks then maybe you shouldn't make it. You don't make a half million plus purchase because you're saving $200/month in taxes...you make it because you want to keep your housing costs stable and use inflated dollars over time to pay down the fixed rate loan.

In 30 years inflation more than double most folks salaries alone, if they keep renting forever they'll see continued increasing rents.

Remember you still can deduct up to $500k and the standard deduction goes to $24k.

How many middle class Americans are taking out jumbo loans?

This mortgage write off benefitted the wealthiest Americans not the middle class. Time to close it altogether IMO.

Ok give me the $200/mo then

You remind me of the cashier who shorted me a nickel because he didn’t have a nickel.  He scoffed that I wanted my full change back.  It’s only five cents!  I told him, if it’s such a small amount you can make it a dime

This is more like you going to a store and ask the coffee shop owner and/or other customers to subsidize your purchase.

 
Title: Re: Republican Tax Plan 2017
Post by: furrychickens on November 17, 2017, 01:08:58 PM
Is there a tool out there that would let non-Excel wizards easily calculate the change in their own taxes under this plan? Obviously all subject to sausage-making change as nothing's law yet.

Just from what I've read, I believe my family will come out ahead because of the increased child credits. Currently we do enough pre-tax savings to pay essentially zero federal tax, might start getting a refund again.
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 17, 2017, 01:32:18 PM
Quote

Are...are you intentionally being obtuse?


Misunderstanding of my point is not my fault. If you want to argue on that topic take it up with the leading expert of systemic risk, Nassim Taleb.
And just check how many times the CBO has been wrong in the past in their projections. Hence - how to lie with statistics - recommended reading for many MBA programs...

https://www.amazon.com/How-Lie-Statistics-Darrell-Huff/dp/0393310728
Title: Re: Republican Tax Plan 2017
Post by: Kevin on November 17, 2017, 01:47:20 PM
I encourage everyone who takes issue with the tax bill to call their Senators. I've called both of mine 3 times since last week. Only got through to a human once, but left messages all the other times.
Title: Re: Republican Tax Plan 2017
Post by: djadziadax on November 17, 2017, 02:08:21 PM
Is there a tool out there that would let non-Excel wizards easily calculate the change in their own taxes under this plan? Obviously all subject to sausage-making change as nothing's law yet.

Just from what I've read, I believe my family will come out ahead because of the increased child credits. Currently we do enough pre-tax savings to pay essentially zero federal tax, might start getting a refund again.

Actually you may really not need to be excel wizard to do this...you can actually just use a calculator.

1. Calculated whether your mortgage deduction (on 500K)+charitable contribution+property taxes will be over 24K if MFJ. If not, you know you will be taking the standard deduction.

2. Combine all sources of income - ordinary income (x1) + investment income (x0.5) to get to your total income. Only 50% of Investment income will be tax, hence multiply by 0.5.

3. Subtract your retirement contributions (401K, IRA if applicable) from your total income

4. Subtract your medical premiums from your income (i believe this stays pretax)

5. Subtract your Standard or Itemized deduction

6. That will give you your taxable income. Then, multiply that x 12% if up to 90K.

7. That gives you your tax.

8. Subtract from 8 the combination of your child and flex credits (1600 per child, 300 per adult in household)

9. That is the tax you will be paying.

I think that is pretty correct but am open to corrections.
Title: Re: Republican Tax Plan 2017
Post by: ZiziPB on November 17, 2017, 02:18:00 PM


2. Combine all sources of income - ordinary income (x1) + investment income (x0.5) to get to your total income. Only 50% of Investment income will be tax, hence multiply by 0.5.


Huh?
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 17, 2017, 02:51:36 PM

and now I have to take it all back.  The new tax plan crushes medicare and the ACA exchanges in order to fund tax cuts for billionaires, EXACTLY like their health care proposal did earlier this year. 


Hey, it's not like they're getting rid of Obamacare altogether. They're leaving the Obamacare taxes in place (the 3.8% NIIT and the .9% Medicare surcharge).
Title: Re: Republican Tax Plan 2017
Post by: dragoncar on November 17, 2017, 02:56:15 PM
If you are basing purchase or career changes of hundreds of thousands of dollars, is saving a couple hundred a month at most really how you should be evaluating it?!

It's pretty ridiculous to pretend that you would've gotten a $700k mortgage to save $200/month but now that you can't deduct it, all bets are off. Yeah ok whatever.

Most of us around here do a "buy vs. rent" calculation, and deductibility of mortgage can be a deciding factor.  Removal or reduction of this deduction can definitely make "rent" come out on top.

Again if you are on the fence over such a huge purchase over just a few hundred bucks then maybe you shouldn't make it. You don't make a half million plus purchase because you're saving $200/month in taxes...you make it because you want to keep your housing costs stable and use inflated dollars over time to pay down the fixed rate loan.

In 30 years inflation more than double most folks salaries alone, if they keep renting forever they'll see continued increasing rents.

Remember you still can deduct up to $500k and the standard deduction goes to $24k.

How many middle class Americans are taking out jumbo loans?

This mortgage write off benefitted the wealthiest Americans not the middle class. Time to close it altogether IMO.

Ok give me the $200/mo then

You remind me of the cashier who shorted me a nickel because he didn’t have a nickel.  He scoffed that I wanted my full change back.  It’s only five cents!  I told him, if it’s such a small amount you can make it a dime

This is more like you going to a store and ask the coffee shop owner and/or other customers to subsidize your purchase.

No, it's like going to the store and I want to buy some milk.  But the price went up 10 cents because the government stopped subsidizing the milk.  I say, now that's more expensive than juice, so I'll buy the juice instead.  Then some guy on the internet tells me I'm wrong because nobody makes a decision to buy milk based on 10 cents and I tell him to give me 10 cents if it's no big deal.

No matter how much extra value someone assigns to home ownership, there's still a break even point where you are on the fence.  Maybe renting costs $1000 and buying costs $1200, but I choose to buy because I'm willing to pay $200 extra to own.  Now the price goes up to $1400, but I'm not willing to pay a extra $400 to own.  So I rent.  Is this really hard to grasp?
Title: Re: Republican Tax Plan 2017
Post by: inline five on November 17, 2017, 03:12:38 PM
If you are basing purchase or career changes of hundreds of thousands of dollars, is saving a couple hundred a month at most really how you should be evaluating it?!

It's pretty ridiculous to pretend that you would've gotten a $700k mortgage to save $200/month but now that you can't deduct it, all bets are off. Yeah ok whatever.

Most of us around here do a "buy vs. rent" calculation, and deductibility of mortgage can be a deciding factor.  Removal or reduction of this deduction can definitely make "rent" come out on top.

Again if you are on the fence over such a huge purchase over just a few hundred bucks then maybe you shouldn't make it. You don't make a half million plus purchase because you're saving $200/month in taxes...you make it because you want to keep your housing costs stable and use inflated dollars over time to pay down the fixed rate loan.

In 30 years inflation more than double most folks salaries alone, if they keep renting forever they'll see continued increasing rents.

Remember you still can deduct up to $500k and the standard deduction goes to $24k.

How many middle class Americans are taking out jumbo loans?

This mortgage write off benefitted the wealthiest Americans not the middle class. Time to close it altogether IMO.

Ok give me the $200/mo then

You remind me of the cashier who shorted me a nickel because he didn’t have a nickel.  He scoffed that I wanted my full change back.  It’s only five cents!  I told him, if it’s such a small amount you can make it a dime

This is more like you going to a store and ask the coffee shop owner and/or other customers to subsidize your purchase.

No, it's like going to the store and I want to buy some milk.  But the price went up 10 cents because the government stopped subsidizing the milk.  I say, now that's more expensive than juice, so I'll buy the juice instead.  Then some guy on the internet tells me I'm wrong because nobody makes a decision to buy milk based on 10 cents and I tell him to give me 10 cents if it's no big deal.

No matter how much extra value someone assigns to home ownership, there's still a break even point where you are on the fence.  Maybe renting costs $1000 and buying costs $1200, but I choose to buy because I'm willing to pay $200 extra to own.  Now the price goes up to $1400, but I'm not willing to pay a extra $400 to own.  So I rent.  Is this really hard to grasp?

No it's completely understandable.

Except your example is not correct because there are no $500k mortgages for $1400/month.

However think about what the tax deduction is doing. For one renters are subsidizing homeowners, when it probably should be the opposite. Two, lower income folks are subsidizing higher income folks who have larger mortgages.

It's already limited to $1m. Correct me if I am wrong but the new tax plan will lower that to $500k mortgages.

How does this hurt the middle class? If anything it's a tax on the wealthy because they can't deduct as much.
Title: Re: Republican Tax Plan 2017
Post by: jean on November 17, 2017, 03:19:10 PM
Is there a tool out there that would let non-Excel wizards easily calculate the change in their own taxes under this plan? Obviously all subject to sausage-making change as nothing's law yet.

Just from what I've read, I believe my family will come out ahead because of the increased child credits. Currently we do enough pre-tax savings to pay essentially zero federal tax, might start getting a refund again.

Actually you may really not need to be excel wizard to do this...you can actually just use a calculator.

1. Calculated whether your mortgage deduction (on 500K)+charitable contribution+property taxes will be over 24K if MFJ. If not, you know you will be taking the standard deduction.

2. Combine all sources of income - ordinary income (x1) + investment income (x0.5) to get to your total income. Only 50% of Investment income will be tax, hence multiply by 0.5.

3. Subtract your retirement contributions (401K, IRA if applicable) from your total income

4. Subtract your medical premiums from your income (i believe this stays pretax)

5. Subtract your Standard or Itemized deduction

6. That will give you your taxable income. Then, multiply that x 12% if up to 90K.

7. That gives you your tax.

8. Subtract from 8 the combination of your child and flex credits (1600 per child, 300 per adult in household)

9. That is the tax you will be paying.

I think that is pretty correct but am open to corrections.

That's seems about right, except the mortgage interest provision is only for new loans (so if you happen to already have a $500k+ mortgage, you can deduct all interest) and property taxes are capped at $10k.  This is the house plan.  The senate plan allows no property tax deduction and allows interest on mortgages up to $1M no change.  The senate plan also has different tax brackets.
Title: Re: Republican Tax Plan 2017
Post by: RangerOne on November 17, 2017, 03:21:12 PM

Quote

No one wants to do weeks worth of tax work. But if the alternative is a $5k a year tax increase, I don't want simplification...

There is a value proposition here. I am willing to suffer complex taxes if it offers me more money in my pocket. If you are not losing anything to move to a simple standard then of course that less tax BS will sound like the best option.

Are you a high earning family? It seems to always be the case for people who compain about actual middle class getting a tax break. Because for our family, this law would result in a $2500 tax break while taking all of 20 min to prepare the tax return. But again, we live in 750 sq ft, all of 4 people.

I agree this is only an issue, for the most part, for people considering buying a median priced Cali home. If you can't or wouldn't itimize then this would be a small tax break.

They are keeping a lot of bullshit tax breaks to give breaks to people who need them even less than I do.

Though I will admit if I weren't negotiating to buy a home right now I'd be happier about California's housing market getting a small reality check.

There will be a lot of unhappy home owners paying more taxes. I can't comment on if the whole lot are just a bunch of "rich kids". But I know we are not fucking multi millionaires getting to ditch the estate tax to spoil our kids....

Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 17, 2017, 03:23:50 PM

and now I have to take it all back.  The new tax plan crushes medicare and the ACA exchanges in order to fund tax cuts for billionaires, EXACTLY like their health care proposal did earlier this year. 


Hey, it's not like they're getting rid of Obamacare altogether. They're leaving the Obamacare taxes in place (the 3.8% NIIT and the .9% Medicare surcharge).

Good point.  I hadn't really thought about that.
Title: Re: Republican Tax Plan 2017
Post by: RangerOne on November 17, 2017, 03:24:35 PM
So the rate reductions and doubling the standard deduction will sunset for individuals in 2026 under the Senate plan.  Maybe we can all FIRE by 2026 so we can avoid the worst of the increase!

This is just a bullshit way to bypass fiscal responsibility. The reality is the adminstration and Congress that is there in 2026 will be all but forced to extend the cuts... Just like we did for bush. It let's them claim they aren't jacking up the deficit as much. But they know that we will likely not let the breaks expire....

Where as a democratic Congress would certainly let corporate breaks expire.

*I don't think this is a terrible thing. The claim taxes will go back up in 2026 is what I am calling bullshit. They probably won't for most people making under 200k.
Title: Re: Republican Tax Plan 2017
Post by: sherr on November 17, 2017, 03:26:12 PM
To decide which is better you have to compare your current marginal tax rate (the discount you'd get for Traditional) with your retirement average tax rate (the discount you'd get for Roth).
That is not correct.

For any given year's choice of traditional vs. Roth (and assuming the traditional contribution would be deductible), comparing the contribution amount's marginal saving rate vs. the expected marginal tax rate on withdrawal amounts based on that contribution is correct.

E.g., see https://www.kitces.com/blog/understanding-marginal-tax-rate-vs-effective-tax-rate-and-when-to-use-each/ and https://www.bogleheads.org/wiki/Traditional_versus_Roth.
So the first $12.7k you are choosing between your current marginal rate and the 0% retirement marginal rate (standard deduction). Obviously Traditional is better than Roth if your current marginal rate is > 0.
For the next $18.65k you are choosing between your current marginal rate and the 10% retirement marginal rate. Obviously Traditional is break-even if your current marginal rate is 10%, and better if it's more.
For the next $57.25k you are choosing between your current marginal rate and the 15% retirement marginal rate. Obviously Roth is better if your current marginal rate is 10% or less, it's break-even at 15%, and Traditional is better if your current marginal rate is 25% or more.
Etc.

Or, the short (slightly estimated) way to say that is that you're choosing between your current marginal rate and your average retirement rate. If you want to split your contribution between Traditional and Roth then by all means, break it down dollar-by-dollar. If you just want to know which account is "better for the vast majority of people" then you can use average. But no matter what you can't just look at the marginal rate on the last dollar and make decisions based on that alone (well, you can if you want to make bad choices and pay too much in taxes).

Don't know if you were misled by something you read, but there are some subtle but important points you may be missing.

Last one first: of course one "can't just look at the marginal rate on the last dollar and make decisions based on that alone."  No argument there, but that isn't the suggested comparison.

One needs to look at the marginal rate (https://www.bogleheads.org/wiki/Marginal_tax_rate) on "amounts".  E.g., if one doesn't wish to split an annual 401k or IRA contribution, the contribution amount would be $18K or $5.5K (or the >50 amount) respectively.  Similarly, one might use a 4%/yr withdrawal ratio on the projected balance of this year's traditional contribution to get the withdrawal amount that goes in the denominator for the marginal calculation. Say, 4% of $18K returning 5% real for 30 years would be an extra $3100.  The withdrawal marginal rate is [(tax including the $3100) - (tax without the $3100)]/$3100.

Using (tax including the $3100)/(total income) could cause one to make bad choices and pay too much in taxes.

Consider this example:
Someone saving 15% on a traditional contribution this year.  Regardless of whether that contribution is made, the person will pay a 25% marginal rate when withdrawing from traditional accounts, but the effective rate will be 11%.

Should the person contribute to traditional or Roth this year?

Well, thanks for correcting me, you've given me a lot to think about. That person should contribute to Roth this year.

I feel like at least half of my point to inline five was that that's a highly improbable scenario. If you're only in the 15% bracket while working, you're almost certainly not going to have enough money or be used to the lifestyle that would cause you to withdraw enough in retirement to be in the 25% bracket. Most retirees spend less in retirement than they do while working, and far less than they make while working, so on average Traditional accounts are going to be better for most people. But that's not the portion you were arguing against.
Title: Re: Republican Tax Plan 2017
Post by: RangerOne on November 17, 2017, 03:32:29 PM
Ive got to assume I am just in the unlucky middle. I make to much and get phased out of tax breaks for the "middle class"  but I don't make enough to celebrate the death of AMT
 I have got to assume that alot of OC folks and Bay area people will not care as much about losing deductions because AMT was probably doing that already... Though it is just a guess on my part. Never had to calculate my AMT tax....
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 17, 2017, 03:33:36 PM

and now I have to take it all back.  The new tax plan crushes medicare and the ACA exchanges in order to fund tax cuts for billionaires, EXACTLY like their health care proposal did earlier this year. 


Hey, it's not like they're getting rid of Obamacare altogether. They're leaving the Obamacare taxes in place (the 3.8% NIIT and the .9% Medicare surcharge).

Good point.  I hadn't really thought about that.

I've never been one to cry out for tax reductions (although I do wish the federal government spent our money differently), but as someone who is "targeted" by these tax proposals (seemingly more by the House proposal than by the Senate proposal, although I've given up trying to figure it all out precisely until there is a new law), I'm starting to feel it!
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 17, 2017, 03:40:29 PM
Ive got to assume I am just in the unlucky middle. I make to much and get phased out of tax breaks for the "middle class"  but I don't make enough to celebrate the death of AMT

The combination of eliminating or limiting the SALT deductions and playing with the boundaries of the brackets (most significantly, the House proposal starting the 35% bracket at $260k for MFJ, rather than ~$416k where it starts now) makes for a lot less celebrating of the death of the AMT than you might imagine. And it's really more like "I don't pay enough taxes to my state/county/city to celebrate the death of the AMT."
Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 17, 2017, 04:01:25 PM
However think about what the tax deduction is doing. For one renters are subsidizing homeowners, when it probably should be the opposite. Two, lower income folks are subsidizing higher income folks who have larger mortgages.
Renters are already (and still will be) getting the full mortgage interest deduction (via the supply side deductions their landlords are able to take, which serve to change the economics and increase the supply of rental housing vs a world where no mortgage interest was deductible for landlords).
Title: Re: Republican Tax Plan 2017
Post by: MDM on November 17, 2017, 04:29:35 PM
Vast majority of people would actually be better off in Roth accounts, so it actually encourages the wrong behavior.
Well that's a pretty bold sourceless assumption. How do you figure?

...

It's not that simple because many things in retirement are based on taxable income. The lower your taxable income the more benefit you can take advantage of.

For the 1% of people like us yes the Trad might make more sense as we plan to retire early then convert the trad to Roth in a low tax bracket but we are NOT typical.

Still no numbers or sources I see. Okay.

I don't disagree that that's a consideration, but a 5% (for 15%-bracketers) discount on your entire retirement income is a pretty big difference to overcome. Never mind the 15% discount for 25%-bracketers. And that's even with me generously assuming that retirees will be "earning" the median US household income; most won't, expenses tend to be less in retirement (the biggie is that a lot of retirees have a paid-for house and / or retire to lower cost-of-living areas when they're not shackled to their job locations anymore). The less they "earn" the more imbalanced it is in favor of Traditional accounts.

And again, having the choice of which account you want to put money into based on your own plans / assumptions is obviously better than having that choice removed. You'd have to do an awful lot of mental gymnastics to explain how a force-everyone-to-use-Roth plan would be "better for the vast majority of people".
Despite the fact that marginal vs. marginal is the correct math, I vote with sherr on the "if one had to guess what is best for a random person" issue here.

One really needs to look at one's specific situation (e.g., ACA or not; low income credits or not; pension or not; how much SS benefit; etc.) because the rules of thumb in the traditional vs. Roth arena have many exceptions.
Title: Re: Republican Tax Plan 2017
Post by: jean on November 17, 2017, 05:28:57 PM
I pay a bit under $20k in mortgage interest, $11k in property taxes, about $9k in state taxes, no kids.  The MJF personal exemption is $8,100 (included in itemized deductions).  Our house is not special - less than 1500 sq ft, older, not fully updates - but we live in an expensive area and didn't buy all that long ago.  Kids are planned but not here yet. 

The house plan has my taxes increasing by $570/month, and the senate plan has them increasing by $320/mo.  And I guess these will increase over time since the bracket changes will sunset. This significantly changes the rent vs buy math we carefully evaluated when purchasing.  Yes, we can still afford it, but the breakeven date is pushed out.  Are there people who can't afford a $570/mo increase in housing costs that have higher incomes?  Probably - we didn't buy at the edge of our budget.

Should someone like me pay more taxes?  Sure, maybe I should. BUT I don't think that I should pay more so that the following can happen:
- the rich can inherit tax-free, and with the step-up basis not changed
- corporations can get a permanent tax break, which they will pass to shareholders (not employees)
- ACA individual mandate can be repealed. WTF is that doing in this tax bill? (I know why it was put there, but still. WTF.)

The crazy thing is if I were a higher earner (say $450k AGI)  my taxes would go down a bit under both scenarios due to the repeal of the AMT.  What?!? The bill is targeted to hit people exactly like me.

I would like to see a bill that helped the true middle class (which I admit isn't me) without all of the corporate tax breaks and giveaways to the wealthy.  This is what I hate about this bill.
Title: Re: Republican Tax Plan 2017
Post by: teen persuasion on November 17, 2017, 05:55:17 PM


2. Combine all sources of income - ordinary income (x1) + investment income (x0.5) to get to your total income. Only 50% of Investment income will be tax, hence multiply by 0.5.


Huh?
+1

Is this new?  I don't remember this change.
Title: Re: Republican Tax Plan 2017
Post by: dragoncar on November 17, 2017, 06:05:52 PM


Again if you are on the fence over such a huge purchase over just a few hundred bucks then maybe you shouldn't make it. You don't make a half million plus purchase because you're saving $200/month in taxes...you make it because you want to keep your housing costs stable and use inflated dollars over time to pay down the fixed rate loan.

In 30 years inflation more than double most folks salaries alone, if they keep renting forever they'll see continued increasing rents.

Remember you still can deduct up to $500k and the standard deduction goes to $24k.

How many middle class Americans are taking out jumbo loans?

This mortgage write off benefitted the wealthiest Americans not the middle class. Time to close it altogether IMO.

Ok give me the $200/mo then

You remind me of the cashier who shorted me a nickel because he didn’t have a nickel.  He scoffed that I wanted my full change back.  It’s only five cents!  I told him, if it’s such a small amount you can make it a dime

This is more like you going to a store and ask the coffee shop owner and/or other customers to subsidize your purchase.

No, it's like going to the store and I want to buy some milk.  But the price went up 10 cents because the government stopped subsidizing the milk.  I say, now that's more expensive than juice, so I'll buy the juice instead.  Then some guy on the internet tells me I'm wrong because nobody makes a decision to buy milk based on 10 cents and I tell him to give me 10 cents if it's no big deal.

No matter how much extra value someone assigns to home ownership, there's still a break even point where you are on the fence.  Maybe renting costs $1000 and buying costs $1200, but I choose to buy because I'm willing to pay $200 extra to own.  Now the price goes up to $1400, but I'm not willing to pay a extra $400 to own.  So I rent.  Is this really hard to grasp?

No it's completely understandable.

Except your example is not correct because there are no $500k mortgages for $1400/month.

However think about what the tax deduction is doing. For one renters are subsidizing homeowners, when it probably should be the opposite. Two, lower income folks are subsidizing higher income folks who have larger mortgages.

It's already limited to $1m. Correct me if I am wrong but the new tax plan will lower that to $500k mortgages.

How does this hurt the middle class? If anything it's a tax on the wealthy because they can't deduct as much.

See your statement above, bolded.  Although my example is generalization to any mortgage size, you suggested eliminating the deduction entirely. 

Renters pay landlords who, guess what, deduct their mortgage expenses.  If landlords couldn't deduct that expense, they would likely raise rents.  So homeowners are no more subsidized by renters than vice versa.

How does all this hurt the middle class?  I guess it depends on whether you consider "upper middle class" to be in the middle class, but I do.  There are plenty of people in California who this will hurt that can't afford extravagant lives beyond having a home in an area with nice climate.
Title: Re: Republican Tax Plan 2017
Post by: RangerOne on November 17, 2017, 06:13:43 PM
I pay a bit under $20k in mortgage interest, $11k in property taxes, about $9k in state taxes, no kids.  The MJF personal exemption is $8,100 (included in itemized deductions).  Our house is not special - less than 1500 sq ft, older, not fully updates - but we live in an expensive area and didn't buy all that long ago.  Kids are planned but not here yet. 

The house plan has my taxes increasing by $570/month, and the senate plan has them increasing by $320/mo.  And I guess these will increase over time since the bracket changes will sunset. This significantly changes the rent vs buy math we carefully evaluated when purchasing.  Yes, we can still afford it, but the breakeven date is pushed out.  Are there people who can't afford a $570/mo increase in housing costs that have higher incomes?  Probably - we didn't buy at the edge of our budget.

Should someone like me pay more taxes?  Sure, maybe I should. BUT I don't think that I should pay more so that the following can happen:
- the rich can inherit tax-free, and with the step-up basis not changed
- corporations can get a permanent tax break, which they will pass to shareholders (not employees)
- ACA individual mandate can be repealed. WTF is that doing in this tax bill? (I know why it was put there, but still. WTF.)

The crazy thing is if I were a higher earner (say $450k AGI)  my taxes would go down a bit under both scenarios due to the repeal of the AMT.  What?!? The bill is targeted to hit people exactly like me.

I would like to see a bill that helped the true middle class (which I admit isn't me) without all of the corporate tax breaks and giveaways to the wealthy.  This is what I hate about this bill.

This is pretty much where I am at. Sure anyone is salty about paying more taxes. Not every low income person will get screwed. But it seems a very weird choice to punish home owners in high cost of living states so multimillionaires can get a tax break.

Title: Re: Republican Tax Plan 2017
Post by: ixtap on November 17, 2017, 06:17:25 PM
There are plenty of people in California who this will hurt that can't afford extravagant lives beyond having a home in an area with nice climate.

Location, location, location.

I think most California's are more hurt by the loss of SALT than the loss of the mortgage deduction. in Jean's example, the numbers currently come out equal, but the mortgage interest will go down, while the taxes should be expected to rise, if nothing else because we hope that Jean's salary and property value continue to rise.
Title: Re: Republican Tax Plan 2017
Post by: RangerOne on November 17, 2017, 06:33:43 PM

No it's completely understandable.

Except your example is not correct because there are no $500k mortgages for $1400/month.

However think about what the tax deduction is doing. For one renters are subsidizing homeowners, when it probably should be the opposite. Two, lower income folks are subsidizing higher income folks who have larger mortgages.

It's already limited to $1m. Correct me if I am wrong but the new tax plan will lower that to $500k mortgages.

How does this hurt the middle class? If anything it's a tax on the wealthy because they can't deduct as much.

I don't think you are entirely wrong but it is more complicated than renters subsidizing homeowners. For one renters rent from owners getting tax breaks. So if you believe subsidizing a corporation leads to higher incomes so to you should believe that subsidizing landlords leads to lower rents for renters. Maybe you think both are bull.

Thats actually a pretty good analogy :) I think.

I believe that in some cases this is true and in others its not. Let me give an example. If all land lords lose their tax deduction and the carrying cost of their properties goes up $200 a month. You better bet if at all possible those costs will passed straight to the renters However I think in some cases, were rents are maxed out do to wages, that may not be possible. In those cases we may just see fewer land lords, which I would consider a good outcome if the goal is home ownership.

So in summary I think the government subsidy goes both ways. Some times renters catch a break because carrying costs for land lords are lowered and in part the rent is determined by the carrying cost. In others maybe the tax incentive is artificially increasing the number of landlords making demand for starter homes to high and driving away would be home owners forcing people to rent creating more rental demand and driving up rents from that angle.

The only black and white reality here, is if either version passes into law, homeowners  in Californians high cost areas are gonna pay $100's of dollars more for homes a month. What the average reaction will be to that is anyone's guess but it probably won't be to just smile and pay more. The market and local governments will need to adjust and I think it will be messy and cause an unduly large portion of the population grief.

But I think the process is disingenuous and we should be admitting that a big part of what might happen is we are removing market distortions due to tax breaks from residential real-estate market and that shit is going to be painful. At least for the high cost of living cities in the US.
Title: Re: Republican Tax Plan 2017
Post by: RangerOne on November 17, 2017, 06:45:14 PM
At this point a house like plan pretty much fucks to dust the mortgage interest deduction since it will never beat or barely beat the standard deduction, unless you itemize for business reasons.

They should just kill it all together or reformulate it into a simple straight forward tax credit for mortgage interest. Then everyone from every state would get some home ownership relief and it would somewhat counter the whip lash from expenses going up for multi property owners.

The only question there is are they even still interested in having tax incentives for homeowners. I think the only answer based on their proposal is no. But many GOP law makers would probably argue the opposite.
Title: Re: Republican Tax Plan 2017
Post by: inline five on November 17, 2017, 07:51:55 PM

No it's completely understandable.

Except your example is not correct because there are no $500k mortgages for $1400/month.

However think about what the tax deduction is doing. For one renters are subsidizing homeowners, when it probably should be the opposite. Two, lower income folks are subsidizing higher income folks who have larger mortgages.

It's already limited to $1m. Correct me if I am wrong but the new tax plan will lower that to $500k mortgages.

How does this hurt the middle class? If anything it's a tax on the wealthy because they can't deduct as much.

I don't think you are entirely wrong but it is more complicated than renters subsidizing homeowners. For one renters rent from owners getting tax breaks. So if you believe subsidizing a corporation leads to higher incomes so to you should believe that subsidizing landlords leads to lower rents for renters. Maybe you think both are bull.

Thats actually a pretty good analogy :) I think.

I believe that in some cases this is true and in others its not. Let me give an example. If all land lords lose their tax deduction and the carrying cost of their properties goes up $200 a month. You better bet if at all possible those costs will passed straight to the renters However I think in some cases, were rents are maxed out do to wages, that may not be possible. In those cases we may just see fewer land lords, which I would consider a good outcome if the goal is home ownership.

So in summary I think the government subsidy goes both ways. Some times renters catch a break because carrying costs for land lords are lowered and in part the rent is determined by the carrying cost. In others maybe the tax incentive is artificially increasing the number of landlords making demand for starter homes to high and driving away would be home owners forcing people to rent creating more rental demand and driving up rents from that angle.

The only black and white reality here, is if either version passes into law, homeowners  in Californians high cost areas are gonna pay $100's of dollars more for homes a month. What the average reaction will be to that is anyone's guess but it probably won't be to just smile and pay more. The market and local governments will need to adjust and I think it will be messy and cause an unduly large portion of the population grief.

But I think the process is disingenuous and we should be admitting that a big part of what might happen is we are removing market distortions due to tax breaks from residential real-estate market and that shit is going to be painful. At least for the high cost of living cities in the US.

You were the first one who was logical about this. The others simply piled on to the whole 'If landlord costs goes down rental costs go down' theory.

That's all it is, a theory.

It assumes everyone has a mortgage on rental property and demand decreases. Just like reducing Corp taxes won't lower prices or magically get people paid more, lowering a landlords costs doesn't magically make rent go down (nor does raising costs increase it).

Now, are we even sure he new tax plan won't allow deductions on rental property? Typically that would be viewed as a business expense. The current plan mentions only personal property IIRC.
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 17, 2017, 07:57:00 PM
How does all this hurt the middle class?  I guess it depends on whether you consider "upper middle class" to be in the middle class, but I do.  There are plenty of people in California who this will hurt that can't afford extravagant lives beyond having a home in an area with nice climate.

You also have to keep in mind that a lot of the discussion about “class” that focuses exclusively or nearly exclusively on income (which is itself misguided, I think) doesn’t even acknowledge that the huge cost of living differences in the US mean that for many people, their relatively high incomes in raw dollars aren’t in fact buying them a better lifestyle. It is ultimately another way in which many residents of HCOL areas subsidize many residents of LCOL areas.  It’s not like a family making $140,000 in LA is meaningfully less “middle class” than a family making $70,000 in Topeka.
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 17, 2017, 08:04:59 PM

Now, are we even sure he new tax plan won't allow deductions on rental property? Typically that would be viewed as a business expense. The current plan mentions only personal property IIRC.

Not only are business expense deductions generally unaffected by the House proposal, but the income tax rate applied to rental real estate income will generally be given special treatment with the capped 25% rate. So a person who makes $X per year from owning renal real estate may pay lower taxes than a person who makes the same income as an employee who manages rental real estate.

Sad/funny video about expense deductibility:
https://m.youtube.com/watch?v=PDB1ZJjJnPA
Title: Re: Republican Tax Plan 2017
Post by: dragoncar on November 17, 2017, 08:19:15 PM
How does all this hurt the middle class?  I guess it depends on whether you consider "upper middle class" to be in the middle class, but I do.  There are plenty of people in California who this will hurt that can't afford extravagant lives beyond having a home in an area with nice climate.

You also have to keep in mind that a lot of the discussion about “class” that focuses exclusively or nearly exclusively on income (which is itself misguided, I think) doesn’t even acknowledge that the huge cost of living differences in the US mean that for many people, their relatively high incomes in raw dollars aren’t in fact buying them a better lifestyle. It is ultimately another way in which many residents of HCOL areas subsidize many residents of LCOL areas.  It’s not like a family making $140,000 in LA is meaningfully less “middle class” than a family making $70,000 in Topeka.

Even though I live in one of the highest COL areas in the US, I don't 100% buy into a straight COL adjustrment.  I recognize that, in general, housing costs are the largest issue, which can still leave a lot or even more left over for consumer goods, which are generally the same price throughout the country (food can be more expensive, but this is a relatively small portion of expenses.  service costs scale linearly with COL, but mustachians insource as much as possible). 

I also personally believe that housing in a "desirable" city is itself a luxury: everyone in the country should be entitled to housing, but not everyone is entitled to live in SF or NYC.

Nevertheless, outsized housing costs for otherwise undistinguished homes should be taken into consideration when deciding who is middle class.  I have neighbors who work full time construction jobs, yet own homes over $500k.  I have neighbors who are teachers, firefighters, blue collar workers, and so on.  They probably make over $100k, but does that make them elite upper class?  Hell no.  They are burdened by high housing costs.
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 17, 2017, 08:38:58 PM
How does all this hurt the middle class?  I guess it depends on whether you consider "upper middle class" to be in the middle class, but I do.  There are plenty of people in California who this will hurt that can't afford extravagant lives beyond having a home in an area with nice climate.

You also have to keep in mind that a lot of the discussion about “class” that focuses exclusively or nearly exclusively on income (which is itself misguided, I think) doesn’t even acknowledge that the huge cost of living differences in the US mean that for many people, their relatively high incomes in raw dollars aren’t in fact buying them a better lifestyle. It is ultimately another way in which many residents of HCOL areas subsidize many residents of LCOL areas.  It’s not like a family making $140,000 in LA is meaningfully less “middle class” than a family making $70,000 in Topeka.

Even though I live in one of the highest COL areas in the US, I don't 100% buy into a straight COL adjustrment.  I recognize that, in general, housing costs are the largest issue, which can still leave a lot or even more left over for consumer goods, which are generally the same price throughout the country (food can be more expensive, but this is a relatively small portion of expenses.  service costs scale linearly with COL, but mustachians insource as much as possible). 

I also personally believe that housing in a "desirable" city is itself a luxury: everyone in the country should be entitled to housing, but not everyone is entitled to live in SF or NYC.

Nevertheless, outsized housing costs for otherwise undistinguished homes should be taken into consideration when deciding who is middle class.  I have neighbors who work full time construction jobs, yet own homes over $500k.  I have neighbors who are teachers, firefighters, blue collar workers, and so on.  They probably make over $100k, but does that make them elite upper class?  Hell no.  They are burdened by high housing costs.

We probably mostly agree here. I’m not claiming that the various published COL comparison tools are gospel, but they exist, and they weigh various factors. I’m with you on living in a HCOL area being partly a luxury item (although it can be considerable harder for low and moderate income workers in HCOL areas to own their housing in HCOL areas). But while in-sourcing services may help people here blunt the costs of HCOL areas, that’s not the entirety of the universe of people who are affected by the tax laws. Progressive taxes and the elimination of most current itemized deductions exacerbates the COL difference (for any “class”). The seemingly significant different impacts of the House proposal in a purely political (“red state vs. blue state”) way is in some sense even sadder than the degree to which the changes apppear to benefit the ultra-wealthy.
Title: Re: Republican Tax Plan 2017
Post by: inline five on November 17, 2017, 08:55:17 PM

Now, are we even sure he new tax plan won't allow deductions on rental property? Typically that would be viewed as a business expense. The current plan mentions only personal property IIRC.

Not only are business expense deductions generally unaffected by the House proposal, but the income tax rate applied to rental real estate income will generally be given special treatment with the capped 25% rate. So a person who makes $X per year from owning renal real estate may pay lower taxes than a person who makes the same income as an employee who manages rental real estate.

Sad/funny video about expense deductibility:
https://m.youtube.com/watch?v=PDB1ZJjJnPA
Well there we go

Moral of the story if you can't beat em, join em, stop complaining about it and get in on the action
Title: Re: Republican Tax Plan 2017
Post by: radram on November 18, 2017, 07:27:56 AM
I pay a bit under $20k in mortgage interest, $11k in property taxes, about $9k in state taxes, no kids.   

That is just WOW to me jean. Those totals are what I spent in TOTALITY in 2016. 1200 square foot house, 1 1/2 acres. No mortgage.

I just can not comprehend these numbers. Do you live on a coast? I live in WI, about 70 miles from Chicago.
Title: Re: Republican Tax Plan 2017
Post by: Undecided on November 18, 2017, 07:43:31 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?

http://www.napa-net.org/news/technical-competence/legislation/could-tax-reform-destroy-deferred-compensation/

The 457(b) goes away.


SAD!

Well that sucks.   I was about to participate in this for the first time, so this will definitely screw me on my tax planning.

Same. This Friday's check will be the first deduction lol.

Just to note it for people following "deferred comp" issues, it's interesting that one of the things the House did change was to drop the proposal to repeal 409A and otherwise accelerate the taxation of equity-based awards to the time of grant.
Title: Re: Republican Tax Plan 2017
Post by: fuzzy math on November 18, 2017, 08:18:21 AM


You also have to keep in mind that a lot of the discussion about “class” that focuses exclusively or nearly exclusively on income (which is itself misguided, I think) doesn’t even acknowledge that the huge cost of living differences in the US mean that for many people, their relatively high incomes in raw dollars aren’t in fact buying them a better lifestyle. It is ultimately another way in which many residents of HCOL areas subsidize many residents of LCOL areas.  It’s not like a family making $140,000 in LA is meaningfully less “middle class” than a family making $70,000 in Topeka.

Even though I live in one of the highest COL areas in the US, I don't 100% buy into a straight COL adjustrment.  I recognize that, in general, housing costs are the largest issue, which can still leave a lot or even more left over for consumer goods, which are generally the same price throughout the country (food can be more expensive, but this is a relatively small portion of expenses.  service costs scale linearly with COL, but mustachians insource as much as possible). 

I also personally believe that housing in a "desirable" city is itself a luxury: everyone in the country should be entitled to housing, but not everyone is entitled to live in SF or NYC.

Nevertheless, outsized housing costs for otherwise undistinguished homes should be taken into consideration when deciding who is middle class.  I have neighbors who work full time construction jobs, yet own homes over $500k.  I have neighbors who are teachers, firefighters, blue collar workers, and so on.  They probably make over $100k, but does that make them elite upper class?  Hell no.  They are burdened by high housing costs.

We probably mostly agree here. I’m not claiming that the various published COL comparison tools are gospel, but they exist, and they weigh various factors. I’m with you on living in a HCOL area being partly a luxury item (although it can be considerable harder for low and moderate income workers in HCOL areas to own their housing in HCOL areas). But while in-sourcing services may help people here blunt the costs of HCOL areas, that’s not the entirety of the universe of people who are affected by the tax laws. Progressive taxes and the elimination of most current itemized deductions exacerbates the COL difference (for any “class”). The seemingly significant different impacts of the House proposal in a purely political (“red state vs. blue state”) way is in some sense even sadder than the degree to which the changes apppear to benefit the ultra-wealthy.

I saw some video about how young people tend to migrate to blue states and self segregate. Perhaps this will cause a mass exodus out of some of those areas back to some red areas that can then become purple or blue.
Title: Re: Republican Tax Plan 2017
Post by: RangerOne on November 18, 2017, 08:32:53 AM

Now, are we even sure he new tax plan won't allow deductions on rental property? Typically that would be viewed as a business expense. The current plan mentions only personal property IIRC.

Hm you may be right about that. I believe commercial property tax breaks are intact. And even second homes used as rentals are subject to different taxes.... So maybe they do still get breaks.
Title: Re: Republican Tax Plan 2017
Post by: jean on November 18, 2017, 09:29:54 AM
I pay a bit under $20k in mortgage interest, $11k in property taxes, about $9k in state taxes, no kids.   

That is just WOW to me jean. Those totals are what I spent in TOTALITY in 2016. 1200 square foot house, 1 1/2 acres. No mortgage.

I just can not comprehend these numbers. Do you live on a coast? I live in WI, about 70 miles from Chicago.
Yes, a coast and an extremely expensive area. I grew up in a low cost area, so I understand where you are coming from. Besides the fact we like it here, the jobs we have are not portable to low cost areas.  If FIRE (rather than FI) were our prime goal, we'd cash out and retire to a lower cost area when we were ready to RE. That's not really the plan, but an option. I'm a fan of RE in states with strong social programs (generally higher tax states), but could choose a different specific city.
Title: Re: Republican Tax Plan 2017
Post by: Jantoven on November 18, 2017, 02:55:42 PM

Yes, a coast and an extremely expensive area. I grew up in a low cost area, so I understand where you are coming from. Besides the fact we like it here, the jobs we have are not portable to low cost areas.  If FIRE (rather than FI) were our prime goal, we'd cash out and retire to a lower cost area when we were ready to RE. That's not really the plan, but an option. I'm a fan of RE in states with strong social programs (generally higher tax states), but could choose a different specific city.

I feel you.  We are in a similar situation - live in a coastal city with a modestly sized yet very expensive home.  Just like you, I don't know if FIRE is our ultimate goal at this point, but we are at least trending towards FI.  If FIRE ever becomes the goal, then we could always sell and move to a LCOL area.  But both of our entire families and friend network are out here, and we have to admit we really do love the ideal weather as well. 

This bill will hurt, but I have come to accept that it'll cost us.  If we ever decide it's no longer worthwhile, then I suppose we can always uproot, as I mentioned.
Title: Re: Republican Tax Plan 2017
Post by: Livewell on November 19, 2017, 09:10:49 AM
I live in CA, and will get hurt by the SALT exclusion, although lower rates will take some sting out.  Still likely to pay more from what I’ve seen.

This bill is such a naked gift to Republican big donors that they will never get a democratic senator to vote for it.  Including taking out the individual mandate of the ACA is likely IMO to make a couple of senators defect (at least).   Deficit chickens may grow some balls as the numbers come in.  Flake and Corker have nothing to lose.  Can McConnell and team find concessions to bring everyone around? There is no guarantee this thing passes. 

Title: Re: Republican Tax Plan 2017
Post by: RangerOne on November 19, 2017, 10:59:12 AM
It faced less oppositio in the house and passed in one shot. The outcry against it is more mixed than the ACA repeal. Thought pills show 60%ish disapprove almost all independents and Dems. It doesn't really hurt the republian base.

I think they will argue and modify but it's pretty clear the agree on the parts I dislike most... So the mods may not help. All we can hope is they hedge their bet and add a few more kick backs for the middle class which may smooth over the lose of itimization for some families.

But I think the pressure to pass something in the Senate to pass something is ultra high. I don't think it will be hard to get unity to pass somethibg very close to what we have.
Title: Re: Republican Tax Plan 2017
Post by: Jantoven on November 19, 2017, 11:06:35 AM
It faced less oppositio in the house and passed in one shot. The outcry against it is more mixed than the ACA repeal. Thought pills show 60%ish disapprove almost all independents and Dems. It doesn't really hurt the republian base.

I think they will argue and modify but it's pretty clear the agree on the parts I dislike most... So the mods may not help. All we can hope is they hedge their bet and add a few more kick backs for the middle class which may smooth over the lose of itimization for some families.

But I think the pressure to pass something in the Senate to pass something is ultra high. I don't think it will be hard to get unity to pass somethibg very close to what we have.

I agree.  I think the final bill will look different than what we see now, but it does seem that SALT is probably going to be severely curbed, which will ultimately impact CA/NY/NJ.  I can't imagine the GOP will want to carry the burden of saying they failed at both ACA reform AND tax reform, so I am basically resigned to the fact that tax reform will be passed and will carry a lot of the same elements we currently see.
Title: Re: Republican Tax Plan 2017
Post by: starguru on November 19, 2017, 11:44:54 AM
I have a feeling we are going to be hit pretty hard.   We have:

30k state taxes
8k mortgage interest
8k property tax
And various other minor deductions that sound like they will all go away. 

I could stomach all that if I knew that the romneys and kochs and trumps of the world were paying the same rate as me, but it seems like we are not there yet....


Sent from my iPhone using Tapatalk
Title: Re: Republican Tax Plan 2017
Post by: Jantoven on November 19, 2017, 02:58:37 PM
I have a feeling we are going to be hit pretty hard.   We have:

30k state taxes
8k mortgage interest
8k property tax
And various other minor deductions that sound like they will all go away. 

I could stomach all that if I knew that the romneys and kochs and trumps of the world were paying the same rate as me, but it seems like we are not there yet....


Sent from my iPhone using Tapatalk

Yeah, that's the kicker.  I'm okay paying more taxes if I felt it was going towards helping the unfortunate, the sick, etc.  But the proposed elimination of student loan interest and medical deductions pretty much says it all. 
Title: Re: Republican Tax Plan 2017
Post by: Bucksandreds on November 19, 2017, 03:05:19 PM
I have a feeling we are going to be hit pretty hard.   We have:

30k state taxes
8k mortgage interest
8k property tax
And various other minor deductions that sound like they will all go away. 

I could stomach all that if I knew that the romneys and kochs and trumps of the world were paying the same rate as me, but it seems like we are not there yet....


Sent from my iPhone using Tapatalk

Yeah, that's the kicker.  I'm okay paying more taxes if I felt it was going towards helping the unfortunate, the sick, etc.  But the proposed elimination of student loan interest and medical deductions pretty much says it all.


But, but, but. Trickle down. Fake news. Didn’t Orin Hatch let us all know that since he grew up lower middle class that it proves this bill isn’t for the rich?
Title: Re: Republican Tax Plan 2017
Post by: sol on November 19, 2017, 04:12:39 PM
I would even be okay with paying more taxes if it DIDN'T help the poor and unfortunate, if it was at least going to reduce the deficit.  Instead, this bill makes the deficit even worse.  Trillions of dollars worse, once you account for the interest on the new debt it will create.

That's really the primary motivation of the GOP tax platform.  It basically only does one thing: it permanently cuts the corporate tax rate from 35 to 20%, and it drives the country into debt to do it.  Everything else is a sideshow.  The individual bracket changes, the loopholes and deductions, the individual mandate repeal, they're basically all trivial details when compared to the multitrillion dollar impact of going into debt to pay for corporate tax cuts. 

Whether or not you or I pay a little more or a little less almost doesn't matter, in that context.  This bill isn't about US citizens, it's about US corporations and how much debt they can offload to US taxpayers in their pursuit of higher profits.
Title: Re: Republican Tax Plan 2017
Post by: Peter Parker on November 19, 2017, 05:35:16 PM
This whole Republican Tax Plan is yet another example of people voting against their own interests.  For the life of me, I don't get it....
Title: Re: Republican Tax Plan 2017
Post by: sol on November 19, 2017, 05:38:45 PM
This whole Republican Tax Plan is yet another example of people voting against their own interests.  For the life of me, I don't get it....

What's not to get?  As soon as you realize whose interests they are serving, it all makes perfect sense.

Hint: not the interests of their voters.
Title: Re: Republican Tax Plan 2017
Post by: RhodyUNC on November 19, 2017, 06:20:05 PM
I make a nice living. A little into the six figure category, family of 4. Certainly not poor, likely top 10% of family income. Not necesarily middle class, likely upper middle class, but certainly not wealthy/rich/ultra high earner by most standards.

I just ran all the numbers for my scenario based on everything I read. Best case scenario, my taxes would go up by about $800. Taxable income will increase $19k but the lower rates keep the increase reasonable. It's still an increase. Most people who itemize will end up paying more due to the loss of exemptions.

It doesn't really impact my FIRE plans, but it sure pisses me off knowing I'm paying more for this proposed "middle class tax cut" while people much more well off than me will pay substantially less.

Even worse for me.  With my giving to charitable causes, mortgage interest deduction, and property taxes kick me way the new standard deduction.  I make to much to get the tax credit for my four kids so I lose their deduction power.  I also lose the dependent care tax credit.  And yet my tax rate stays the same.  By my count I'm staring at a ~$6,000 increase in taxes. 

Not a tax cut for many of us. 
Title: Re: Republican Tax Plan 2017
Post by: SwordGuy on November 19, 2017, 06:46:25 PM
If the state and local income tax deduction on federal taxes is repealed, I'm suggesting to my state assembly members that they repeal our state income tax and institute a new property tax.

The property tax will only be on newly acquired property.   The only property of interest will be property acquired as salary, capital gains, etc.

Because, as we all know, "dollars" are property too.

Said "dollar property" will be calculated in the exact same way the old income tax was calculated.  :)

Don't know whether it would get thru the GOP-controlled state assembly.

If it did, we would all save a bunch in taxes and it would be a big FU to the national GOP by the state GOP.

If it didn't, we would all pay a bunch in taxes and it would be the state and national GOP's fault, but not the state and national Democrat's fault.

It's worth a try.
Title: Re: Republican Tax Plan 2017
Post by: sol on November 19, 2017, 06:50:40 PM
Not a tax cut for many of us.

If your estate is more than $11,000,000 when you die, then your kids get a 100% tax cut on their inheritance!

That's how we're going to MAGA.  Nevermind crumbling infrastructure, skyrocketing deficits, and eroding freedoms.  Billionaire inheritors like Donald Trump will get those tax breaks they so desperately need.
Title: Re: Republican Tax Plan 2017
Post by: cairnstone on November 19, 2017, 07:16:32 PM
I make a nice living. A little into the six figure category, family of 4. Certainly not poor, likely top 10% of family income. Not necesarily middle class, likely upper middle class, but certainly not wealthy/rich/ultra high earner by most standards.

I just ran all the numbers for my scenario based on everything I read. Best case scenario, my taxes would go up by about $800. Taxable income will increase $19k but the lower rates keep the increase reasonable. It's still an increase. Most people who itemize will end up paying more due to the loss of exemptions.

It doesn't really impact my FIRE plans, but it sure pisses me off knowing I'm paying more for this proposed "middle class tax cut" while people much more well off than me will pay substantially less.

Even worse for me.  With my giving to charitable causes, mortgage interest deduction, and property taxes kick me way the new standard deduction.  I make to much to get the tax credit for my four kids so I lose their deduction power.  I also lose the dependent care tax credit.  And yet my tax rate stays the same.  By my count I'm staring at a ~$6,000 increase in taxes. 

Not a tax cut for many of us. 

Did you take into account the increase in the maximum income to qualify for the child tax credit? That will probably be enough to make this new tax law about equivalent for me if it passes as-is (5 kids in high tax state).
Title: Re: Republican Tax Plan 2017
Post by: Jantoven on November 19, 2017, 08:00:24 PM

I would even be okay with paying more taxes if it DIDN'T help the poor and unfortunate, if it was at least going to reduce the deficit.  Instead, this bill makes the deficit even worse.  Trillions of dollars worse, once you account for the interest on the new debt it will create.

That's really the primary motivation of the GOP tax platform.  It basically only does one thing: it permanently cuts the corporate tax rate from 35 to 20%, and it drives the country into debt to do it.  Everything else is a sideshow.  The individual bracket changes, the loopholes and deductions, the individual mandate repeal, they're basically all trivial details when compared to the multitrillion dollar impact of going into debt to pay for corporate tax cuts. 

Whether or not you or I pay a little more or a little less almost doesn't matter, in that context.  This bill isn't about US citizens, it's about US corporations and how much debt they can offload to US taxpayers in their pursuit of higher profits.

I fully agree.  I work for a large Health Care organization that has been recording "record profits" quarterly for many years now.  Have we, the workers, seen any significant kind of pay increase as a result of record breaking profits?  No.  It appears the trickle down economics is.. not trickling down.  Shocker, eh?

And that's the thing with this proposed bill.  The corporations will pocket more money.  Will the workers see significant raises and windfalls as a result?    LOL.
Title: Re: Republican Tax Plan 2017
Post by: RhodyUNC on November 19, 2017, 08:03:03 PM
I did not see this.  Thanks for pointing out that it's changing.  Not sure what the new phase out rate would be but helpful to know it's higher.

This calculator was helpful in understanding the differences between the house and senate plans for us. 

https://www.marketwatch.com/story/the-new-trump-tax-calculator-what-do-you-owe-2017-10-26
Title: Re: Republican Tax Plan 2017
Post by: Debts_of_Despair on November 19, 2017, 08:23:18 PM
I wonder what the sentiment will be when most people find that their first paycheck in the new year is a little fatter.
Title: Re: Republican Tax Plan 2017
Post by: MMMarbleheader on November 19, 2017, 08:30:52 PM
Did the language about changing the capital gains exemption on home sales from 2 years to 5 stay in the bill? I am in year 1 of a live in flip and not sure I want to stay here for 5 years
Title: Re: Republican Tax Plan 2017
Post by: Jantoven on November 19, 2017, 08:32:57 PM
Did the language about changing the capital gains exemption on home sales from 2 years to 5 stay in the bill? I am in year 1 of a live in flip and not sure I want to stay here for 5 years

So far, it appears that both bills have that feature in it, I believe. 
Title: Re: Republican Tax Plan 2017
Post by: sol on November 19, 2017, 08:41:19 PM
I wonder what the sentiment will be when most people find that their first paycheck in the new year is a little fatter.

I suspect the news coverage will highlight that this little pay bump is a temporary measure and their taxes will go back up even higher than they were before, and that the GOP only gifted you that temporary bump to garner votes for passage for those corporations.  Will people care?  Hey man, $50 is $50 and if some multinational gets to bank an extra billion at the same time who am I to turn down $50? 

Besides, the huge increase in the national debt that would result from this plan (for so many reasons that I need a whole separate post) will be a problem for my kids and grandkids, not for me, and hey I still go this $50 extra burning a hole in my pocket.
Title: Re: Republican Tax Plan 2017
Post by: Kenbo on November 19, 2017, 08:44:45 PM

I would even be okay with paying more taxes if it DIDN'T help the poor and unfortunate, if it was at least going to reduce the deficit.  Instead, this bill makes the deficit even worse.  Trillions of dollars worse, once you account for the interest on the new debt it will create.

That's really the primary motivation of the GOP tax platform.  It basically only does one thing: it permanently cuts the corporate tax rate from 35 to 20%, and it drives the country into debt to do it.  Everything else is a sideshow.  The individual bracket changes, the loopholes and deductions, the individual mandate repeal, they're basically all trivial details when compared to the multitrillion dollar impact of going into debt to pay for corporate tax cuts. 

Whether or not you or I pay a little more or a little less almost doesn't matter, in that context.  This bill isn't about US citizens, it's about US corporations and how much debt they can offload to US taxpayers in their pursuit of higher profits.

I fully agree.  I work for a large Health Care organization that has been recording "record profits" quarterly for many years now.  Have we, the workers, seen any significant kind of pay increase as a result of record breaking profits?  No.  It appears the trickle down economics is.. not trickling down.  Shocker, eh?

And that's the thing with this proposed bill.  The corporations will pocket more money.  Will the workers see significant raises and windfalls as a result?    LOL.

One thing that scares me as a health care worker is I expect my employer to benefit from the tax reduction but how hard will the medicare reduction hit that. 

I think the whole trickle down is just one more excuse to use in order to serve their pockets.  Everything about this bill is just absurd.  Economy is running just fine, deficit continues to grow and this will just exacerbate that, the only real winners are corporations and the super wealthy.  Just let that income inequality grow, baby. 

As a Kansan I know how this story goes and will be interested in 3-7 years for the next tax bill to come along.  The only real question is how much damage they can cause between now and then.
Title: Re: Republican Tax Plan 2017
Post by: sol on November 19, 2017, 08:53:21 PM
Everything about this bill is just absurd.  Economy is running just fine, deficit continues to grow and this will just exacerbate that, the only real winners are corporations and the super wealthy.  Just let that income inequality grow, baby. 

Right, the basic tenant of Keynesian economics is that government needs to smooth out the business cycle, not only by stimulating the economy in bad times (lowering taxes and increase government spending in times of recession ala George Bush Jr in 2008/9), but also by putting the brakes on in the really great bubble times (raising taxes and cutting government subsidies).  For some reason, Republicans are fully wedded to tax cuts for the wealthy completely independently of whatever the economy is doing.  Tax cuts can totally help, sometimes, but now is clearly not one of those times.  The economy is frothy bubble terrific!  Now is the time to raise taxes so we can pay down the deficits we incurred during the last recession.

Quote
As a Kansan I know how this story goes and will be interested in 3-7 years for the next tax bill to come along.  The only real question is how much damage they can cause between now and then.

In a few years, when the economy is suffering as a result of this tax plan, if republicans are in power they will claim they need to cut medicaid and medicare and social security to make up for the losses incurred by their corporate cut.  If democrats are in power, republicans will blame democrats for their "irresponsible spending".   So from the GOP perspective, they can't really lose.  They either get to eviscerate the Great Society, or return to their favorite position of outspoken minority violently criticizing the adults in charge of the economy.
Title: Re: Republican Tax Plan 2017
Post by: Mr Mark on November 19, 2017, 08:59:44 PM
Anyone know what the impact might be on capital gains tax rates for qualified div & LTCG?

Is there a big impact on post-FIRE income calculations and Roth ladders?
Title: Re: Republican Tax Plan 2017
Post by: Jantoven on November 19, 2017, 09:00:16 PM

One thing that scares me as a health care worker is I expect my employer to benefit from the tax reduction but how hard will the medicare reduction hit that. 

I think the whole trickle down is just one more excuse to use in order to serve their pockets.  Everything about this bill is just absurd.  Economy is running just fine, deficit continues to grow and this will just exacerbate that, the only real winners are corporations and the super wealthy.  Just let that income inequality grow, baby. 

As a Kansan I know how this story goes and will be interested in 3-7 years for the next tax bill to come along.  The only real question is how much damage they can cause between now and then.

Right.  The cuts to Medicare will come, which will lead to an eventual decrease in "entitlement" programs.  Reductions in social security, medicare and health care coverage, etc.  It's very concerning...
Title: Re: Republican Tax Plan 2017
Post by: dragoncar on November 20, 2017, 12:02:51 AM
If the state and local income tax deduction on federal taxes is repealed, I'm suggesting to my state assembly members that they repeal our state income tax and institute a new property tax.

The property tax will only be on newly acquired property.   The only property of interest will be property acquired as salary, capital gains, etc.

Because, as we all know, "dollars" are property too.

Said "dollar property" will be calculated in the exact same way the old income tax was calculated.  :)

Don't know whether it would get thru the GOP-controlled state assembly.

If it did, we would all save a bunch in taxes and it would be a big FU to the national GOP by the state GOP.

If it didn't, we would all pay a bunch in taxes and it would be the state and national GOP's fault, but not the state and national Democrat's fault.

It's worth a try.

That’s cute but I’m sure it says “real property.”  Remember, this isn’t a new deduction, it’s existed Forbes a longer time and has a bunch of guidance and rulings on it.  They are just removing the other deductions
Title: Re: Republican Tax Plan 2017
Post by: FIREchiefsr on November 20, 2017, 01:05:27 AM
Not a tax cut for many of us.

If your estate is more than $11,000,000 when you die, then your kids get a 100% tax cut on their inheritance!

That's how we're going to MAGA.  Nevermind crumbling infrastructure, skyrocketing deficits, and eroding freedoms.  Billionaire inheritors like Donald Trump will get those tax breaks they so desperately need.

Okay, here's the ironic part about that.  Those kids will do one of two things with that money.  They will spend it (which will generate economic activity, which generates fed revenue), or they will invest it (which will theoretically be good for capitalism).  If the former, the money quickly winds up with others.  If the later, the rich kids still have it (likely even more through growth); which means our congress a generation from now can tax them for even higher revenues.  Nothing lasts forever.  The wealthy can hoard to their heart's content, but today's "permanent changes" offer little assurance that the gov won't take it at some point later.
Title: Re: Republican Tax Plan 2017
Post by: teen persuasion on November 20, 2017, 06:19:29 AM
I did not see this.  Thanks for pointing out that it's changing.  Not sure what the new phase out rate would be but helpful to know it's higher.

This calculator was helpful in understanding the differences between the house and senate plans for us. 

https://www.marketwatch.com/story/the-new-trump-tax-calculator-what-do-you-owe-2017-10-26
Thanks for the link.
Unfortunately, it's really rudimentary and not accurate.  It asked how many child dependents we have - 2, one under 17, one over.  It treated both as under 17 and eligible for CTC.  It then said we are not eligible for refundable credits.  So $0 tax owed, but no refund!  Totally ignored EITC. No mention of AOTC.
Title: Re: Republican Tax Plan 2017
Post by: DarkandStormy on November 20, 2017, 07:17:18 AM
I wonder what the sentiment will be when most people find that their first paycheck in the new year is a little fatter.

The real question is if people will have long enough attention spans to recognize their taxes increasing on the back end of this deal and when their tax cuts expire but the corporations don't.
Title: Re: Republican Tax Plan 2017
Post by: Wexler on November 20, 2017, 08:42:12 AM
I'm okay paying more taxes if I felt it was going towards helping the unfortunate, the sick, etc. 

I would even be okay with paying more taxes if it DIDN'T help the poor and unfortunate, if it was at least going to reduce the deficit.  Instead, this bill makes the deficit even worse.  Trillions of dollars worse, once you account for the interest on the new debt it will create.

That's really the primary motivation of the GOP tax platform.  It basically only does one thing: it permanently cuts the corporate tax rate from 35 to 20%, and it drives the country into debt to do it.  Everything else is a sideshow.  The individual bracket changes, the loopholes and deductions, the individual mandate repeal, they're basically all trivial details when compared to the multitrillion dollar impact of going into debt to pay for corporate tax cuts. 

Whether or not you or I pay a little more or a little less almost doesn't matter, in that context.  This bill isn't about US citizens, it's about US corporations and how much debt they can offload to US taxpayers in their pursuit of higher profits.

This is interesting:
https://www.washingtonpost.com/news/posteverything/wp/2017/09/28/i-helped-create-the-gop-tax-myth-trump-is-wrong-tax-cuts-dont-equal-growth/?utm_term=.25867e4bb25e

According to the engineer of Reagan's tax plan, they saw that tax cuts led to wage cuts, not the reverse.  Putting more money in corporate pockets doesn't even lead to trickle down.

There's plenty of data out there about various Republican tax cutting schemes and how they affect the economy.  Not only in Oklahoma and Kansas (seriously-why would you keep voting for Republicans when your state can't even afford a 5 day school week because of lost revenues?  Have some dignity, people), but also after the W tax cuts.  The W tax cuts led to several years of decreased federal revenues.  The Obama stock market boom?  The Clinton boom?  All in the context of increased taxes.  We don't have to armchair it-there's evidence to examine.

Title: Re: Republican Tax Plan 2017
Post by: Livewell on November 20, 2017, 09:16:03 AM
A thought I’ve taken action on if you live in a high tax state (CA, NY, NJ), and know what your upcoming spring 2018 property tax will be:  pay it in 2017.

If this plan goes through, and SALT deduction goes away, we’ll no longer be able to itemize.  Even though we would be able to take advantage of the property tax deduction in one of the plans, it won’t matter because we won’t be itemizing.

However that is not the case this year!

Worse case we paid four months early, go back to the regular schedule next year and for us, get a nice return on that early payment.
Title: Re: Republican Tax Plan 2017
Post by: Scortius on November 20, 2017, 09:49:09 AM
Not a tax cut for many of us.

If your estate is more than $11,000,000 when you die, then your kids get a 100% tax cut on their inheritance!

That's how we're going to MAGA.  Nevermind crumbling infrastructure, skyrocketing deficits, and eroding freedoms.  Billionaire inheritors like Donald Trump will get those tax breaks they so desperately need.

Okay, here's the ironic part about that.  Those kids will do one of two things with that money.  They will spend it (which will generate economic activity, which generates fed revenue), or they will invest it (which will theoretically be good for capitalism).  If the former, the money quickly winds up with others.  If the later, the rich kids still have it (likely even more through growth); which means our congress a generation from now can tax them for even higher revenues.  Nothing lasts forever.  The wealthy can hoard to their heart's content, but today's "permanent changes" offer little assurance that the gov won't take it at some point later.

Do you know what the rich kids would do with the money if any amount beyond $11 million were taxed? They would either spend it, or they would invest it. But, instead that extra amount that was taxed could be applied by the government to pay for crucial services to the general public, like medicaid or eduction, or it could be used to lower the deficit, or it could instead be used to maintain tax breaks for the lower and middle class to give those people more money in their pockets, that they would either 1) spend, or 2) invest (but probably spend because they're the ones living paycheck to paycheck).
Title: Re: Republican Tax Plan 2017
Post by: Kevin on November 20, 2017, 10:30:36 AM
Did the language about changing the capital gains exemption on home sales from 2 years to 5 stay in the bill? I am in year 1 of a live in flip and not sure I want to stay here for 5 years

It's still there. I am in the same position, except we are 2 years into our flip. This bill could not have been written to fuck us over more. We stand to personally lose $8k all so we can give corporations a tax break and repeal the estate tax for those inheriting multi-million dollar sums of money.

https://forum.mrmoneymustache.com/welcome-to-the-forum/republican-tax-plan-2017/msg1775000/#msg1775000
Title: Re: Republican Tax Plan 2017
Post by: boarder42 on November 20, 2017, 10:34:17 AM
A thought I’ve taken action on if you live in a high tax state (CA, NY, NJ), and know what your upcoming spring 2018 property tax will be:  pay it in 2017.

If this plan goes through, and SALT deduction goes away, we’ll no longer be able to itemize.  Even though we would be able to take advantage of the property tax deduction in one of the plans, it won’t matter because we won’t be itemizing.

However that is not the case this year!

Worse case we paid four months early, go back to the regular schedule next year and for us, get a nice return on that early payment.

even if its not a high tax state this makes sense to do if you itemize.  i'll itemize this year and an instant 25%+6% ROI is nothing to frown at for me to prepay 6k in taxes.

now is there any way to prepay 2018 state income taxes.  does anyone know?
Title: Re: Republican Tax Plan 2017
Post by: SaucyAussie on November 20, 2017, 10:52:30 AM
Some tweaks to the Senate plan later in the week definitely helped out the middle to upper middle. Tax rates were reduced (my marginal rate would go from 25 to 24) plus the brackets were expanded (for me, marginal rate kicks in at 70K instead of 60K). The child credit was increased to $2000 per child which should make up for losing the exemption. The current law prices me out of the child credit so that alone is a big win for me.

But yeah, the really big winners here are still the super rich...
Title: Re: Republican Tax Plan 2017
Post by: teen persuasion on November 20, 2017, 11:34:07 AM
A thought I’ve taken action on if you live in a high tax state (CA, NY, NJ), and know what your upcoming spring 2018 property tax will be:  pay it in 2017.

If this plan goes through, and SALT deduction goes away, we’ll no longer be able to itemize.  Even though we would be able to take advantage of the property tax deduction in one of the plans, it won’t matter because we won’t be itemizing.

However that is not the case this year!

Worse case we paid four months early, go back to the regular schedule next year and for us, get a nice return on that early payment.
WNYer here - property tax bills don't come out before Jan 1, no way to pre-pay.  Same for school tax bills out after Sept 1, due by Oct 1.  No way to shift to another year, without paying seriously late and the fines would wipe out any advantage.
Title: Re: Republican Tax Plan 2017
Post by: RangerOne on November 20, 2017, 12:02:45 PM
Okay I reran some numbers with the current senate tax brackets and it looks like I really underestimated the adjustment due to the bracket tax cuts and child tax credit.

It looks like at least for my starter home/condo, the senate bill would net me about the same $3k positive cash back in my pocket per year that ownership would. The delta roughly appears to be $100-$500........

I suspect people earning even a bit more than me would start to see that gap widen due to drifting well into the 25%/22% bracket but at least for me it looks like I was being unfair to the size of the other adjustments they are making.

I would be force to take the standard, but I am not against renters getting the same break I would get with the home.

If I max out my 401k the new plan actually saves me money even taking into account. California would also like dial back its income tax a bit which could close the gap.

Title: Re: Republican Tax Plan 2017
Post by: Michael in ABQ on November 20, 2017, 12:16:06 PM
With 5 kids I can make up to about $90k under the house plan and $105k under the senate plan and have zero income tax burden. Sounds like a pretty good deal for me. Of course under the current system the exemptions and child tax credits basically wipe out my income taxes anyways but I used to get some back from the refundable child tax credits when my income was lower
Title: Re: Republican Tax Plan 2017
Post by: DarkandStormy on November 20, 2017, 12:25:04 PM
I wonder what the sentiment will be when most people find that their first paycheck in the new year is a little fatter.

The real question is if people will have long enough attention spans to recognize their taxes increasing on the back end of this deal and when their tax cuts expire but the corporations don't.
That's a rhetorical question right?

Yes.  Virtually everyone sees a slightly lower number for '17/'18 comparisons and thinks "YAY! What's wrong with this plan?"  Very few are talking about how bad this plan is over the next decade+ for almost all people except the top 0.1%.
Title: Re: Republican Tax Plan 2017
Post by: RangerOne on November 20, 2017, 01:56:06 PM
If you are talking about the tax rates expiring this isn't a problem. The problem is the fiscal irresponsibility of an unfunded tax cut, and the eventual need to cut programs. The assumption that no sane Congress would allow middle class tax breaks to expire is sound at least historically.
Title: Re: Republican Tax Plan 2017
Post by: DarkandStormy on November 20, 2017, 02:32:57 PM
If you are talking about the tax rates expiring this isn't a problem. The problem is the fiscal irresponsibility of an unfunded tax cut, and the eventual need to cut programs. The assumption that no sane Congress would allow middle class tax breaks to expire is sound at least historically.

The GOP sure had their panties in a bunch under Obama about deficits.  Now they're in charge and they're excited about adding $1.5 trillion to the debt.

But yes, it's all about paving the way of cutting programs like Medicare and Medicaid

Sherrod Brown was calling out the Senate on their BS and Orrin Hatch was feigning taking offense, saying no real proposals brought by Democrats, etc. etc.  So Brown says, "OK, let's start with CHIP."  And Hatch is like, "No, we're not starting with CHIP."  LOL wtf dude?
Title: Re: Republican Tax Plan 2017
Post by: Just Joe on November 20, 2017, 02:54:52 PM
So what does the GOP expect America to look like when the poor have little or no safety nets?
Title: Re: Republican Tax Plan 2017
Post by: ixtap on November 20, 2017, 06:02:41 PM
So what does the GOP expect America to look like when the poor have little or no safety nets?

All those poor people will suddenly have an incentive to be productive members of society. They will go out and get jobs with sustainable incomes.

Barring that, they will suffer the wrath that God rains down on the lazy.

Everyone knows that welfare is what traps people in poverty.
Title: Re: Republican Tax Plan 2017
Post by: sol on November 20, 2017, 06:13:08 PM
So what does the GOP expect America to look like when the poor have little or no safety nets?

All those poor people will suddenly have an incentive to be productive members of society. They will go out and get jobs with sustainable incomes.

Barring that, they will suffer the wrath that God rains down on the lazy.

Everyone knows that welfare is what traps people in poverty.

Can't... tell... if sarcasm... or not.
Title: Re: Republican Tax Plan 2017
Post by: ixtap on November 20, 2017, 06:16:48 PM
So what does the GOP expect America to look like when the poor have little or no safety nets?

All those poor people will suddenly have an incentive to be productive members of society. They will go out and get jobs with sustainable incomes.

Barring that, they will suffer the wrath that God rains down on the lazy.

Everyone knows that welfare is what traps people in poverty.

Can't... tell... if sarcasm... or not.

Pretty much word for word what I have been told. The satire writes itself.
Title: Re: Republican Tax Plan 2017
Post by: Glenstache on November 20, 2017, 06:38:49 PM
So what does the GOP expect America to look like when the poor have little or no safety nets?
I think the short answer is that they simply don't care.
Title: Re: Republican Tax Plan 2017
Post by: ZiziPB on November 20, 2017, 08:34:00 PM
One of the commentators I heard recently said something that I think is a very accurate description of the bill.  He said the only goal is to get the corporate rate down to 20%, the rest is just window dressing.  BTW, does anyone know if either of the bills closes even one corporate tax loophole??
Title: Re: Republican Tax Plan 2017
Post by: sol on November 20, 2017, 10:50:33 PM
One of the commentators I heard recently said something that I think is a very accurate description of the bill.  He said the only goal is to get the corporate rate down to 20%, the rest is just window dressing.

Was that commentator me, in this very thread (https://forum.mrmoneymustache.com/welcome-to-the-forum/republican-tax-plan-2017/msg1778585/#msg1778585)?  When I said...

Quote from: me
That's really the primary motivation of the GOP tax platform.  It basically only does one thing: it permanently cuts the corporate tax rate from 35 to 20%, and it drives the country into debt to do it.  Everything else is a sideshow.  The individual bracket changes, the loopholes and deductions, the individual mandate repeal, they're basically all trivial details when compared to the multitrillion dollar impact of going into debt to pay for corporate tax cuts. 

Whether or not you or I pay a little more or a little less almost doesn't matter, in that context.  This bill isn't about US citizens, it's about US corporations and how much debt they can offload to US taxpayers in their pursuit of higher profits.
Title: Re: Republican Tax Plan 2017
Post by: ZiziPB on November 21, 2017, 04:25:23 AM
One of the commentators I heard recently said something that I think is a very accurate description of the bill.  He said the only goal is to get the corporate rate down to 20%, the rest is just window dressing.

Was that commentator me, in this very thread (https://forum.mrmoneymustache.com/welcome-to-the-forum/republican-tax-plan-2017/msg1778585/#msg1778585)?  When I said...

Quote from: me
That's really the primary motivation of the GOP tax platform.  It basically only does one thing: it permanently cuts the corporate tax rate from 35 to 20%, and it drives the country into debt to do it.  Everything else is a sideshow.  The individual bracket changes, the loopholes and deductions, the individual mandate repeal, they're basically all trivial details when compared to the multitrillion dollar impact of going into debt to pay for corporate tax cuts. 

Whether or not you or I pay a little more or a little less almost doesn't matter, in that context.  This bill isn't about US citizens, it's about US corporations and how much debt they can offload to US taxpayers in their pursuit of higher profits.
Haha, it was someone else but stating your exact sentiment. 

So what about those corporate loopholes?  Have any been closed? 
Title: Re: Republican Tax Plan 2017
Post by: Acastus on November 21, 2017, 07:33:31 AM
One of the commentators I heard recently said something that I think is a very accurate description of the bill.  He said the only goal is to get the corporate rate down to 20%, the rest is just window dressing.  BTW, does anyone know if either of the bills closes even one corporate tax loophole??

Corporate tax cuts cost about 2 trillion over 10 years. The total tax cut is at 6 trillion for now. Not exactly a sideshow. The cuts to the 40% bracket and pass throughs for Donald'sh companies cost a lot, too.

How anyone can call raising taxes on 30% of the population a tax cut is the height of hubris.
Title: Re: Republican Tax Plan 2017
Post by: Glenstache on November 21, 2017, 09:02:33 AM
One of the commentators I heard recently said something that I think is a very accurate description of the bill.  He said the only goal is to get the corporate rate down to 20%, the rest is just window dressing.  BTW, does anyone know if either of the bills closes even one corporate tax loophole??

Corporate tax cuts cost about 2 trillion over 10 years. The total tax cut is at 6 trillion for now. Not exactly a sideshow. The cuts to the 40% bracket and pass throughs for Donald'sh companies cost a lot, too.

How anyone can call raising taxes on 30% of the population a tax cut is the height of hubris.

Also known as "doublespeak"
https://en.wikipedia.org/wiki/Doublespeak
Title: Re: Republican Tax Plan 2017
Post by: DarkandStormy on November 21, 2017, 09:05:22 AM
https://www.cnbc.com/2017/11/20/senate-gop-tax-plan-to-ultimately-raise-taxes-for-half-of-us-tax-policy-center.html

Quote
Trump spoke as the Tax Policy Center said that while all income groups would see tax reductions, on average, under the Senate bill in 2019, 9 percent of taxpayers would pay higher taxes that year than under current law. By 2027, that proportion would grow to 50 percent, largely because the legislation's personal tax cuts expire in 2026, which Republicans did to curb budget deficits the bill would create.

Quote
In 2019, those making less than $25,000 would get an average $50 tax reduction, or 0.3 percent of their after-tax income. Middle-income earners would get average cuts of $850, while people making at least $746,000 would get average cuts of $34,000, or 2.2 percent of income.

Quote
The center also said the Senate proposal would generate enough economic growth to produce additional revenue of $169 billion over a decade. That's far short of closing the near $1.5 trillion in red ink that Congress' nonpartisan Joint Committee on Taxation has estimated the bill would produce over that period.

So basically the plan does very little for economic growth while making sure corporations and the top 1% get a little more cash.  Idiotic.
Title: Re: Republican Tax Plan 2017
Post by: A Definite Beta Guy on November 21, 2017, 09:12:13 AM
Giving corporations and the top 1% a tax cut makes more sense from a supply-side growth perspective than a tax cut for wage earners. The bottom do not drive growth.
Title: Re: Republican Tax Plan 2017
Post by: obstinate on November 21, 2017, 09:14:41 AM
Giving corporations and the top 1% a tax cut makes more sense from a supply-side growth perspective than a tax cut for wage earners. The bottom do not drive growth.
Yeah, in that model, it's true. But the supply side model is not actually how reality works, so a tax policy being good in that model does it no credit in real life.
Title: Re: Republican Tax Plan 2017
Post by: ixtap on November 21, 2017, 09:16:04 AM
Giving corporations and the top 1% a tax cut makes more sense from a supply-side growth perspective than a tax cut for wage earners. The bottom do not drive growth.

The economics class I took said that the demand side causes the supply to grow. So we will have a greater demand for luxury goods?
Title: Re: Republican Tax Plan 2017
Post by: partgypsy on November 21, 2017, 09:26:59 AM
Giving corporations and the top 1% a tax cut makes more sense from a supply-side growth perspective than a tax cut for wage earners. The bottom do not drive growth.

yes, economic experts call supply-side economics "voodoo economics". It has been shown historically not to help to the degree proponents say it will, hence the ballooning of the deficits that happened during the Reagan years. People using the "supply-side" argument for these tax cuts are ignorant, deceptive or both. Other names for it is "trickle down" economics, and also
"horse and sparrow theory"
"—what an older and less elegant generation called the horse-and-sparrow theory: If you feed the horse enough oats, some will pass through to the road for the sparrows." — John Kenneth Galbraith

Demand does create supply. The opposite is not necessarily true.
Title: Re: Republican Tax Plan 2017
Post by: GreenEggs on November 21, 2017, 09:27:29 AM
We elected Trump & he'll give us what we deserve for being so foolish. 

He said he would "drain the swamp", but he didn't tell us that he'd "drain our wallets" too. 

Title: Re: Republican Tax Plan 2017
Post by: RangerOne on November 21, 2017, 09:27:32 AM
Giving corporations and the top 1% a tax cut makes more sense from a supply-side growth perspective than a tax cut for wage earners. The bottom do not drive growth.

That statement can't be universally true. If you give more money to consumers they can absolutely drive growth. Walmart could certainly gorw if everyone shopped more. But clearly not all companies would benefit.

Just the same boosting coorporate earnings gives you first short term artificial growth if we'll after tax earnings get a bump. It will also put more money in the pockets of growing companies to grow faster which means more jobs. I haven't studied this so I must assume there are some studies on the potential impact of expanding your middle income consuemr base.

But I assume some companies are happy with their growth rate and won't just hire more people. They can pocket the extra earnings or simply pump it right back into stocks and their share holders. The later is not really the growth we need though I believe this will be more common from the largest American companies.

I think the Republican balancing between breaks for mid and high are off balance. And their budgeting ability sucks as bad as the Dems the railed on for the past 8 years.
Title: Re: Republican Tax Plan 2017
Post by: A Definite Beta Guy on November 21, 2017, 09:55:28 AM
Giving consumers more money works to boost demand, but you don't need more demand except in cases where the economy is in recession. It's more a special case than the general rule.

All economic growth in the long-run comes from innovation, resources, and capital deepening....IE, the supply side. Not all tax cuts are equal, and if you are going to go for a supply-side tax cut, you should target the people who actually are most likely to produce more with a tax reduction. To give a labor economics example, men are not as sensitive to the tax rate as women are. Men just work per their social-norm required hours. Women are more likely to have a decision between working part-time, full-time, or not at all, and are more likely to work when the tax rate is lower.
Either way, though, reducing tax cuts on the middle class would be considered less important than cutting taxes on innovators, savers, and investors.

Most conservative economists will point out that the phase-outs of government spending create marginal tax rates close to or over 100% for lower-income families, but that's not the middle class either.


Quote
I hope you're just saying that since it's the basis of supply-side economics and not something you actually believe. In the economic literature, supply-side economics is given about as much credibility as homeopathy is by Western medicine.
Not really. This is just a Democratic political attack. There's no one that believes in the extreme claims that tax cuts pay for themselves, but that's totally different from everyone assuming tax cuts are a bad idea and tax hikes pose no problem at all.
Title: Re: Republican Tax Plan 2017
Post by: ZiziPB on November 21, 2017, 10:07:39 AM
An interesting article regarding existing and new tax loopholes in the House bill:

https://www.bloomberg.com/news/articles/2017-11-21/tax-loopholes-for-wall-street-s-wealthiest-loom-in-house-bill
Title: Re: Republican Tax Plan 2017
Post by: Scortius on November 21, 2017, 10:14:12 AM
Giving consumers more money works to boost demand, but you don't need more demand except in cases where the economy is in recession. It's more a special case than the general rule.

All economic growth in the long-run comes from innovation, resources, and capital deepening....IE, the supply side. Not all tax cuts are equal, and if you are going to go for a supply-side tax cut, you should target the people who actually are most likely to produce more with a tax reduction. To give a labor economics example, men are not as sensitive to the tax rate as women are. Men just work per their social-norm required hours. Women are more likely to have a decision between working part-time, full-time, or not at all, and are more likely to work when the tax rate is lower.
Either way, though, reducing tax cuts on the middle class would be considered less important than cutting taxes on innovators, savers, and investors.

Most conservative economists will point out that the phase-outs of government spending create marginal tax rates close to or over 100% for lower-income families, but that's not the middle class either.


Quote
I hope you're just saying that since it's the basis of supply-side economics and not something you actually believe. In the economic literature, supply-side economics is given about as much credibility as homeopathy is by Western medicine.
Not really. This is just a Democratic political attack. There's no one that believes in the extreme claims that tax cuts pay for themselves, but that's totally different from everyone assuming tax cuts are a bad idea and tax hikes pose no problem at all.

You're right, we don't need more demand right now, and with corporations sitting on record levels of cash reserves, we certainly don't need to give them more tax breaks to help them stimulate the current record bull market. So, why the hell are we cutting taxes right now at all? Indeed, we want to stimulate the growth of our economy by reducing the burden on innovators, so let's leverage a tax on tuition credits that will all but destroy America's amazing system of higher eduction, the source of which has brought most of the expansion of our modern information-age economy. For all of the things you name as important, this tax bill addresses none of those issues and actively penalizes others. But at least it will add 2 trillion to the debt once the temporary tax cuts are made permanent. All for what?
Title: Re: Republican Tax Plan 2017
Post by: J Boogie on November 21, 2017, 10:30:09 AM
I think it's important to differentiate between the idea that domestic trickle-down economics is effective and the idea that lowering the corporate tax rate to a more globally competitive number is needed to stop businesses from moving their HQs.

It makes sense to lower our corp tax rate to 20%.  The avg corp tax rate in the EU is 22.5%.

Maybe we're not big fans of globalization, but as one country we can't enact effective legislation to stop businesses from relocating. I think our best option is to be competitive so we recapture some of these trillions of dollars that corporations hold in tax havens.







Title: Re: Republican Tax Plan 2017
Post by: Glenstache on November 21, 2017, 10:33:47 AM
Giving consumers more money works to boost demand, but you don't need more demand except in cases where the economy is in recession. It's more a special case than the general rule.

All economic growth in the long-run comes from innovation, resources, and capital deepening....IE, the supply side. Not all tax cuts are equal, and if you are going to go for a supply-side tax cut, you should target the people who actually are most likely to produce more with a tax reduction. To give a labor economics example, men are not as sensitive to the tax rate as women are. Men just work per their social-norm required hours. Women are more likely to have a decision between working part-time, full-time, or not at all, and are more likely to work when the tax rate is lower.
Either way, though, reducing tax cuts on the middle class would be considered less important than cutting taxes on innovators, savers, and investors.

Most conservative economists will point out that the phase-outs of government spending create marginal tax rates close to or over 100% for lower-income families, but that's not the middle class either.

It is worth pointing out that the currently proposed tax bill will strongly discourage people from going to graduate school because they will be taxed on the value of tuition waivers received for doing work for the university (teaching , etc). This is a directly disincentive to innovation, etc. This is in addition to changes in deductions for student loan interest. This will have a long-term negative impact on our country's standing in STEM and innovation. 
Title: Re: Republican Tax Plan 2017
Post by: Scortius on November 21, 2017, 11:09:37 AM
I think it's important to differentiate between the idea that domestic trickle-down economics is effective and the idea that lowering the corporate tax rate to a more globally competitive number is needed to stop businesses from moving their HQs.

It makes sense to lower our corp tax rate to 20%.  The avg corp tax rate in the EU is 22.5%.

Maybe we're not big fans of globalization, but as one country we can't enact effective legislation to stop businesses from relocating. I think our best option is to be competitive so we recapture some of these trillions of dollars that corporations hold in tax havens.

I keep hearing this argument as well, but I think it's important to question the premise that we want to be involved in a race to the bottom. On the surface it makes intuitive sense that we want to have a lower tax rate than our 'competitors', but I think that overlooks and undervalues exactly what we have here in the US. Right now we have far and away the best higher education and academic research system in the world.  The smartest and best students from every country in the world come to the US to study. That benefits the US economy immensely. So many of the modern start-up 'unicorns' have been built by first, second, or third generation immigrants of families that came to the US to study advanced technology. We have the best collection of engineering and mathematic talent in the world by far. Foreign talent fights to obtain visas to come work in the US.

If you wanted to start a modern day tech company, the type that would operate on a global scale, where would you do it? Well, the answer is easy, you do it in Silicon Valley. That's not hyperbole, it's the verifiable truth. Why would you do it in the country with the higher tax rate, in the state with the higher tax rate, in the city with the insane cost of living? Why wouldn't you start your tech company in Austria or Italy, China or India? Because you go to where the talent is and you are more than willing to pay that premium.

Makers of superior luxury goods don't compete in price wars with companies that offer cheaper generic comparable goods. Similarly, the US should have no need to engage in a corporate tax war with a country like India. We are the country that produces the superior brand in terms of an educated workforce, modern infrastructure, stable and uncorrupt government.  All that talk about how VTSAX is a 'global' index because all the companies operate globally. There's a reason all of those companies originated and are based in the US, and it sure as hell isn't because our corporate tax rate is lower. If anything, we should be doing whatever we can to make sure we stay the global leader in higher education and research as the US has benefited incredibly from it's ability to draw in the top talent from across the world to work and innovate (and pay taxes) here in the US. Thus, why this idea of partially paying for corporate tax cuts by cutting tuition credits is the most asinine idea I've ever heard of.
Title: Re: Republican Tax Plan 2017
Post by: DarkandStormy on November 21, 2017, 11:14:02 AM

It makes sense to lower our corp tax rate to 20%.  The avg corp tax rate in the EU is 22.5%.

The average effective corporate tax rate in the U.S. is 19%.
Title: Re: Republican Tax Plan 2017
Post by: J Boogie on November 21, 2017, 11:33:37 AM
I agree the US is great. But we're not great because of our 35% corp tax rate, and adjusting it to match our peers doesn't constitute a race to the bottom - maybe if we aimed to beat Singapore or Ireland, I'd see it that way.

If we kill loopholes and lower to 20%, I think it's possible our revenue might increase, not decrease.

Yeah, silicon valley is special. Our universities are special. And it's good to focus on making those core competencies of ours better, not worse. However there's very little our 35% corp tax rate contributes to making silicon valley special. It'd be just as or more special if we lower it to 20%. Our schools are funded by state governments, not federal. I don't think there's a very strong positive relationship between our 35% rate and the success of our universities.

I'd be interested in your argument that our 35% corp tax rate directly benefits silicon valley and our universities.

As far as luxury brands go, we overestimate our superiority at our own peril. Peter Thiel himself sees Silicon Valley's dominance diminishing over the next ten years, to no region in particular - though he mentions China as a country where there has been immense innovation recently.

Spotify, Skype, Tencent (Chinese version of FB with a higher valuation than FB), Waze, Shazam, etc all started outside silicon valley and outside the US for that matter.

Another reason it would make us more competitive - combined with killing loopholes, it would shift focus away from creative tax strategy, which creates zero value - to allow focus something that does create value.



Title: Re: Republican Tax Plan 2017
Post by: J Boogie on November 21, 2017, 11:39:59 AM

It makes sense to lower our corp tax rate to 20%.  The avg corp tax rate in the EU is 22.5%.

The average effective corporate tax rate in the U.S. is 19%.
Plus all of the work needed to get that rate keeps of financial professionals employed. ;)

Exactly my point - as low as 12% by some estimates. That's why I think a 20% tax rate would actually result in increased revenue, as companies would be disincentived to pursue loopholes as the financial benefit would greatly diminish. They couldn't justify hiring the best of the best tax lawyers to get them 1/4 of the tax break they've historically been able to achieve - and this is factoring no efforts to close loopholes.

Even Obama wanted to lower the corp tax rate - granted, not to 20, but 28, but still - he recognized 35% is problematic.
Title: Re: Republican Tax Plan 2017
Post by: sokoloff on November 21, 2017, 11:45:48 AM
If you wanted to start a modern day tech company, the type that would operate on a global scale, where would you do it? Well, the answer is easy, you do it in Silicon Valley. That's not hyperbole, it's the verifiable truth. Why would you do it in the country with the higher tax rate, in the state with the higher tax rate, in the city with the insane cost of living? Why wouldn't you start your tech company in Austria or Italy, China or India? Because you go to where the talent is and you are more than willing to pay that premium.
I would start as a Delaware company and hire employees in Silicon Valley, but if I were targeting a global company, I'd be sure to have a plan for how to make the company not a US company in the end, or at least not exclusively a US company. That's pretty much the standard playbook for VC-funded tech startups. I can think of far more Delaware startups than California startups, even those who are very heavy employers in California.
Title: Re: Republican Tax Plan 2017
Post by: Peter Parker on November 21, 2017, 11:58:24 AM