The Money Mustache Community
General Discussion => Welcome and General Discussion => Topic started by: Glenstache on November 02, 2017, 10:44:02 AM
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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:
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.
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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.
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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.
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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.
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PTF
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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.
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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.
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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.
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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.
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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.
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The 429 page bill is attached if anyone else cares for more details.
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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.
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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.
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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.
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Can anyone clarify the change on page 143 of the PDF above?
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:
(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.
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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.
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PTF
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Can anyone clarify the change on page 143 of the PDF above?
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:
(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.
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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!
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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.
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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
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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.
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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.
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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?
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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.
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ptf
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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!
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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.
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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.
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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...
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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.
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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.
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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.
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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!"
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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.
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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.
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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.
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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.
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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.
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- 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”.
- 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.
- Removing the estate tax is very evil and keeps power even more consolidated within families. In fact, I think this tax should substaintially increase, something like 75% over 500k
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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.
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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.
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- 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.
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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.
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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.
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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.
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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.
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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.
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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).
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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.
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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.
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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.
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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?
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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.
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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!
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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.
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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.
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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
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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?
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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.
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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
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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.
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If this plan passes will it change our taxes due April 2017 or not until April 2018?
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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).
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
:)
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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.
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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.
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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.
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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.
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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).
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^^^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.
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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.)
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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.
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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.
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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.
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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.
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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...?
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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.
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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.
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Ran the numbers...I save $6.45 with this proposal!
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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 :)
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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.
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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.
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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.
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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.
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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.
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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.
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(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.
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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/
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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.
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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?
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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.
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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".
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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
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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.
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I started a thread on DAFs.
https://forum.mrmoneymustache.com/taxes/let's-talk-about-dafs/
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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...
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I would love to see the US stop taking citizens when residing outside the country.
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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%...
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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.
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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.
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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.
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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.
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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
‘‘(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.
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(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.
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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.
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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
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I haven't seen it reported, but I'm guessing the carried interest loophole has also once again survived.
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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....
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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
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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?
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I suppose it is simplified to the extent that many filers who used to itemize would not do so under the proposed bill.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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?
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Here is the proposed "postcard" tax return... seems pretty simple to me.
(https://loudermilk.house.gov/uploadedphotos/highresolution/b753c229-0daf-437b-a60d-cee9dd9d6b0d.jpg)
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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.
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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?
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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.
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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.
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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.
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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.
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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.
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...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.
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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)?
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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.
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...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.
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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).
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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.
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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?
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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.
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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.
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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
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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.
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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.
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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.
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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......
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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?
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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!
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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:
[img width=600]https://loudermilk.house.gov/uploadedphotos/highresolution/b753c229-0daf-437b-a60d-cee9dd9d6b0d.jpg[/img]
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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.
(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.’’.
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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."
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This looks like a win for high earners who don't itemize, right?
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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).)
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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.
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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???
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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).
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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
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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.
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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.
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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.
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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.
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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!"
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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
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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.
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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.
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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....
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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:
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.
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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!
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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.
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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.
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PTF
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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...
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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/
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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.
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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?
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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
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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/).
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Well, I think Harvard can spare 1.5% of its profits on the 20B in endowment they have. They have room for that.
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+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.
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".
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+ 1 (or I guess +19 Trillion (and counting!))
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Ptf, partly because I will be completely screwed if this passes.
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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.
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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.
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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.
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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.
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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.
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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)
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tl;dr: you come out $650 behind in the new plan with 1 kid, and $250 behind with 2+ kids.
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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."
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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.
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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.
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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.
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.
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Ptf
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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.
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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.
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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):
(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....
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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.
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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.
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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?
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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.
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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.
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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.
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Word is some big changes are supposed to be published today.
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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.
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The Senate is due to release their own plan this week so all this could be thrown on its head.
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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.
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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!))
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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...
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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.
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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?
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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.
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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.
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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.
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The Senate is due to release their own plan this week so all this could be thrown on its head.
This, plus the house taking it up on the floor. That said, I wouldn't expect very significant changes. As we all know, much in Washington is agreed upon behind closed doors, and with the Republicans leading all house of congress, plus the White house, I imagine that the overall framework has all been agreed upon. Off the top of my head, here are the things that I could see changing:
a) the $1M threshold for the 39.6% bracket being lowered to $600K to $800K.
b) a capped itemized deduction for state and local taxes being added back in (maybe $10,000 like the property taxes, or maybe a non-inflation adjusted pool of $20K for all SALT including property taxes)
c) further tweaks to the bracket thresholds (possibly raising the top of the 12% bracket)
d) phase in of the corporate cuts over six years (possibly immediate cut to 30% with further 2% reduction each of the following five years)
e) increase in the new Standard Deduction (already published IRS tables for 2018 indicate a MFJ standard deduction of $13,000; only in Washington and with our idiot media can we be talking for days about $24,400 being a doubling of $13,000 without anybody blinking an eye)
I think the following are pretty well set:
a) four brackets at 12, 25, 35 and 39.6
b) the doubling of the standard deduction and elimination of personal exemptions
c) elimination of all itemized deductions other than mortgage, charitable, and capped SALT
I am interested to hear what other forum members think might be tweaked.
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Well, I think Harvard can spare 1.5% of its profits on the 20B in endowment they have. They have room for that.
+1 with this. I would think a progressive tax here would be a good idea so that places with massive endowments would pay > 1.5%. The endowments at some of these places are just enormous.
+ 1 (or I guess +19 Trillion (and counting!))
Harvard endowment - 36 billion. Assume 4% SWR (which they actually use!) = 1.5B withdrawal a year for various uses, which would then be taxed at 1.5%, or 22MM.
Highlights:
Harvard (selected) income: Tuition + Grants -1.6 Billion.
Harvard (selected) Cost :Salaries + benefits - 2.2 billion.
Harvard operating budget is 4.5B (all sources) on a 20,000 student body and 16000 staff and faculty.
(Tax bill proposes the tax to apply only on endowments that are higher than number of students*$100,000. So a college with 5000 students would have to have an endowment of 500 million to start seeing the tax. )
Who thinks they cannot afford a 22MM in tax?
Come on guys. Anyone who saves a dollar can "afford" to pay that dollar in taxes. Affordability is a necessary precondition, but not a sufficient justification for tax increases.
You are correct - "afford" was the wrong word. They do not "deserve" to be taxed. Just like Warren Buffet deserves to pay lower tax rate than his secretary.
I agree with dragoncar here. Everyone on this forum is saving some amount of money and hence could afford to pay more tax.
When it comes to deciding whether or not to impose taxes, there are essentially two reasons to do it: 1) to bring in revenue 2) to change behavior.
The personal income tax is an example of the first reason. Cigarette taxes or soda taxes are examples of the second.
The endowment tax isn't going to raise a lot of revenue ($3B over 10 years was the estimate I read) and will add significant new compliance costs for both the university foundation side and the government auditing side so it's not a great tax from the point of view of raising revenue.
Now if we want to change behavior and encourage universities to not accumulate large endowments, maybe this will have some effect there. Is that a goal we have as a society?
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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.
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It would be nice if income taxes were done away with in general.
The US government takes in about $3.7 trillion in taxes per year. The household networth of the US citizens is about $85 trillion.
$3.7T is 4.4% of $85T so just tax everyone 4.4% of their total networth every year and be done with it. It is perfectly progressive and taxes a billionair more than a millionair.
I don't like this idea. I would, however, go for some sort of consumption tax if it was combined with a universal basic income. In fact, I suspect that is the way of the future after the robots take all our jobs and nobody has any income to be taxed.
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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.
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Well, it's less regressive if combined with a universal basic income.
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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."
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It would be nice if income taxes were done away with in general.
The US government takes in about $3.7 trillion in taxes per year. The household networth of the US citizens is about $85 trillion.
$3.7T is 4.4% of $85T so just tax everyone 4.4% of their total networth every year and be done with it. It is perfectly progressive and taxes a billionair more than a millionair.
If I Roth convert everything before you implement your plan, am I then free of taxes for life? (i.e. same as today - assuming estate tax is gone)
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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).
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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).
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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.
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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.
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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.
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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.
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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.
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In all, this tax plan could cost me hundreds of thousands of dollars.
That's kind of the point of the plan. Tax the upper middle class more in order to give tax breaks to the super rich, while ignoring the poor.
They're making America great again, one billionaire at a time.
Yep.
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In all, this tax plan could cost me hundreds of thousands of dollars.
That's kind of the point of the plan. Tax the upper middle class more in order to give tax breaks to the super rich, while ignoring the poor.
They're making America great again, one billionaire at a time.
I don't know that a corporate executive is really just upper middle class. I'd say if this tax plan is costing you hundreds of thousands you're in the upper 1% or higher of earners. And around this site could have or should have FIREd already from the sounds of it. At which point this tax plan would be beneficial.
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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.
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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.
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In all, this tax plan could cost me hundreds of thousands of dollars.
That's kind of the point of the plan. Tax the upper middle class more in order to give tax breaks to the super rich, while ignoring the poor.
They're making America great again, one billionaire at a time.
I don't know that a corporate executive is really just upper middle class. I'd say if this tax plan is costing you hundreds of thousands you're in the upper 1% or higher of earners. And around this site could have or should have FIREd already from the sounds of it. At which point this tax plan would be beneficial.
Hundreds of thousands in future value...not per year. That clarification is important, I guess.
As for the rest of your comment, context is important. A) I am young and haven't been an executive forever. B) While I could technically walk away right now, there are some major medical conditions in my family for which I must build a large investment reserve, given the uncertainty around healtchcare in this country. C) Outside of that, I am still saving more than a 3 percent withdrawal rate would demand because I have meaningful philanthropic interests that I'd like to pursue/support in FIRE.
Let's not get judgy. I didn't realize there was a rule against 1% earners adopting and embracing mustachianism.
my point was youre wealthy and have a large income with large income benefits. So the tax negatively effecting you isnt necessarily a bad thing for society as a whole.
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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.
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In all, this tax plan could cost me hundreds of thousands of dollars.
That's kind of the point of the plan. Tax the upper middle class more in order to give tax breaks to the super rich, while ignoring the poor.
They're making America great again, one billionaire at a time.
I don't know that a corporate executive is really just upper middle class. I'd say if this tax plan is costing you hundreds of thousands you're in the upper 1% or higher of earners. And around this site could have or should have FIREd already from the sounds of it. At which point this tax plan would be beneficial.
Hundreds of thousands in future value...not per year. That clarification is important, I guess.
As for the rest of your comment, context is important. A) I am young and haven't been an executive forever. B) While I could technically walk away right now, there are some major medical conditions in my family for which I must build a large investment reserve, given the uncertainty around healtchcare in this country. C) Outside of that, I am still saving more than a 3 percent withdrawal rate would demand because I have meaningful philanthropic interests that I'd like to pursue/support in FIRE.
Let's not get judgy. I didn't realize there was a rule against 1% earners adopting and embracing mustachianism.
my point was youre wealthy and have a large income with large income benefits. So the tax negatively effecting you isnt necessarily a bad thing for society as a whole.
I never said it was. I actually agree with you. The point of this thread, however, was to discuss how the tax plan impacts us personally, not how it impacts society. But, what does bother me is that these incremental taxes to me are not going to pay for incremental services that benefit society. Instead, it is simply a redistribution of wealth from my pocket to someone whose pockets are much deeper already.
yes i'll agree the money is flowing the wrong direction.
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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.
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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.
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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:)
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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.
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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".
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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.
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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.
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I'm missed the elimination of the 5k for childcare deduction. That's 1250 in savings gone for us when we have kids. I thought this was an area that they were looking to expand.
You will still have the Child Care Tax Credit available, which gives a 20% credit on $3000 (1 kid) or $6000 (2+ kids). 20% of $6k is still a $1200 credit, which is close enough to a 25% rate on a $5k deduction plus 20% of the remaining $1k ($6k - $5k) from the credit. This is a simplification, I don't know why there are two overlapping child care tax treatments, and probably a more equitable approach, since the size of the tax reduction doesn't rise with income.
Of course, it's all moot, since yesterday's amendment by the committee chair put DC FSAs back in.
do you have a link to the ammendments. or does someone have a quick summary.
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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?
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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)
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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
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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.
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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.
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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.
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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?
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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!
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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.
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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.
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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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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.
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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.
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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".
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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.
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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.
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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.
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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.
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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.
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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.
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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).
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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.
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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.
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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?
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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?
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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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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%.
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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.
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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.
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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.
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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?
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.
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.
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.
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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!
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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.
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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.
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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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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.
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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.
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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
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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
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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).
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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.
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.
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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.
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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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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)
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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. :)
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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.
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New question.
Is the savers credit changed or eliminated? Sorry if this was already covered.
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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.
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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.
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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.
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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.
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Can anyone clarify the change on page 143 of the PDF above?
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:
(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 ....
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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.
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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.
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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.
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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.
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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
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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).
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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.
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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.
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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.
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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!!
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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?
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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.
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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%.
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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....
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Trump's making America great again, for Himself!
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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). :{(
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Now I'm reading that the Senate hasn't even drafted a bill yet. They have just released their two page "plan."
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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.
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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.
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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.
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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.
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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.
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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
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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.
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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".
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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).
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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.
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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.
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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
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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.
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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.
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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.
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.
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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.
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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.
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.
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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.
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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.
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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?
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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
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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).
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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.
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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.
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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?
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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.
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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.
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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.
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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.
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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.
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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.)
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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 :)
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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.
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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.
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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.
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... 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.
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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.
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... 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.
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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.
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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/
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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.
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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.
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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.
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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.
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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).
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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!
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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.
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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.
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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.
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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.
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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 ...).
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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
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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.
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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.
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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.
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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.
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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.
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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.
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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...
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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.
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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
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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.
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Yikes I didn't even think of that, good point sokoloff!
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http://www.washingtonexaminer.com/steven-mnuchin-shifts-says-its-very-hard-not-to-cut-taxes-for-wealthy/article/2637899
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
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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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?
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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.
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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...
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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...
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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
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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.
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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.
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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??
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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.
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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.
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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.
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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
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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.
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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.
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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?
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https://twitter.com/TopherSpiro/status/930522616980484097
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
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https://twitter.com/TopherSpiro/status/930522616980484097
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.
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Tuesday night the Senate GOP quietly added language to sunset individual tax cuts, but keep the corp tax cuts permanent:
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.
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https://twitter.com/TopherSpiro/status/930522616980484097
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.
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https://twitter.com/TopherSpiro/status/930522616980484097
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.
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https://twitter.com/TopherSpiro/status/930522616980484097
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?
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https://twitter.com/TopherSpiro/status/930522616980484097
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.
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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.
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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
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Shorter version of the Republican Tax Plan: it's a big middle finger to the millionaire next door types.
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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.
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(https://pbs.twimg.com/media/DOsm5TaX4AQKmxf.jpg)
This looks like a pile of shit.
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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.
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(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.
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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
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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.
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(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.
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(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?
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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.
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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?
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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
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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.
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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.
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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.
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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??
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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.
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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/
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.
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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
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.
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
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.
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.
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.
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/
Former students won’t be able to deduct student loan interest.
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
One tax break on the chopping block in the House Republicans' tax reform bill -- alimony payments.
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
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
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
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.
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@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.
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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?
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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.
...
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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.
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We're one step closer: The House passed it.
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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).
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http://www.cnn.com/2017/11/16/politics/house-tax-plan-vote/index.html
House plan passes, 227-205.
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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.
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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).
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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.
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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
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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?
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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?
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.
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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.
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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
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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.
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.
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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.
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).
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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.
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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?
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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?
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.
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“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.”
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.
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.
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.
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.
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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.
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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.
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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.
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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.
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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.
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.
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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.
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.
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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.
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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.
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.
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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.
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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.
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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.
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Is the 1031 exchange staying?
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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?
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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?
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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
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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.
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Maybe you're rich if $200/month is something to scoff at?
Wait, sorry! Wrong thread!
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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.
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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.
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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.
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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?
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Whatever happened to draining the swamp?
It was bullshit from day one. Unfortunately not everyone saw that last November, and many still believe it.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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".
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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!
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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).
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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.
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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.
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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!!
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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.
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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.
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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?
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.
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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?
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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.
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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.
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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
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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.
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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?
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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).
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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?
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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.
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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.
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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....
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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.
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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.
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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.
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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....
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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!
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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."
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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).
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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?
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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
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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.
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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.
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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
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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
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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.
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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?
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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.
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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....
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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.
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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.
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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.
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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.
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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).
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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.
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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
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I wonder what the sentiment will be when most people find that their first paycheck in the new year is a little fatter.
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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
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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.
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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.
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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.
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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.
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.
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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?
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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...
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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
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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.
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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.
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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.
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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.
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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.
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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).
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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?
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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...
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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.
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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.
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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
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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%.
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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.
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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?
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So what does the GOP expect America to look like when the poor have little or no safety nets?
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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.
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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.
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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.
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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.
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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??
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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...
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.
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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...
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?
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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.
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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
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https://www.cnbc.com/2017/11/20/senate-gop-tax-plan-to-ultimately-raise-taxes-for-half-of-us-tax-policy-center.html
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.
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.
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.
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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.
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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.
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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?
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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.
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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.
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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.
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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.
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.
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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
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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.
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?
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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.
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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.
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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.
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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%.
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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.
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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.
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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.
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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.
One thing that is rarely mentioned when it comes to US corporations is that we also have the greatest military in the world that protects their interests around the globe (think oil in the middle east). This costs life and treasure....
I see taxes like insurance--when you have more to lose your premium should be higher.
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I see taxes like insurance--when you have more to lose your premium should be higher.
I don't think there's all that much debate on that point. The question is not whether they should be higher in absolute numbers, but whether they should be progressively higher as a percentage of <whatever>.
IOW, should they be twice as much when you have twice as much to lose, or more than twice as much?
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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.
You want 20% but keep the deductions/credits?
If you don't think companies will still pay to pay as close to $0 in tax as possible, you don't understand corporations. It's all about squeezing as many dollars as they can.
Plus, most companies are probably sitting on NOLs and Cap Losses to carry forward anyway. It would be a mess.
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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.
You want 20% but keep the deductions/credits?
If you don't think companies will still pay to pay as close to $0 in tax as possible, you don't understand corporations. It's all about squeezing as many dollars as they can.
Plus, most companies are probably sitting on NOLs and Cap Losses to carry forward anyway. It would be a mess.
No, I want to close loopholes as well. My point is that when there isn't that much left to save, the juice isn't worth the squeeze. Of course corporations want to minimize their tax burdens as much as possible. But their efforts will be much different when there's far less to save. This effect will be compounded by the closing of loopholes.
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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.
One thing that is rarely mentioned when it comes to US corporations is that we also have the greatest military in the world that protects their interests around the globe (think oil in the middle east). This costs life and treasure....
I see taxes like insurance--when you have more to lose your premium should be higher.
Yeah, our military spending crossed my mind in regards to why we would need to charge more.
However, as has been mentioned, the avg corp tax rate is pretty low as tons of sheltering and tax law gymnastics is going on, so it seems we're not actually getting more revenue from our corps than other countries without massive militaries.
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No, I want to close loopholes as well. My point is that when there isn't that much left to save, the juice isn't worth the squeeze. Of course corporations want to minimize their tax burdens as much as possible. But their efforts will be much different when there's far less to save. This effect will be compounded by the closing of loopholes.
I could get behind a 20% corporate rate with no deductions or credits. But it'll never pass - they'll throw a fit and lobby the **** out of Congress. Not to mention all the tax prep work that goes on.
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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.
One thing that is rarely mentioned when it comes to US corporations is that we also have the greatest military in the world that protects their interests around the globe (think oil in the middle east). This costs life and treasure....
I see taxes like insurance--when you have more to lose your premium should be higher.
Yeah, our military spending crossed my mind in regards to why we would need to charge more.
However, as has been mentioned, the avg corp tax rate is pretty low as tons of sheltering and tax law gymnastics is going on, so it seems we're not actually getting more revenue from our corps than other countries without massive militaries.
Which is my point--Why provide Corporations with a tax cut when we provide them with:
1. The highest educated workforce in the world
2. The highest investment in research and development
3. The protections of our laws (patents etc)
4. And the might and protection of our military around the world
Maybe they should pay more for all of this rather than the 19% effective rate that they are paying now. Maybe we should tax products made by US corporations that produce products oversees (so they don't have to pay american wages) at a higher rate....when we are the ones that are shouldering the costs for their protection.
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Yeah, but why would the corporations, which control the government, offer to tax themselves more? That doesn't make sense does it?
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Yeah, but why would the corporations, which control the government, offer to tax themselves more? That doesn't make sense does it?
Corporations are happy to take advantage of the various loopholes they can find at any given time, naturally. They'll lobby and study to have as much tax avoidance as possible.
However, all the moving parts that contribute to this strategy make it more difficult for corporations to forecast how risky their new investments will be. There's a lot of value in having a stable and predictable tax rate when it comes to making long term financial decisions.
I disagree with your statement that corporations control the govt. It lacks nuance and totally lets us off the hook. Corporations didn't vote trump in, we did. Corporations didn't elect the congress and the senate, we did. Sure they lobby and litigate. It's concerning no doubt, but their influence does not equal control. Corruption is much lower in the US than in the developing world and we're not much more corrupt than other developed nations.
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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.
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?
So you support sending more people to graduate education to expand the economy? And you think raising taxes on graduate students will reduce the number of graduate students and therefore reduce economic growth. Because that's really only one step away from supply-side economics, and because graduate students are wealthier than the average American, it is also trickle-down economics.
Anyways, the idea behind the tax isn't necessarily to pump more money into the economy to make the economy grow faster. It's to make investment and innovation more attractive. If you have a hypothetical investment that yields $1,000,000 over the next 10 years, you make $5.8 million at a tax rate of 35%, and $7.2 million at a tax rate of 20%. All investments that cost between $5.8 million and $7.2 million suddenly become viable investment projects. The government is also basically subsidizing any project that were going to be pursued anyways, but there are some projects that become better.
If the tax cut actually "stimulated" a full-employment economy, the Fed would have to raise interest rates to offset the stimulus.
Panda,
"Innovation" is hard to measure, but no one denies that it exists. You can look into Krugman's "The Myth of the Asian Miracle" for a discussion on this from a liberal economist, where he argues that Asian economies have accomplished all their economic growth by input gains, rather than actual productivity improvements. The slowdown in both the Korean and Japanese economies bolsters that point, IMO.
Your assertion that NO ONE takes supply-side economics just isn't true. Here's Gregory Mankiw in the NY Times, who gives an off-hand comment to how he thinks the world works:
https://www.nytimes.com/2017/06/02/upshot/a-tax-cut-might-be-nice-but-remember-the-deficit.html
A key question is how revenue neutrality is to be judged. Traditional analyses of the effects of tax proposals rely on what is known as static scoring, a method based on the simple but dubious assumption that changes in the tax code do not alter the path of national income. An alternative approach, called dynamic scoring, accounts for the possibility that lower tax rates will promote growth.
Dynamic scoring is potentially more accurate, but it is also more easily abused by those who want to promote their policies with an unhealthy dose of wishful thinking. Tax cuts rarely pay for themselves. My reading of the academic literature leads me to believe that about one-third of the cost of a typical tax cut is recouped with faster economic growth.
He's on the record as saying a tax cut will recover up to 1/3 of the revenue lost through increased economic growth.
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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%.
A high statutory tax rate, with a low average effective tax rate because of lots of special interest deductions and credits and loopholes is a terrible system that is going to great all sorts of unintended economic distortions and perverse incentives.
If the approach to tax cuts was to eliminate deductions/credits/loopholes, and use the increase in revenue to reduce statutory tax rates in a revenue neutral fashion (so that the average effective corporate tax rate would stay the same), I think this part of the bill would get a lot more support. I'd support it anyway.
But that's not what this tax bill does.
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Even accounting for the loopholes, which most nations have, the US still has among the highest corporate tax rates.
https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/52419-internationaltaxratecomp.pdf
I don't think you can eliminate the loopholes. Here's a breakdown of the tax loopholes companies use to not pay tax:
https://taxfoundation.org/corporate-and-individual-tax-expenditures/
1. Deferral of Income from Controlled Foreign Corporations ($65 billion) - The US does not tax income that is earned in a foreign nation and remains in a foreign nation. This is by far the largest "corporate tax loophole." But virtually every nation has the same system. It's why the UK is leading the charge against Ireland and Switzerland as tax havens. You can't realistically stop this, and attempting to do so would turn the US into a pariah worse than Trump.
2. Deduction for US production activities. - Good luck convincing Congress to close this one.
3. Exclusion of income earned on muni bonds - Utterly standard, applies to everyone. The same logic applies to giving it to both GE and myself.
4. Accelerated Depreciation - This basically is just a tax deduction to encourage investment. It means instead of straight-line depreciating a 5 year asset by 20% each year, you can depreciate 20% in Year 1, 60% in Year 2, 10% in Year 3, 5% Year 4, 5% Year 5. It affects government finances in a present value of money sense, but the government is just deferring income in a non-preferential manner. It's not really foregoing income.
There's other ones, and they aren't trivial in total, but the big deductions aren't really closeable. Obama's tax reform was to charge a minimum tax on foreign earnings (which will piss off practically everyone), and selectively targeting oil and gas companies to eliminate certain deductions. The last easy loopholes to close were in 1986, and the hit to real estate in the 1986 tax reform probably made sure multi-family real estate investment didn't recover for decades:
https://fred.stlouisfed.org/series/C292RC1Q027SBEA
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So you support sending more people to graduate education to expand the economy? And you think raising taxes on graduate students will reduce the number of graduate students and therefore reduce economic growth. Because that's really only one step away from supply-side economics, and because graduate students are wealthier than the average American, it is also trickle-down economics.
I want to see your source for graduate students being wealthier than the average American. Perhaps you meant that graduate degree holders are wealthier than the average American?
This is one of those issues where both sides get to feel like they're right.
On the one hand, grad students are demonstrably quite poor. Many are supporting two person households on $18,000-$24,000/year. On top of this they are often expected to absorb the cost of things like traveling to meetings (registration, hotel, and airfare can run $1,000-$2,000) for several months before getting reimbursed by the university.
On the other hand, domestic grad students are much more likely to come from affluent family backgrounds, in part because people who come from poorer backgrounds tend to feel a lot more family pressure to go out and start earning significant amounts of money right away once they complete their undergrad degree. If you look at physical, life, and social scientists today, their parents were in about the 70th percentile of household incomes when they were children, and, on average, they tend to end up back around the 70th percentile of household incomes themselves after they go out into the world and find real jobs (https://i.pinimg.com/736x/4f/91/b6/4f91b6f6e58565ffc562f4f77385bc6a.jpg).
Both the above paragraphs are true. So it boils down to whether we're judging people based on the economic circumstances of their parents or based on their own economic circumstances. (With the caveat that if we decide grad students have rich parents and can afford to pay more taxes, it'll also mean even fewer people without rich parents end up going to grad school).
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Back to reality--This is going to be a cluster F*ck. Murkowski seems to have given in. I've called/written the other reps that are on the fence--hoping this doesn't go through. What a royal screw job.
https://www.accountingtoday.com/articles/tax-reform-bill-odds-improve-as-key-senator-lisa-murkowski-backs-health-mandate-repeal
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So you support sending more people to graduate education to expand the economy? And you think raising taxes on graduate students will reduce the number of graduate students and therefore reduce economic growth. Because that's really only one step away from supply-side economics, and because graduate students are wealthier than the average American, it is also trickle-down economics.
I want to see your source for graduate students being wealthier than the average American. Perhaps you meant that graduate degree holders are wealthier than the average American?
Anyways, the idea behind the tax isn't necessarily to pump more money into the economy to make the economy grow faster. It's to make investment and innovation more attractive. If you have a hypothetical investment that yields $1,000,000 over the next 10 years, you make $5.8 million at a tax rate of 35%, and $7.2 million at a tax rate of 20%. All investments that cost between $5.8 million and $7.2 million suddenly become viable investment projects. The government is also basically subsidizing any project that were going to be pursued anyways, but there are some projects that become better.
The problem is that for that claim to be true you are also arguing that companies are refraining from investing because the current yields aren't high enough. However, CEO's recently said they aren't really planning on increasing investments if the tax rates go down (http://www.chicagotribune.com/business/ct-biz-trump-tax-plan-corporate-investment-20171115-story.html). Turns out that you really need to have something to invest in.
Your assertion that NO ONE takes supply-side economics just isn't true. Here's Gregory Mankiw in the NY Times, who gives an off-hand comment to how he thinks the world works:
https://www.nytimes.com/2017/06/02/upshot/a-tax-cut-might-be-nice-but-remember-the-deficit.html
A key question is how revenue neutrality is to be judged. Traditional analyses of the effects of tax proposals rely on what is known as static scoring, a method based on the simple but dubious assumption that changes in the tax code do not alter the path of national income. An alternative approach, called dynamic scoring, accounts for the possibility that lower tax rates will promote growth.
Dynamic scoring is potentially more accurate, but it is also more easily abused by those who want to promote their policies with an unhealthy dose of wishful thinking. Tax cuts rarely pay for themselves. My reading of the academic literature leads me to believe that about one-third of the cost of a typical tax cut is recouped with faster economic growth.
He's on the record as saying a tax cut will recover up to 1/3 of the revenue lost through increased economic growth.
I didn't say that no one takes it, I said that,
In the economic literature, supply-side economics is given about as much credibility as homeopathy is by Western medicine.
Sorry, I meant that graduate degree holders are wealthier than the average American. However, the average graduate student makes $30,000 per year per Glassdoor, so a household of two average graduate students also exceeds the median household income in the US. Whether you want to compare average to median is up to you....
Education spending tends to favor well-off Americans. This is why Obama tried (unsuccessfully) to eliminate the tax loophole that allows wealthy families to save for their children's college education. It's just trickle-down economics, with a group that happens to be more liked than Paris Hilton.
I disagree with your statement about supply-side economics. N Gregory Mankiw is not a random guy. He is one of the most respected economists on the planet, and probably is among the top 100 respected economists in history. The only go with more name recognition is probably Paul Krugman. I think he works mostly with stabilization policies, but he has papers on tax policies as well, and supports no capital income tax, a possibly LOWER tax for the richest Americans, and wants a consumption tax. That's not exactly unusual for a right-leaning economist. I am sure Eugene Fama, John Taylor, Gary Becker, etc. all hold/held similar views (though none address tax and growth specifically in their work, afaik).
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However, the average graduate student makes $30,000 per year per Glassdoor, so a household of two average graduate students also exceeds the median household income in the US. Whether you want to compare average to median is up to you....
I think that figure is PhD only. PhD students are much more likely than Master's to have a stipend these days. And yes, median is a lot better than average. For instance, if you have 9 full-time PhD students while getting a stipend of 20k per year while there is a part-time student working making 110k with a stipend of 10k (still a 30k average), it can skew things.
FWIW, I'm not 100% opposed to the idea of taxing these benefits to grad students in a vacuum, I just don't like them being siphoned off to make up the partial difference on estate taxes and corporate rates. Grad students provide cheap labor for a lot of research and innovative work all the while getting experience themselves (which they can take with them to corporations). I'm not sure we want to punish or dis-incentivize this arrangement too much.
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Back to reality--This is going to be a cluster F*ck. Murkowski seems to have given in. I've called/written the other reps that are on the fence--hoping this doesn't go through. What a royal screw job.
https://www.accountingtoday.com/articles/tax-reform-bill-odds-improve-as-key-senator-lisa-murkowski-backs-health-mandate-repeal
My spidey sense is tingling also.
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Oh yeah, I think the odds are they definitely pass SOMETHING. They have to or they will have literally nothing to show for a year of complete GOP control. Doesn't matter at this point how shitty the bill actually is, as long as it cuts corporate taxes.
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Oh they got something done, something their base will continue to reward them for for a while.
(https://static.independent.co.uk/s3fs-public/styles/article_small/public/thumbnails/image/2017/02/01/02/neil-gorsuch-trump.jpg)
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Oh yeah, I think the odds are they definitely pass SOMETHING. They have to or they will have literally nothing to show for a year of complete GOP control. Doesn't matter at this point how shitty the bill actually is, as long as it cuts corporate taxes.
It seems like they are in a lose-lose situation for the GOP here. However, the "lose" of not passing anything is a more certain loss than passing something that is unpopular. They can probably spin passing something unpopular, and people might forget by 2018 elections, or they can remind people that they got a $1000 tax cut and they can buy a new car or renovate their kitchen with that. (Ha. ha. ha.)
Most average americans don't want this tax reform, but that isn't how our government works. The GOP could take a little more time and pass something more popular (or maybe tax reform is bound to be unpopular because someone has to give something up?) but they probably don't want to risk any delays. Rushing things through seems to be working...
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Oh they got something done, something their base will continue to reward them for for a while.
(https://static.independent.co.uk/s3fs-public/styles/article_small/public/thumbnails/image/2017/02/01/02/neil-gorsuch-trump.jpg)
True. I wish the liberal base would get half as motivated over things like judicial appointments as they do over minority, etc., civil rights issues. The right seems to never lose track of the bigger more consequential over longer periods of time (ETA for clarity) battles. I believe (someone might correct me) that there have been an unprecedented number of super conservative judicial appointments under Trump. That very likely will be his big legacy. Possibly his only legacy.
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Oh yeah, I think the odds are they definitely pass SOMETHING. They have to or they will have literally nothing to show for a year of complete GOP control. Doesn't matter at this point how shitty the bill actually is, as long as it cuts corporate taxes.
Honestly I wish they'd just lower corporate taxes and leave everything else alone. Deficit spending is not the end of the world, and it's easier to fix later.
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Oh yeah, I think the odds are they definitely pass SOMETHING. They have to or they will have literally nothing to show for a year of complete GOP control. Doesn't matter at this point how shitty the bill actually is, as long as it cuts corporate taxes.
It seems like they are in a lose-lose situation for the GOP here. However, the "lose" of not passing anything is a more certain loss than passing something that is unpopular. They can probably spin passing something unpopular, and people might forget by 2018 elections, or they can remind people that they got a $1000 tax cut and they can buy a new car or renovate their kitchen with that. (Ha. ha. ha.)
Most average americans don't want this tax reform, but that isn't how our government works. The GOP could take a little more time and pass something more popular (or maybe tax reform is bound to be unpopular because someone has to give something up?) but they probably don't want to risk any delays. Rushing things through seems to be working...
Do I need to remind anyone how rapidly Obama Care was reamed through the House....?
I disagree with your statement about supply-side economics. N Gregory Mankiw is not a random guy. He is one of the most respected economists on the planet, and probably is among the top 100 respected economists in history. The only go with more name recognition is probably Paul Krugman. I think he works mostly with stabilization policies, but he has papers on tax policies as well, and supports no capital income tax, a possibly LOWER tax for the richest Americans, and wants a consumption tax. That's not exactly unusual for a right-leaning economist. I am sure Eugene Fama, John Taylor, Gary Becker, etc. all hold/held similar views (though none address tax and growth specifically in their work, afaik).
Don't worry, at least one of us read your post. Frustrating that the echo chamber still exists, but if those discussing this topic can't 'prove you wrong', then they have no choice but to try and discredit your opinion by calling it psudo-science. That way, they can happily continue to ignore other valid opinions! :)
Haven't heard of some of these, you have given me some more reading material. Thanks!
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Most average americans don't want this tax reform, but that isn't how our government works. The GOP could take a little more time and pass something more popular (or maybe tax reform is bound to be unpopular because someone has to give something up?) but they probably don't want to risk any delays. Rushing things through seems to be working...
I believe that "most average americans" have paid little attention to this and are more concerned with how they're going to pay this month's bills. The majority don't like our president, so will likely disagree with anything associated with his name.
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I feel like we got a bit sidetracked with this discussion of what exactly supply-side economics are and just how rich or poor are domestic grad students. Neither of those really had anything to do with the points I was trying to make. There's a difference between raising or lowering taxes on grad students vs. counting tuition credits as income and essentially decimating the entire research community in the country. As an aside, I've never heard of a $30k grad stipend, even in STEM fields. Not to say they don't exist, but that would be exceptional to me.
What I want to get back to with all this talk of supply-side economics and the desire to spur economic growth through a lowering of the corporate tax rate is this idea that 1) do corporations really need tax relief right now to spur investment and 2) do we actually want economic expansion to be our primary goal. Republicans right now seem to speak to the idea that we need this plan to stimulating corporate well-being and increasing the GDP and create more jobs. Yet, currently, we are sitting at record low unemployment, record high market valuations, and corporations are sitting on record piles of cash. What are we trying to fix here? Do Apple and Walmart really need a lowering of their tax rate or a repatriation event to allow them to hire more people or invest in more capital? It seems like Apple's limitations are the supply of enough highly educated engineers to design their products and the demand of the billions of people who buy their new phone every year. With record profit margins and cash reserves, it seems that Apple's first problem, the ability to recruit and hire more talented people (and invest in new facilities) is not a problem at all. Rather, making sure the people we complain about on this site have enough money to continue to pay for their thousand dollar phones is certainly an potential threat to their business projections. The same with Walmart. What do they need relief for? What would they do with the extra money? They certainly wouldn't give their employees a better wage as they don't have to in order to hire unskilled labor to man their stores. The profits would like go back to the shareholders, the people who are wealthy enough to buy and hold stock in the first place. Would it expand the economy? Sure. Would it increase the standard of living for a broad base of Americans? Absolutely not.
And that's the catch. All this talk about expanding the economy continues to ignore one of the most well-known facts. That all the gains from the growth of the economy over the last 20 years has gone to owners of capital, not to labor (the people Republicans claim to care about the most). So yes, we can grow the economy, and certainly it's a worthy goal, but no, that growth is not helping the people who most need help, and that's a problem. You can call it socialism or class warfare or demand-side economics or whatever, but in this time of record profits and economic growth where wealth inequality is nearing the highest it's ever been, why do we need to now focus on those who have gained immensely from this process rather than those who have been completely left behind? There has to be a middle ground somewhere between economic expansion and quality of life improvements for middle- and lower-class America. That is not what this tax bill is about.
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Back to reality--This is going to be a cluster F*ck. Murkowski seems to have given in.
Murkowski was bought when they offered her the chance to open ANWR to drilling. Everyone in Alaska desperately wants to drill for oil in the arctic, because each Alaskan citizen gets a dividend check from the oil companies just for being an Alaska resident. Murkowski has previously opposed dismantling the ACA, but oil drilling in the arctic has always been her number one issue and it will trump everything else.
So I think she'll fold, and vote for the tax bill. Horse trading at its finest.
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I feel like we got a bit sidetracked with this discussion of what exactly supply-side economics are and just how rich or poor are domestic grad students. Neither of those really had anything to do with the points I was trying to make. There's a difference between raising or lowering taxes on grad students vs. counting tuition credits as income and essentially decimating the entire research community in the country. As an aside, I've never heard of a $30k grad stipend, even in STEM fields. Not to say they don't exist, but that would be exceptional to me.
What I want to get back to with all this talk of supply-side economics and the desire to spur economic growth through a lowering of the corporate tax rate is this idea that 1) do corporations really need tax relief right now to spur investment and 2) do we actually want economic expansion to be our primary goal. Republicans right now seem to speak to the idea that we need this plan to stimulating corporate well-being and increasing the GDP and create more jobs. Yet, currently, we are sitting at record low unemployment, record high market valuations, and corporations are sitting on record piles of cash. What are we trying to fix here? Do Apple and Walmart really need a lowering of their tax rate or a repatriation event to allow them to hire more people or invest in more capital? It seems like Apple's limitations are the supply of enough highly educated engineers to design their products and the demand of the billions of people who buy their new phone every year. With record profit margins and cash reserves, it seems that Apple's first problem, the ability to recruit and hire more talented people (and invest in new facilities) is not a problem at all. Rather, making sure the people we complain about on this site have enough money to continue to pay for their thousand dollar phones is certainly an potential threat to their business projections. The same with Walmart. What do they need relief for? What would they do with the extra money? They certainly wouldn't give their employees a better wage as they don't have to in order to hire unskilled labor to man their stores. The profits would like go back to the shareholders, the people who are wealthy enough to buy and hold stock in the first place. Would it expand the economy? Sure. Would it increase the standard of living for a broad base of Americans? Absolutely not.
And that's the catch. All this talk about expanding the economy continues to ignore one of the most well-known facts. That all the gains from the growth of the economy over the last 20 years has gone to owners of capital, not to labor (the people Republicans claim to care about the most). So yes, we can grow the economy, and certainly it's a worthy goal, but no, that growth is not helping the people who most need help, and that's a problem. You can call it socialism or class warfare or demand-side economics or whatever, but in this time of record profits and economic growth where wealth inequality is nearing the highest it's ever been, why do we need to now focus on those who have gained immensely from this process rather than those who have been completely left behind? There has to be a middle ground somewhere between economic expansion and quality of life improvements for middle- and lower-class America. That is not what this tax bill is about.
+1
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I'd just wish folks would remember a fundamental rule of tax policy: corporations don't pay taxes, people pay taxes.
A corporate rate cut will benefit individuals in one of three ways:
1. Increased returns to shareholders
2. Increased wages for workers
3. Reduced prices for consumers.
The incidence of corporate taxes is a matter of dispute in the economic literature. My own personal thought is that the incidence is going to fall on different groups of people differently depending on the industry.
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I'd just wish folks would remember a fundamental rule of tax policy: corporations don't pay taxes, people pay taxes.
A corporate rate cut will benefit individuals in one of three ways:
1. Increased returns to shareholders
2. Increased wages for workers
3. Reduced prices for consumers.
The incidence of corporate taxes is a matter of dispute in the economic literature. My own personal thought is that the incidence is going to fall on different groups of people differently depending on the industry.
I think it is naive to expect 2 or 3. The opposite might be true when taxes go up, but why would the give up the increased profits of taxes going down?
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I'd just wish folks would remember a fundamental rule of tax policy: corporations don't pay taxes, people pay taxes.
A corporate rate cut will benefit individuals in one of three ways:
1. Increased returns to shareholders
2. Increased wages for workers
3. Reduced prices for consumers.
The incidence of corporate taxes is a matter of dispute in the economic literature. My own personal thought is that the incidence is going to fall on different groups of people differently depending on the industry.
I think it is naive to expect 2 or 3. The opposite might be true when taxes go up, but why would the give up the increased profits of taxes going down?
Well, say you're in a highly competitive industry (say fast food). McDonalds can now go back to the dollar menu and maintain the exact same profit margins, plus, steal business away from Burger King and Wendy's. How do you think Burger King and Wendy's will react?
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I'd just wish folks would remember a fundamental rule of tax policy: corporations don't pay taxes, people pay taxes.
A corporate rate cut will benefit individuals in one of three ways:
1. Increased returns to shareholders
2. Increased wages for workers
3. Reduced prices for consumers.
The incidence of corporate taxes is a matter of dispute in the economic literature. My own personal thought is that the incidence is going to fall on different groups of people differently depending on the industry.
I think it is naive to expect 2 or 3. The opposite might be true when taxes go up, but why would the give up the increased profits of taxes going down?
Well, say you're in a highly competitive industry (say fast food). McDonalds can now go back to the dollar menu and maintain the exact same profit margins, plus, steal business away from Burger King and Wendy's. How do you think Burger King and Wendy's will react?
Probably by taking tax savings, investing in automation, firing all the workers ,and serve their crappy product to those lucky few who still have jobs...
The point is, as Scortius points out, this will not increase wages as the Republicans like to pretend. Did you not see all the CEOs at the round table say they would not invest in their workers?
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Has anyone actually digested the proposed Senate bill? The full text got published on Tuesday but there definitely wasn't as much written about it as it was about the House version. Has anyone seen any good summaries?
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Has anyone actually digested the proposed Senate bill? The full text got published on Tuesday but there definitely wasn't as much written about it as it was about the House version. Has anyone seen any good summaries?
Don't waste your time with the summaries. If you really want to understand the bill, get the full text and read the sections that apply to your situation.
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I'd just wish folks would remember a fundamental rule of tax policy: corporations don't pay taxes, people pay taxes.
A corporate rate cut will benefit individuals in one of three ways:
1. Increased returns to shareholders
2. Increased wages for workers
3. Reduced prices for consumers.
The incidence of corporate taxes is a matter of dispute in the economic literature. My own personal thought is that the incidence is going to fall on different groups of people differently depending on the industry.
I think it is naive to expect 2 or 3. The opposite might be true when taxes go up, but why would the give up the increased profits of taxes going down?
It's mostly #1, and those shareholder earnings will also be taxed at a lower rate (qualified dividends and capital gains). This will lower tax revenues. It will only boost the economy if there are people out there who see a bigger dividend and go out and spend it. Fat chance.
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I'd just wish folks would remember a fundamental rule of tax policy: corporations don't pay taxes, people pay taxes.
A corporate rate cut will benefit individuals in one of three ways:
1. Increased returns to shareholders
2. Increased wages for workers
3. Reduced prices for consumers.
The incidence of corporate taxes is a matter of dispute in the economic literature. My own personal thought is that the incidence is going to fall on different groups of people differently depending on the industry.
I think it is naive to expect 2 or 3. The opposite might be true when taxes go up, but why would the give up the increased profits of taxes going down?
It's mostly #1, and those shareholder earnings will also be taxed at a lower rate (qualified dividends and capital gains). This will lower tax revenues. It will only boost the economy if there are people out there who see a bigger dividend and go out and spend it. Fat chance.
Don't forget #4: stock buybacks at absurdly high valuations that help executives meet their quarterly PE targets so they can get their bonus options.
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Has anyone actually digested the proposed Senate bill? The full text got published on Tuesday but there definitely wasn't as much written about it as it was about the House version. Has anyone seen any good summaries?
Don't waste your time with the summaries. If you really want to understand the bill, get the full text and read the sections that apply to your situation.
Haha, have you tried it? That was the first thing I did, but the thing is something like 600 pages long and doesn’t even have a table of contents... I got through several pages and gave up. A summary would be useful to see which sections I should be reading. That’s what I did with the house bill.
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Has anyone actually digested the proposed Senate bill? The full text got published on Tuesday but there definitely wasn't as much written about it as it was about the House version. Has anyone seen any good summaries?
Don't waste your time with the summaries. If you really want to understand the bill, get the full text and read the sections that apply to your situation.
Haha, have you tried it? That was the first thing I did, but the thing is something like 600 pages long and doesn’t even have a table of contents... I got through several pages and gave up. A summary would be useful to see which sections I should be reading. That’s what I did with the house bill.
Yes, I did "try it." I did it for both House and Senate bills. The Senate bill has 253 pages and a thorough table of contents. The major amendment is 103 pages. I've read both house and senate bills for impacts on individual income taxes. Not sure what you're doing wrong?
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Has anyone actually digested the proposed Senate bill? The full text got published on Tuesday but there definitely wasn't as much written about it as it was about the House version. Has anyone seen any good summaries?
Don't waste your time with the summaries. If you really want to understand the bill, get the full text and read the sections that apply to your situation.
Haha, have you tried it? That was the first thing I did, but the thing is something like 600 pages long and doesn’t even have a table of contents... I got through several pages and gave up. A summary would be useful to see which sections I should be reading. That’s what I did with the house bill.
Yes, I did "try it." I did it for both House and Senate bills. The Senate bill has 253 pages and a thorough table of contents. The major amendment is 103 pages. I've read both house and senate bills for impacts on individual income taxes. Not sure what you're doing wrong?
Do you mind posting a link? The full text I attempted to read was a link from Bloomberg. It has 515 pages and no table of contents https://www.finance.senate.gov/imo/media/doc/11.20.17%20Tax%20Cuts%20and%20Jobs%20Act.pdf
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Education spending tends to favor well-off Americans. This is why Obama tried (unsuccessfully) to eliminate the tax loophole that allows wealthy families to save for their children's college education.
I believe that education is one of the fastest and surest routes for people to lift themselves and their progeny out of the lower strata of economic (and social) class and into the upper-middle.
Education alone won't get you beyond that, but there are countless examples, including my own, of lower class to upper middle class in two generations driven in large part by prioritizing education. The fact that people who are in the upper middle class also use education to maintain that position is not a reason to take away that opportunity from the upper-lower, lower-middle, and middle class, IMO.
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The fact that people who are in the upper middle class also use education to maintain that position is not a reason to take away that opportunity from the upper-lower, lower-middle, and middle class, IMO.
How about just plain dirt poor? Shouldn't they have the opportunity too? Seems like there are less opportunities than there were a generation ago when I went to school. Carter gave us the BEOG (Basic Education Opportunity Grant), CETA for college students (Comprehensive Education and Training Act), there were low interest loans (NDSL) and state scholarships.
Well - Mr Reagan and company took the first two away. I don't know what happened to the National Direct Student Loans. State scholarships have dried up somewhat. Mr. Clinton and company gave us these marvelous trade deals that sent many good jobs abroad (jobs were also lost by increased automation). So less tax revenue was there to pay for state scholarships.
It also used to be a fact that you could get an industrial job over the Summer and defray much of your school costs. Now you can get a minimum wage job and defray about zero costs. Or take a loan out and be a slave to a bank for many years.
I didn't read through the multiplicity of posts that preceded my Thanksgiving typing, but I'll bet you the right wing boys in power haven't done jack to help poor folk go to higher ed. However, I have read elsewhere that these potential tax bills are going to raise the average Joe's taxes. Can somebody who has read the 250 to 600 pages confirm this?
Am I just getting old or is the country actually going backward?
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The fact that people who are in the upper middle class also use education to maintain that position is not a reason to take away that opportunity from the upper-lower, lower-middle, and middle class, IMO.
How about just plain dirt poor? Shouldn't they have the opportunity too?
Of course they should have the opportunity as well.
I didn't include the dirt-poor in my list only because when discussing tax advantages for saving substantial sums in 529 accounts, it obviously doesn't make sense to talk about them.
Most of the top schools are need-blind anyway, so the very poor are already covered there (at least for tuition financing/grants).
The middle class gets pinched on the "how do I afford college?" deal, especially when multiple kids are college-bound. The very rich cover themselves; the very poor are comped by the schools; the middle often have an expected family contribution well in excess of what the middle class can cover.
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The fact that people who are in the upper middle class also use education to maintain that position is not a reason to take away that opportunity from the upper-lower, lower-middle, and middle class, IMO.
How about just plain dirt poor? Shouldn't they have the opportunity too?
Of course they should have the opportunity as well.
I didn't include the dirt-poor in my list only because when discussing tax advantages for saving substantial sums in 529 accounts, it obviously doesn't make sense to talk about them.
Most of the top schools are need-blind anyway, so the very poor are already covered there (at least for tuition financing/grants).
The middle class gets pinched on the "how do I afford college?" deal, especially when multiple kids are college-bound. The very rich cover themselves; the very poor are comped by the schools; the middle often have an expected family contribution well in excess of what the middle class can cover.
sokoloff, your post two posts above is great. And one more thing to add about education, the “dirt poor” can start off at a local JC (just like my two “dirt poor” parents did) and get most lower division coursework out of the way for nearly nothing in cost, just like any middle class or rich kid.
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Yes - good response. I would like your opinion on the other point I brought up. The country seems to be going backwards. I do not recall that enormous debt was incurred a generation ago. I had an NDSL loan with an interest rate of 1.5 or 3 percent. I've been told there is certainly no low interest loans for the students of today.
Is it harder to go to school today? Shouldn't student support be an obvious investment to by made by the country? Shouldn't the short term profit motive be waived for the good of us all? Are our current politicians doing anything to help with this long term investment in our future?
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(I'm declining to respond to your other point out of substantial and acknowledged ignorance.)
I do know that tuition growth has been wildly greater than general inflation for a couple decades now. That's been driven in large part by plentiful cheap money and strong loan guarantees for school loans. I can't say that I object to loans being available nor to loans being non-dischargeable in bankruptcy. But those two facts combine to let private college costs grow wildly out of connection to general inflation (because the willingness to pay grows faster than inflation). I just don't have a good answer, nor a lot of expertise in the area.
I funded my college largely with ROTC scholarship, gluing together some other small merit-based private scholarships, working summers and a side job during school, and taking a few loans. That was 26-29 years ago. I don't expect for my kids to get any need-based aid, so I haven't kept close tabs on the current status of it.
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I'd just wish folks would remember a fundamental rule of tax policy: corporations don't pay taxes, people pay taxes.
A corporate rate cut will benefit individuals in one of three ways:
1. Increased returns to shareholders
2. Increased wages for workers
3. Reduced prices for consumers.
The incidence of corporate taxes is a matter of dispute in the economic literature. My own personal thought is that the incidence is going to fall on different groups of people differently depending on the industry.
I think it is naive to expect 2 or 3. The opposite might be true when taxes go up, but why would the give up the increased profits of taxes going down?
Well, say you're in a highly competitive industry (say fast food). McDonalds can now go back to the dollar menu and maintain the exact same profit margins, plus, steal business away from Burger King and Wendy's. How do you think Burger King and Wendy's will react?
Probably by taking tax savings, investing in automation, firing all the workers ,and serve their crappy product to those lucky few who still have jobs...
The point is, as Scortius points out, this will not increase wages as the Republicans like to pretend. Did you not see all the CEOs at the round table say they would not invest in their workers?
This isn't a 'point' this is an empirical question. CBO has an interesting report going through the literature which finds that "the majority of studies find that labor bears a substantial burden" of the corporate income tax. Of course, they mention the huge uncertainties surrounding this question as well.
If there is a 'point' to be made, its that a corporate rate cut is almost an unalloyed good for mustachian types. You either have higher returns to capital (which mustachians own), you have lower prices for goods, or you have higher wages.
(https://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/122xx/doc12239/06-14-2011-corporatetaxincidence.pdf)
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If there is a 'point' to be made, its that a corporate rate cut is almost an unalloyed good for mustachian types. You either have higher returns to capital (which mustachians own), you have lower prices for goods, or you have higher wages.
The Republican tax plan is designed to add trillions to the deficit, triggering automatic cuts to medicaid and medicare. How is that good for mustachians, again?
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The fact that people who are in the upper middle class also use education to maintain that position is not a reason to take away that opportunity from the upper-lower, lower-middle, and middle class, IMO.
How about just plain dirt poor? Shouldn't they have the opportunity too?
Of course they should have the opportunity as well.
I didn't include the dirt-poor in my list only because when discussing tax advantages for saving substantial sums in 529 accounts, it obviously doesn't make sense to talk about them.
Most of the top schools are need-blind anyway, so the very poor are already covered there (at least for tuition financing/grants).
The middle class gets pinched on the "how do I afford college?" deal, especially when multiple kids are college-bound. The very rich cover themselves; the very poor are comped by the schools; the middle often have an expected family contribution well in excess of what the middle class can cover.
sokoloff, your post two posts above is great. And one more thing to add about education, the “dirt poor” can start off at a local JC (just like my two “dirt poor” parents did) and get most lower division coursework out of the way for nearly nothing in cost, just like any middle class or rich kid.
I took a class at the local CC a year or 2 ago. About $1000 between tuition, fees and book for just the one class. I don't consider that next to nothing.
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I'd just wish folks would remember a fundamental rule of tax policy: corporations don't pay taxes, people pay taxes.
A corporate rate cut will benefit individuals in one of three ways:
1. Increased returns to shareholders
2. Increased wages for workers
3. Reduced prices for consumers.
The incidence of corporate taxes is a matter of dispute in the economic literature. My own personal thought is that the incidence is going to fall on different groups of people differently depending on the industry.
I think it is naive to expect 2 or 3. The opposite might be true when taxes go up, but why would the give up the increased profits of taxes going down?
Well, say you're in a highly competitive industry (say fast food). McDonalds can now go back to the dollar menu and maintain the exact same profit margins, plus, steal business away from Burger King and Wendy's. How do you think Burger King and Wendy's will react?
Probably by taking tax savings, investing in automation, firing all the workers ,and serve their crappy product to those lucky few who still have jobs...
The point is, as Scortius points out, this will not increase wages as the Republicans like to pretend. Did you not see all the CEOs at the round table say they would not invest in their workers?
This isn't a 'point' this is an empirical question. CBO has an interesting report going through the literature which finds that "the majority of studies find that labor bears a substantial burden" of the corporate income tax. Of course, they mention the huge uncertainties surrounding this question as well.
If there is a 'point' to be made, its that a corporate rate cut is almost an unalloyed good for mustachian types. You either have higher returns to capital (which mustachians own), you have lower prices for goods, or you have higher wages.
(https://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/122xx/doc12239/06-14-2011-corporatetaxincidence.pdf)
Here's what I know....
1. My Wages will NOT increase with this tax plan.
2. My Taxes WILL go UP with this tax plan (No SALT deduction, I get hit with reduced mortgage deduction, and MOST IMPORTANTLY, I will not be able to take advantage of multiple deferred comp contributions)
3. I doubt very seriously, my expenses will be reduced...
All of this to to give corporations a permanent tax break, and to allow Billionaires to pass on tax-free inheritances to their children....
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All of this to to give corporations a permanent tax break, and to allow Billionaires to pass on tax-free inheritances to their children....
This has always been the Republican approach taxes. It is essentially just another form of wealth redistribution, from the middle class to the very rich. Democrats have also favored redistribution, but usually in the other direction.
Which is why I find it so galling that they've pitched this plan as a tax "cut" when it instead raises taxes on most people.
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All of this to to give corporations a permanent tax break, and to allow Billionaires to pass on tax-free inheritances to their children....
This has always been the Republican approach taxes. It is essentially just another form of wealth redistribution, from the middle class to the very rich. Democrats have also favored redistribution, but usually in the other direction.
Which is why I find it so galling that they've pitched this plan as a tax "cut" when it instead raises taxes on most people.
i've been following your responses Sol, and you have been so right on the money...
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The fact that people who are in the upper middle class also use education to maintain that position is not a reason to take away that opportunity from the upper-lower, lower-middle, and middle class, IMO.
How about just plain dirt poor? Shouldn't they have the opportunity too?
Of course they should have the opportunity as well.
I didn't include the dirt-poor in my list only because when discussing tax advantages for saving substantial sums in 529 accounts, it obviously doesn't make sense to talk about them.
Most of the top schools are need-blind anyway, so the very poor are already covered there (at least for tuition financing/grants).
The middle class gets pinched on the "how do I afford college?" deal, especially when multiple kids are college-bound. The very rich cover themselves; the very poor are comped by the schools; the middle often have an expected family contribution well in excess of what the middle class can cover.
sokoloff, your post two posts above is great. And one more thing to add about education, the “dirt poor” can start off at a local JC (just like my two “dirt poor” parents did) and get most lower division coursework out of the way for nearly nothing in cost, just like any middle class or rich kid.
I took a class at the local CC a year or 2 ago. About $1000 between tuition, fees and book for just the one class. I don't consider that next to nothing.
I guess I should have qualified that as "California Community College" fees; at roughly $46/unit, a student can take 12 units per semester for $600, which in an extremely inexpensive AA/AS degree for roughly $3k. That still seems pretty reasonable to me, especially compared to the CSU/UC cost for the same lower division coursework per year ($10-$15k). Throw in a couple vo-tec classes while you're at it, and you can end up with a decent skill set and make above minimum wage while then attending college/university and graduate with little to no debt burden. It stands to reason that someone who is "dirt poor" with an appetite for education has a pretty decent opportunity to get an education (at least in CA).
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It stands to reason that someone who is "dirt poor" with an appetite for education has a pretty decent opportunity to get an education (at least in CA).
When I was a kid I remember my older brother telling me the he wished we lived in California as one could go to school for next to nothing. Looks like this is a benefit that they haven't totally eliminated. I guess they missed it.
Heck - I even took a class in Contra Costa when I lived there. I guess with all that brain power in Silicon Valley, it's not too hard to find someone willing to teach a class and make a few bucks.
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The fact that people who are in the upper middle class also use education to maintain that position is not a reason to take away that opportunity from the upper-lower, lower-middle, and middle class, IMO.
How about just plain dirt poor? Shouldn't they have the opportunity too?
Of course they should have the opportunity as well.
I didn't include the dirt-poor in my list only because when discussing tax advantages for saving substantial sums in 529 accounts, it obviously doesn't make sense to talk about them.
Most of the top schools are need-blind anyway, so the very poor are already covered there (at least for tuition financing/grants).
The middle class gets pinched on the "how do I afford college?" deal, especially when multiple kids are college-bound. The very rich cover themselves; the very poor are comped by the schools; the middle often have an expected family contribution well in excess of what the middle class can cover.
sokoloff, your post two posts above is great. And one more thing to add about education, the “dirt poor” can start off at a local JC (just like my two “dirt poor” parents did) and get most lower division coursework out of the way for nearly nothing in cost, just like any middle class or rich kid.
I took a class at the local CC a year or 2 ago. About $1000 between tuition, fees and book for just the one class. I don't consider that next to nothing.
I guess I should have qualified that as "California Community College" fees; at roughly $46/unit, a student can take 12 units per semester for $600, which in an extremely inexpensive AA/AS degree for roughly $3k. That still seems pretty reasonable to me, especially compared to the CSU/UC cost for the same lower division coursework per year ($10-$15k). Throw in a couple vo-tec classes while you're at it, and you can end up with a decent skill set and make above minimum wage while then attending college/university and graduate with little to no debt burden. It stands to reason that someone who is "dirt poor" with an appetite for education has a pretty decent opportunity to get an education (at least in CA).
Without help community college is to expensive. A lower income person geenrally can't afford to buy something even in the $500 range above and beyond their basic cost of living.
I'm not sure if CC offer breaks for low income students now but CC in general can be an excellent stepping stone to a 4 year degree. I had a number of friends and my brother do 2 years at the community college to get guranteed entry into UCSD, where they only had to deal with 2 years at the higher cost. And most came in and did better than me and my friends who did all 4 years there. Work ethic matters.
The ballooning cost of the UC system and many other public schools is definitely in part the fault of the upper middle class thinking it's a good idea to take out any size loan to get any and every degree....
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The fact that people who are in the upper middle class also use education to maintain that position is not a reason to take away that opportunity from the upper-lower, lower-middle, and middle class, IMO.
How about just plain dirt poor? Shouldn't they have the opportunity too?
Of course they should have the opportunity as well.
I didn't include the dirt-poor in my list only because when discussing tax advantages for saving substantial sums in 529 accounts, it obviously doesn't make sense to talk about them.
Most of the top schools are need-blind anyway, so the very poor are already covered there (at least for tuition financing/grants).
The middle class gets pinched on the "how do I afford college?" deal, especially when multiple kids are college-bound. The very rich cover themselves; the very poor are comped by the schools; the middle often have an expected family contribution well in excess of what the middle class can cover.
sokoloff, your post two posts above is great. And one more thing to add about education, the “dirt poor” can start off at a local JC (just like my two “dirt poor” parents did) and get most lower division coursework out of the way for nearly nothing in cost, just like any middle class or rich kid.
I took a class at the local CC a year or 2 ago. About $1000 between tuition, fees and book for just the one class. I don't consider that next to nothing.
I guess I should have qualified that as "California Community College" fees; at roughly $46/unit, a student can take 12 units per semester for $600, which in an extremely inexpensive AA/AS degree for roughly $3k. That still seems pretty reasonable to me, especially compared to the CSU/UC cost for the same lower division coursework per year ($10-$15k). Throw in a couple vo-tec classes while you're at it, and you can end up with a decent skill set and make above minimum wage while then attending college/university and graduate with little to no debt burden. It stands to reason that someone who is "dirt poor" with an appetite for education has a pretty decent opportunity to get an education (at least in CA).
Without help community college is to expensive. A lower income person geenrally can't afford to buy something even in the $500 range above and beyond their basic cost of living.
I'm not sure if CC offer breaks for low income students now but CC in general can be an excellent stepping stone to a 4 year degree. I had a number of friends and my brother do 2 years at the community college to get guranteed entry into UCSD, where they only had to deal with 2 years at the higher cost. And most came in and did better than me and my friends who did all 4 years there. Work ethic matters.
The ballooning cost of the UC system and many other public schools is definitely in part the fault of the upper middle class thinking it's a good idea to take out any size loan to get any and every degree....
California CCs do offer tuition assistance; if you take CC classes while in high school (as I did), tuition is waived entirely and you don’t have to worry about taking the silly AP tests to get college credit. Based on CCC stats, CC tuition is about 1/3 the average rate nationwide, and only about 2% of students need to take out loans for tuition at CCCs.
The rise in cost of tuition at the UC system is more tied to the dramatic drop-off in state funding for the UC system rather than easy access to student loans. Tuition increased dramatically in the years following the 2007 recession, mostly because of cratering housing prices resulting in lower property tax assessments and less money for California State to put towards the UC and CSU systems. In fact, state contributions dropped from about $6 billion to $4 billion between 2007-2103. The difference has to be made up somewhere, which unfortunately meant higher costs shouldered by students.
The CSUs, while note all “Tier 1” schools (not that that really matters for an undergrad degree anyways), still are reasonably affordable for 4 year schools compared to the nationwide average for public 4-year colleges, while the UCs tend to be more expensive.
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Yeah state funding loss could be the larger factor there. But much like any other major expenditure schools can only charge a fortune if working people can get loans generally.
Maybe UC is not a great example since it's initial lower cost was tied to state funds. But I would bet statistics bear out that many people at both public and private institutions pay for their education with loans.
If that number is high enough, then dialing back the amount people could borrow would force some institutions to lower prices since students with the ability to pay more would dry up.
Of course if a school isn't over priced and they need that money. Such a move would be a disaster....
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The fact that people who are in the upper middle class also use education to maintain that position is not a reason to take away that opportunity from the upper-lower, lower-middle, and middle class, IMO.
How about just plain dirt poor? Shouldn't they have the opportunity too?
Of course they should have the opportunity as well.
I didn't include the dirt-poor in my list only because when discussing tax advantages for saving substantial sums in 529 accounts, it obviously doesn't make sense to talk about them.
Most of the top schools are need-blind anyway, so the very poor are already covered there (at least for tuition financing/grants).
The middle class gets pinched on the "how do I afford college?" deal, especially when multiple kids are college-bound. The very rich cover themselves; the very poor are comped by the schools; the middle often have an expected family contribution well in excess of what the middle class can cover.
sokoloff, your post two posts above is great. And one more thing to add about education, the “dirt poor” can start off at a local JC (just like my two “dirt poor” parents did) and get most lower division coursework out of the way for nearly nothing in cost, just like any middle class or rich kid.
I took a class at the local CC a year or 2 ago. About $1000 between tuition, fees and book for just the one class. I don't consider that next to nothing.
I guess I should have qualified that as "California Community College" fees; at roughly $46/unit, a student can take 12 units per semester for $600, which in an extremely inexpensive AA/AS degree for roughly $3k. That still seems pretty reasonable to me, especially compared to the CSU/UC cost for the same lower division coursework per year ($10-$15k). Throw in a couple vo-tec classes while you're at it, and you can end up with a decent skill set and make above minimum wage while then attending college/university and graduate with little to no debt burden. It stands to reason that someone who is "dirt poor" with an appetite for education has a pretty decent opportunity to get an education (at least in CA).
That seems unusually low. Here in Memphis a VLCOL city, community college costs $160 per credit hour plus various fees. For a 12 credit hour semester it is $2,077.50. For out of state students it costs about 4 times as much. By comparison, one 12 credit hour semester at the state college equivalent here, University of Memphis would cost about $4700 (depending on individual course fees it could be more).
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The fact that people who are in the upper middle class also use education to maintain that position is not a reason to take away that opportunity from the upper-lower, lower-middle, and middle class, IMO.
How about just plain dirt poor? Shouldn't they have the opportunity too?
Of course they should have the opportunity as well.
I didn't include the dirt-poor in my list only because when discussing tax advantages for saving substantial sums in 529 accounts, it obviously doesn't make sense to talk about them.
Most of the top schools are need-blind anyway, so the very poor are already covered there (at least for tuition financing/grants).
The middle class gets pinched on the "how do I afford college?" deal, especially when multiple kids are college-bound. The very rich cover themselves; the very poor are comped by the schools; the middle often have an expected family contribution well in excess of what the middle class can cover.
sokoloff, your post two posts above is great. And one more thing to add about education, the “dirt poor” can start off at a local JC (just like my two “dirt poor” parents did) and get most lower division coursework out of the way for nearly nothing in cost, just like any middle class or rich kid.
I took a class at the local CC a year or 2 ago. About $1000 between tuition, fees and book for just the one class. I don't consider that next to nothing.
I guess I should have qualified that as "California Community College" fees; at roughly $46/unit, a student can take 12 units per semester for $600, which in an extremely inexpensive AA/AS degree for roughly $3k. That still seems pretty reasonable to me, especially compared to the CSU/UC cost for the same lower division coursework per year ($10-$15k). Throw in a couple vo-tec classes while you're at it, and you can end up with a decent skill set and make above minimum wage while then attending college/university and graduate with little to no debt burden. It stands to reason that someone who is "dirt poor" with an appetite for education has a pretty decent opportunity to get an education (at least in CA).
That seems unusually low. Here in Memphis a VLCOL city, community college costs $160 per credit hour plus various fees. For a 12 credit hour semester it is $2,077.50. For out of state students it costs about 4 times as much. By comparison, one 12 credit hour semester at the state college equivalent here, University of Memphis would cost about $4700 (depending on individual course fees it could be more).
Yeah this seems to vary greatly. The CC where I live charges $75/credit hour. The CC near where I grew up in Saint Louis costs $109.50/credit hour and the CC my wife went to (Valencia Community College) charges $103.06/credit hour.
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https://www.nytimes.com/2017/11/26/us/politics/teacher-tax-deduction-house-senate-tax-cuts.html
As someone who is married to a teacher, I gotta call BS on this article. In the 25% bracket, the educator expense is worth at most $62.50 ($250*.25). I will gladly give that up if they are going to double my standard deduction and lower my effective rate. But hey, any one who picks on teachers MUST be evil. More liberal garbage for people who can't do simple math.
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https://www.nytimes.com/2017/11/26/us/politics/teacher-tax-deduction-house-senate-tax-cuts.html
As someone who is married to a teacher, I gotta call BS on this article. In the 25% bracket, the educator expense is worth at most $62.50 ($250*.25). I will gladly give that up if they are going to double my standard deduction and lower my effective rate. But hey, any one who picks on teachers MUST be evil. More liberal garbage for people who can't do simple math.
While I agree that in the grand scheme of things that it is not a lot of money, perhaps the bigger issue we should focus on is that we do such a poor job at the federal, state, and local level of funding education as a nation that we wrote in a special federal deduction in the first place.
Disclaimer: also married to a teacher.
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When my kids went to community college, the American Opportunity Tax credit offset nearly all the costs. Are those of you providing CC costs taking this into consideration??
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Education spending tends to favor well-off Americans. This is why Obama tried (unsuccessfully) to eliminate the tax loophole that allows wealthy families to save for their children's college education.
I believe that education is one of the fastest and surest routes for people to lift themselves and their progeny out of the lower strata of economic (and social) class and into the upper-middle.
Education alone won't get you beyond that, but there are countless examples, including my own, of lower class to upper middle class in two generations driven in large part by prioritizing education. The fact that people who are in the upper middle class also use education to maintain that position is not a reason to take away that opportunity from the upper-lower, lower-middle, and middle class, IMO.
There are ways we can spend on education that does not result in additional money going to upper class families. Even if college can help advance lower-class families, the existence of tax loopholes that let wealthy families save for college is money not going to the treasury. For those concerned about inequality, it reinforces that as well.
Even if college can help families advance, it does no one any good if the system on net entrenches an existing class divide. Yale handing out scholarships to the occasional poor kid is like the King of France handing out an estate to the occasional minor Lord: the system as a whole can still be a wealth-extractive entity that serves primarily to enrich the elite, and it makes no sense to NOT tax the system, since the vast majority of the users are the elite. You might even remove the sole avenue of advance for the lower classes, which is ingratiating yourself to the King so you can get land...but who cares? The vast majority of the serfs are not better off because there is one new Lord who used to be a serf. They would be better off having their own land and not feeding money into a system that primarily benefits the elite.
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https://www.nytimes.com/2017/11/26/us/politics/teacher-tax-deduction-house-senate-tax-cuts.html
As someone who is married to a teacher, I gotta call BS on this article. In the 25% bracket, the educator expense is worth at most $62.50 ($250*.25). I will gladly give that up if they are going to double my standard deduction and lower my effective rate. But hey, any one who picks on teachers MUST be evil. More liberal garbage for people who can't do simple math.
This math seems pretty good to me:
http://time.com/5032079/gop-tax-plan-graduate-students-waiver/
It's not teachers, just TAs, but it's a stupid way to raise tax revenues. And I don't think that's liberal garbage.
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This math seems pretty good to me:
http://time.com/5032079/gop-tax-plan-graduate-students-waiver/
It's not teachers, just TAs, but it's a stupid way to raise tax revenues. And I don't think that's liberal garbage.
For Hill, the impact of the House GOP tax bill is alarming. He currently takes home about $27,000 a year from his graduate stipend, after taxes. Under the House bill, he estimates that he would would take home about $15,000 a year. Graduate tuition at MIT costs about $50,000, and Hill receives a $30,000 stipend; the GOP plan would require him to pay income taxes on that combined $80,000.
(http://static5.businessinsider.com/image/5a0c624f35876eb2018b6222-1200/11-15-17-married-jointly-tax-brackets-current-house-senate.png)
So let's run some numbers. Gross income of $80,000. $80,000 minus standard deduction of $24,000 equals $61,000. This is entirely in the 12% bracket so taxes owed is $7,320. $30,000-$7,320=$22,680 take home. That is quite a bit more than "half" and just $4,320 less than what he's brining home now. Also keep in mind that he is getting free tuition from MIT. Glad to see the liberal thought process of making a bad decision (having a baby while in grad school while barely getting by) then blaming others for your problems when the situation slightly changes, though. One more thing: if this doofus could look beyond the next year of his life, he could see that the new tax plan will greatly benefit him as a PhD most likely earning six figures.
I would really expect some better critical thinking on this forum, instead of trusting a source like TIME.
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Good chart. I think I read somewhere that the individual rate cuts will sunset after 5 years, but the corporate rate cuts are forever. So, I should just FIRE before the individual rates go back up. :-) Also, since my company will be saving a bunch of money in taxes, they can pay me more during my remaining working years, right? Hope springs eternal.
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For Hill, the impact of the House GOP tax bill is alarming. He currently takes home about $27,000 a year from his graduate stipend, after taxes. Under the House bill, he estimates that he would would take home about $15,000 a year. Graduate tuition at MIT costs about $50,000, and Hill receives a $30,000 stipend; the GOP plan would require him to pay income taxes on that combined $80,000.
<snip>
So let's run some numbers. Gross income of $80,000. $80,000 minus standard deduction of $24,000 equals $61,000. This is entirely in the 12% bracket so taxes owed is $7,320. $30,000-$7,320=$22,680 take home. That is quite a bit more than "half" and just $4,320 less than what he's bringing home now. Also keep in mind that he is getting free tuition from MIT.
Depends somewhat on whether that $30K is considered "earned income".
If so (and assuming none of the $50K scholarship is currently taxable), with the earned income credit and child tax credit the current take home would be slightly above $30K. Even with no credits (but also no FICA), current total state and federal tax would be ~$1500.
Any comparison with the new tax law should also include changes in the credits, if those would apply. Haven't kept track of what those might be.
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This math seems pretty good to me:
http://time.com/5032079/gop-tax-plan-graduate-students-waiver/
It's not teachers, just TAs, but it's a stupid way to raise tax revenues. And I don't think that's liberal garbage.
For Hill, the impact of the House GOP tax bill is alarming. He currently takes home about $27,000 a year from his graduate stipend, after taxes. Under the House bill, he estimates that he would would take home about $15,000 a year. Graduate tuition at MIT costs about $50,000, and Hill receives a $30,000 stipend; the GOP plan would require him to pay income taxes on that combined $80,000.
So let's run some numbers. Gross income of $80,000. $80,000 minus standard deduction of $24,000 equals $61,000. This is entirely in the 12% bracket so taxes owed is $7,320. $30,000-$7,320=$22,680 take home. That is quite a bit more than "half" and just $4,320 less than what he's brining home now. Also keep in mind that he is getting free tuition from MIT. Glad to see the liberal thought process of making a bad decision (having a baby while in grad school while barely getting by) then blaming others for your problems when the situation slightly changes, though. One more thing: if this doofus could look beyond the next year of his life, he could see that the new tax plan will greatly benefit him as a PhD most likely earning six figures.
I would really expect some better critical thinking on this forum, instead of trusting a source like TIME.
You forgot to include the $2,000 child tax credit which would reduce his taxes from $7,320 to $5,320 resulting in after tax income of $24,680.
Under the current system I doubt he's paying any income taxes as he would qualify for the earned income tax credit. At $30,000 less the standard deduction ($12,700) and three personal exemptions ($12,150) his taxable income is only $5,150 which at 10% is only $515. Going through the IRS's horrible EITC assistant (seriously I think there were about 30 poorly worded questions to get to an estimate) at $30,000 of earned income they would qualify for an EITC of $2,368 for an effective tax of -$1,853 or -6.2%. So when he says he brings home $27,000 after taxes what he forgot to say is "and then I get a $5,000 refund because I didn't claim enough exemptions on my W-4."
I haven't heard anything about changes to the EITC under these new tax plans so this person would still qualify for that assuming the graduate stipend isn't counted as "earned income".
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You forgot to include the $2,000 child tax credit which would reduce his taxes from $7,320 to $5,320 resulting in after tax income of $24,680.
Under the current system I doubt he's paying any income taxes as he would qualify for the earned income tax credit. At $30,000 less the standard deduction ($12,700) and three personal exemptions ($12,150) his taxable income is only $5,150 which at 10% is only $515. Going through the IRS's horrible EITC assistant (seriously I think there were about 30 poorly worded questions to get to an estimate) at $30,000 of earned income they would qualify for an EITC of $2,368 for an effective tax of -$1,853 or -6.2%. So when he says he brings home $27,000 after taxes what he forgot to say is "and then I get a $5,000 refund because I didn't claim enough exemptions on my W-4."
I haven't heard anything about changes to the EITC under these new tax plans so this person would still qualify for that assuming the graduate stipend isn't counted as "earned income".
Child tax credit is currently $1000/child if fully eligible.
EITC would go away under the new tax plan even if the $50K isn't counted as earned income, if the $50K gets included in AGI but nothing else changes. Again, I make no claim on understanding what if any changes are contemplated here.
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https://www.nytimes.com/2017/11/26/us/politics/teacher-tax-deduction-house-senate-tax-cuts.html
As someone who is married to a teacher, I gotta call BS on this article. In the 25% bracket, the educator expense is worth at most $62.50 ($250*.25). I will gladly give that up if they are going to double my standard deduction and lower my effective rate. But hey, any one who picks on teachers MUST be evil. More liberal garbage for people who can't do simple math.
Speaking of the inability to do simple math. The current standard deduction for MFJ is 12,700. 24,000 is not doubling 12,700. Add in the elimination of personal exemptions (4,050 x 2) and the raise in the lowest tax rate from 10% to 12% and there is very little change, if any.
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This math seems pretty good to me:
http://time.com/5032079/gop-tax-plan-graduate-students-waiver/
It's not teachers, just TAs, but it's a stupid way to raise tax revenues. And I don't think that's liberal garbage.
For Hill, the impact of the House GOP tax bill is alarming. He currently takes home about $27,000 a year from his graduate stipend, after taxes. Under the House bill, he estimates that he would would take home about $15,000 a year. Graduate tuition at MIT costs about $50,000, and Hill receives a $30,000 stipend; the GOP plan would require him to pay income taxes on that combined $80,000.
(http://static5.businessinsider.com/image/5a0c624f35876eb2018b6222-1200/11-15-17-married-jointly-tax-brackets-current-house-senate.png)
So let's run some numbers. Gross income of $80,000. $80,000 minus standard deduction of $24,000 equals $61,000. This is entirely in the 12% bracket so taxes owed is $7,320. $30,000-$7,320=$22,680 take home. That is quite a bit more than "half" and just $4,320 less than what he's brining home now. Also keep in mind that he is getting free tuition from MIT. Glad to see the liberal thought process of making a bad decision (having a baby while in grad school while barely getting by) then blaming others for your problems when the situation slightly changes, though. One more thing: if this doofus could look beyond the next year of his life, he could see that the new tax plan will greatly benefit him as a PhD most likely earning six figures.
I would really expect some better critical thinking on this forum, instead of trusting a source like TIME.
I would have a much easier time paying attention to what people say if they were capable of saying it without spewing insults along with whatever else they said.
It's a huge turn-off, and runs rampant these days.
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This math seems pretty good to me:
http://time.com/5032079/gop-tax-plan-graduate-students-waiver/
It's not teachers, just TAs, but it's a stupid way to raise tax revenues. And I don't think that's liberal garbage.
For Hill, the impact of the House GOP tax bill is alarming. He currently takes home about $27,000 a year from his graduate stipend, after taxes. Under the House bill, he estimates that he would would take home about $15,000 a year. Graduate tuition at MIT costs about $50,000, and Hill receives a $30,000 stipend; the GOP plan would require him to pay income taxes on that combined $80,000.
So let's run some numbers. Gross income of $80,000. $80,000 minus standard deduction of $24,000 equals $61,000. This is entirely in the 12% bracket so taxes owed is $7,320. $30,000-$7,320=$22,680 take home. That is quite a bit more than "half" and just $4,320 less than what he's brining home now. Also keep in mind that he is getting free tuition from MIT. Glad to see the liberal thought process of making a bad decision (having a baby while in grad school while barely getting by) then blaming others for your problems when the situation slightly changes, though. One more thing: if this doofus could look beyond the next year of his life, he could see that the new tax plan will greatly benefit him as a PhD most likely earning six figures.
I would really expect some better critical thinking on this forum, instead of trusting a source like TIME.
You forgot to include the $2,000 child tax credit which would reduce his taxes from $7,320 to $5,320 resulting in after tax income of $24,680.
Under the current system I doubt he's paying any income taxes as he would qualify for the earned income tax credit. At $30,000 less the standard deduction ($12,700) and three personal exemptions ($12,150) his taxable income is only $5,150 which at 10% is only $515. Going through the IRS's horrible EITC assistant (seriously I think there were about 30 poorly worded questions to get to an estimate) at $30,000 of earned income they would qualify for an EITC of $2,368 for an effective tax of -$1,853 or -6.2%. So when he says he brings home $27,000 after taxes what he forgot to say is "and then I get a $5,000 refund because I didn't claim enough exemptions on my W-4."
I haven't heard anything about changes to the EITC under these new tax plans so this person would still qualify for that assuming the graduate stipend isn't counted as "earned income".
Yeah-this one is kind of an edge case because the guy is married and has a kid. Under most cases, the grad student gets a 12, 700 deduction and no EITC (because no kid). I wonder what the math looks like for 2 married grad students with no kids (160k taxable income).
As for the theory that he should lick Orrin Hatch's boots for this tax plan for all the future savings he'll be eligible for, don't those all go away in 2026? My understanding is that the EITC, the changes to the brackets, AND the doubling of the deduction all go away, BUT there's still the elimination of SALT which will remain as non-deductible after 2026 under the current Senate plan (I could be a version off) So, this guy will be an economist (or computer scientist, or geneticist or other MMM STEM-approved career track, because I don't muddy the discussion with people's opinions about the humanities), likely living in HCOL city, with a mortgage. No more doubled deduction. EITC is phased out. No SALT. Do the personal exemptions come back in 2026? I think this guy likely pays MORE under this plan as both a grad student and a high earning professional after 2026, which will be most of his career years. He will certainly be able to afford it, and I guess he's a garbage liberal and should just reconsider his garbage liberal lifestyle choices of being married and having a kid and suck it up.
Anyway, adding 50k of taxable income to a 30k stipend is a big change in policy. Most cases have taxes going up significantly for grad students. I can see why they are upset.
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taxes going up significantly for grad students. I can see why they are upset.
I'm pretty sure this is a feature and not a bug. Conservatives hate graduate students, educated peoples, and all forms of scientists.
Educated scientists gave us the theory of evolution and birth control. Educated scientists tend to doubt the revealed truth of Divine scripture, like when it says animals could talk and the sun stopped in the sky. Educated scientists question the authority of societally enforced gender discrimination and keep making noises about the wage gap, when they should be telling their womenses to get back in the kitchen. Educated scientists fight against teaching creationism in public schools. Clearly, educated scientists oppose the GOP ideology in every form, so why should the GOP encourage anyone else to become one? Better to just tax them into Oblivion.
So I don't think it's a coincidence. The whole tax plan is targeted at groups they don't like, which is why it is so bad for blue states, and poor people who need health insurance, and small businesses, and graduate students, but great for super wealthy inheritors, big corporations, and real estate developers. It's more politics than policy, but that doesn't mean they won't pass it.
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Glad to see the liberal thought process of making a bad decision (having a baby while in grad school while barely getting by) then blaming others for your problems when the situation slightly changes, though.
I would have a much easier time paying attention to what people say if they were capable of saying it without spewing insults along with whatever else they said.
It's a huge turn-off, and runs rampant these days.
Conservatives hate graduate students, educated peoples, and all forms of scientists.
JLee - agreed.
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taxes going up significantly for grad students. I can see why they are upset.
I'm pretty sure this is a feature and not a bug. Conservatives hate graduate students, educated peoples, and all forms of scientists.
Educated scientists gave us the theory of evolution and birth control. Educated scientists tend to doubt the revealed truth of Divine scripture, like when it says animals could talk and the sun stopped in the sky. Educated scientists question the authority of societally enforced gender discrimination and keep making noises about the wage gap, when they should be telling their womenses to get back in the kitchen. Educated scientists fight against teaching creationism in public schools. Clearly, educated scientists oppose the GOP ideology in every form, so why should the GOP encourage anyone else to become one? Better to just tax them into Oblivion.
So I don't think it's a coincidence. The whole tax plan is targeted at groups they don't like, which is why it is so bad for blue states, and poor people who need health insurance, and small businesses, and graduate students, but great for super wealthy inheritors, big corporations, and real estate developers. It's more politics than policy, but that doesn't mean they won't pass it.
The entire graduate thing would be terrible, especially given the drastic difference in costs depending on the University. I went to a state school for my PhD and after the first year qualified as in-state, so this likely wouldn't really have impacted me. But if I had gone to a private university like Carnegie Melon, or MIT, etc. It would have placed an enormous burden on me. One thing to keep in mind is that hard sciences tend to have much better stipends than other programs. My stipend was $5k/semester and if I got a summer teaching assistanship it was another $2.3k. If I went to a private university my entire stipend would have been paid out in taxes because I was single at the time.
I wonder if private universities could just strategically adjust the cost of tuition for graduate programs specifically.
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The NY Times modeled the bill (or at least one iteration of it) for a large number of middle class households. As the discussion above indicates, it is a mixed bag depending on the specific situation.
https://www.nytimes.com/interactive/2017/11/28/upshot/what-the-tax-bill-would-look-like-for-25000-middle-class-families.html?smid=fb-nytimes&smtyp=cur
Here are the details on their analysis methods:
Some details about our sources and methodology
The tax analysis is confined exclusively to middle-class households, defined as households that earn two-thirds to two times household-size adjusted median income. That’s roughly $40,000 to $125,000 for a family of four, or about $30,000 to $90,000 for a couple. For singles, the middle class starts at about $20,000, although to make the charts more readable, we aren’t showing households earning less than $40,000. (We’re using what tax analysts call “expanded income,” which includes cash income but also noncash items such as employer contributions to health insurance and the employer share of payroll taxes.)
To figure out how the Senate bill would affect households, we worked with the Open Source Policy Center — a Washington research organization affiliated with the right-leaning American Enterprise Institute — to model the proposal using the center’s TaxBrain program. Special thanks to Ernie Tedeschi, an economist and occasional Upshot contributor, for his thoughts on modeling the impact of the corporate tax cuts.
The data we’re using comes from the Census Bureau’s Current Population Survey, which asks tens of thousands of Americans detailed questions about their household finances every year. Although these records are not as accurate as the administrative I.R.S. tax records that some think tanks like the Tax Policy Center use (particularly regarding the wealthiest Americans), they line up reasonably closely. The Open Source Policy Center adjusted the data to align with I.R.S. definitions of income; the center also ran parts of our analysis using data from the I.R.S. to ensure that the findings held up.
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taxes going up significantly for grad students. I can see why they are upset.
I'm pretty sure this is a feature and not a bug. Conservatives hate graduate students, educated peoples, and all forms of scientists.
Educated scientists gave us the theory of evolution and birth control. Educated scientists tend to doubt the revealed truth of Divine scripture, like when it says animals could talk and the sun stopped in the sky. Educated scientists question the authority of societally enforced gender discrimination and keep making noises about the wage gap, when they should be telling their womenses to get back in the kitchen. Educated scientists fight against teaching creationism in public schools. Clearly, educated scientists oppose the GOP ideology in every form, so why should the GOP encourage anyone else to become one? Better to just tax them into Oblivion.
So I don't think it's a coincidence. The whole tax plan is targeted at groups they don't like, which is why it is so bad for blue states, and poor people who need health insurance, and small businesses, and graduate students, but great for super wealthy inheritors, big corporations, and real estate developers. It's more politics than policy, but that doesn't mean they won't pass it.
The entire graduate thing would be terrible, especially given the drastic difference in costs depending on the University. I went to a state school for my PhD and after the first year qualified as in-state, so this likely wouldn't really have impacted me. But if I had gone to a private university like Carnegie Melon, or MIT, etc. It would have placed an enormous burden on me. One thing to keep in mind is that hard sciences tend to have much better stipends than other programs. My stipend was $5k/semester and if I got a summer teaching assistanship it was another $2.3k. If I went to a private university my entire stipend would have been paid out in taxes because I was single at the time.
I wonder if private universities could just strategically adjust the cost of tuition for graduate programs specifically.
Maybe?
This is such a weird discussion. Why are the conservatives on this forum arguing about why it's good for people making 30k to suddenly pay a lot more in taxes? I apologize for posting an article with a weird case (married with kid grad student), which is not the situation for many grad students I'd guess. It looks like people who have run the numbers estimate at least an extra 2k a year in taxes for many grad students at private institutions. Can anyone on the the "this tax plan is great!" side of the argument do the magic math that says that a single, no kid grad student doesn't pay more? And why is everyone ignoring the sunset provisions of the tax bill? If doubling the standard deduction is indeed better for everyone, what happens when that goes away in 7 years? Those 2026 grad students are still paying the taxes on their tuition waiver, but they no longer have an increased standard deduction that is supposed to be the spoonful of sugar to make the taxes go down.
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taxes going up significantly for grad students. I can see why they are upset.
I'm pretty sure this is a feature and not a bug. Conservatives hate graduate students, educated peoples, and all forms of scientists.
Educated scientists gave us the theory of evolution and birth control. Educated scientists tend to doubt the revealed truth of Divine scripture, like when it says animals could talk and the sun stopped in the sky. Educated scientists question the authority of societally enforced gender discrimination and keep making noises about the wage gap, when they should be telling their womenses to get back in the kitchen. Educated scientists fight against teaching creationism in public schools. Clearly, educated scientists oppose the GOP ideology in every form, so why should the GOP encourage anyone else to become one? Better to just tax them into Oblivion.
So I don't think it's a coincidence. The whole tax plan is targeted at groups they don't like, which is why it is so bad for blue states, and poor people who need health insurance, and small businesses, and graduate students, but great for super wealthy inheritors, big corporations, and real estate developers. It's more politics than policy, but that doesn't mean they won't pass it.
The entire graduate thing would be terrible, especially given the drastic difference in costs depending on the University. I went to a state school for my PhD and after the first year qualified as in-state, so this likely wouldn't really have impacted me. But if I had gone to a private university like Carnegie Melon, or MIT, etc. It would have placed an enormous burden on me. One thing to keep in mind is that hard sciences tend to have much better stipends than other programs. My stipend was $5k/semester and if I got a summer teaching assistanship it was another $2.3k. If I went to a private university my entire stipend would have been paid out in taxes because I was single at the time.
I wonder if private universities could just strategically adjust the cost of tuition for graduate programs specifically.
Maybe?
This is such a weird discussion. Why are the conservatives on this forum arguing about why it's good for people making 30k to suddenly pay a lot more in taxes? I apologize for posting an article with a weird case (married with kid grad student), which is not the situation for many grad students I'd guess. It looks like people who have run the numbers estimate at least an extra 2k a year in taxes for many grad students at private institutions. Can anyone on the the "this tax plan is great!" side of the argument do the magic math that says that a single, no kid grad student doesn't pay more? And why is everyone ignoring the sunset provisions of the tax bill? If doubling the standard deduction is indeed better for everyone, what happens when that goes away in 7 years? Those 2026 grad students are still paying the taxes on their tuition waiver, but they no longer have an increased standard deduction that is supposed to be the spoonful of sugar to make the taxes go down.
Because it's a tax loophole. Employer perks are wage income and should be taxed. If they are not taxed, they are tax loopholes (like your employer-based health insurance, which is the biggest tax loophole in America). It's no different at a university just because the perk happens to be reduced tuition.
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I don't remember if my fellowship stipend was taxed back in the day when I did my masters degree. I was so low-income though that it probably wasn't much tax...don't know.
When my employer paid for another masters degree, it was considered income and I had to pay income tax on it, even though I never received the actual income in money form. The company directly paid the tuition.
I didn't realize stipend payments for graduate degree were not taxed.
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I don't remember if my fellowship stipend was taxed back in the day when I did my masters degree. I was so low-income though that it probably wasn't much tax...don't know.
When my employer paid for another masters degree, it was considered income and I had to pay income tax on it, even though I never received the actual income in money form. The company directly paid the tuition.
I didn't realize stipend payments for graduate degree were not taxed.
They are, we are referring to tuition waivers, not stipends.
Some stipends are seen as payment for teaching and therefore taxed as earned income, including FICA. Some are awards and therefore exempt from FICA. However, they are still income to be reported.
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Because it's a tax loophole. Employer perks are wage income and should be taxed. If they are not taxed, they are tax loopholes (like your employer-based health insurance, which is the biggest tax loophole in America). It's no different at a university just because the perk happens to be reduced tuition.
Is the bill closing even one CORPORATE tax loophole??? Corporations keep their SALT deduction and get a 20% rate, but all of a sudden the Republicans think it makes sense to take away loopholes for individuals?? They keep the carried interest loophole benefiting hedge fund managers but make tuition waivers for grad students taxable???
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taxes going up significantly for grad students. I can see why they are upset.
I'm pretty sure this is a feature and not a bug. Conservatives hate graduate students, educated peoples, and all forms of scientists.
Educated scientists gave us the theory of evolution and birth control. Educated scientists tend to doubt the revealed truth of Divine scripture, like when it says animals could talk and the sun stopped in the sky. Educated scientists question the authority of societally enforced gender discrimination and keep making noises about the wage gap, when they should be telling their womenses to get back in the kitchen. Educated scientists fight against teaching creationism in public schools. Clearly, educated scientists oppose the GOP ideology in every form, so why should the GOP encourage anyone else to become one? Better to just tax them into Oblivion.
So I don't think it's a coincidence. The whole tax plan is targeted at groups they don't like, which is why it is so bad for blue states, and poor people who need health insurance, and small businesses, and graduate students, but great for super wealthy inheritors, big corporations, and real estate developers. It's more politics than policy, but that doesn't mean they won't pass it.
The entire graduate thing would be terrible, especially given the drastic difference in costs depending on the University. I went to a state school for my PhD and after the first year qualified as in-state, so this likely wouldn't really have impacted me. But if I had gone to a private university like Carnegie Melon, or MIT, etc. It would have placed an enormous burden on me. One thing to keep in mind is that hard sciences tend to have much better stipends than other programs. My stipend was $5k/semester and if I got a summer teaching assistanship it was another $2.3k. If I went to a private university my entire stipend would have been paid out in taxes because I was single at the time.
I wonder if private universities could just strategically adjust the cost of tuition for graduate programs specifically.
Maybe?
This is such a weird discussion. Why are the conservatives on this forum arguing about why it's good for people making 30k to suddenly pay a lot more in taxes? I apologize for posting an article with a weird case (married with kid grad student), which is not the situation for many grad students I'd guess. It looks like people who have run the numbers estimate at least an extra 2k a year in taxes for many grad students at private institutions. Can anyone on the the "this tax plan is great!" side of the argument do the magic math that says that a single, no kid grad student doesn't pay more? And why is everyone ignoring the sunset provisions of the tax bill? If doubling the standard deduction is indeed better for everyone, what happens when that goes away in 7 years? Those 2026 grad students are still paying the taxes on their tuition waiver, but they no longer have an increased standard deduction that is supposed to be the spoonful of sugar to make the taxes go down.
Because it's a tax loophole. Employer perks are wage income and should be taxed. If they are not taxed, they are tax loopholes (like your employer-based health insurance, which is the biggest tax loophole in America). It's no different at a university just because the perk happens to be reduced tuition.
I'm thinking that schools will have to make adjustments then, by increasing stipends to facilitate being able to eat, for example.
When my spouse was in grad school, we lived a couple of years in grad student housing. Very cheap compared to regular housing. We didn't have kids, but many did. Some had stay at home spouses, but many spouses (like me) worked.
I can't imagine what it would mean to tax tuition perks like that. I mean, I went to Carnegie Mellon (undergrad), and thank you US taxpayers for paying for it. Or most of it. Actually, y'all paid for my master's degree too. If you started working before 1996 anyway.
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I'm thinking that schools will have to make adjustments then, by increasing stipends to facilitate being able to eat, for example.
When my spouse was in grad school, we lived a couple of years in grad student housing. Very cheap compared to regular housing. We didn't have kids, but many did. Some had stay at home spouses, but many spouses (like me) worked.
I can't imagine what it would mean to tax tuition perks like that. I mean, I went to Carnegie Mellon (undergrad), and thank you US taxpayers for paying for it. Or most of it. Actually, y'all paid for my master's degree too. If you started working before 1996 anyway.
Interesting. When I was working on my PhD, the grad student housing was priced according to the nice apartments in the area plus utilities that I did without (we still had dial up available through the university, so I didn't have cable or internet). And it was not cut in half if you had a roommate, but rather some calculus by which you were at the very least both paying the full cable and internet bills. They ended up opening it up to undergrads because so few grad students fell for it.
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I don't remember if my fellowship stipend was taxed back in the day when I did my masters degree. I was so low-income though that it probably wasn't much tax...don't know.
When my employer paid for another masters degree, it was considered income and I had to pay income tax on it, even though I never received the actual income in money form. The company directly paid the tuition.
I didn't realize stipend payments for graduate degree were not taxed.
They are, we are referring to tuition waivers, not stipends.
Some stipends are seen as payment for teaching and therefore taxed as earned income, including FICA. Some are awards and therefore exempt from FICA. However, they are still income to be reported.
Now that I think about it, I did not have to pay income tax on the fellowship amount that went towards my tuition, only on the stipend. It makes sense now.
But when my employer paid for another masters, I did have to pay income tax on it...weird.
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There is a fundamental underlying question of whether the government should be adjusting the tax code to encourage/discourage activities. I think the answer is "yes" and that as a society we benefit from doing what we can to make education more affordable. The directed taxation of endowments and stipends hurts our educational system. It is important to note that universities are not funded strictly through tuition. For the big research institutions, a significant portion of the funding has come through research grant overhead. This is to a large extent a system that evolved following WWII and during the cold war. As DOD-driven funding has dropped, it has changed university budgets. I'm not so certain that university budgets are as fungible as some commenters above indicate. I think that arguing that decreasing funding to universities will force them to reduce tuition is not correct and not how the market will respond. I know that in Washington state it has been exactly the opposite when State-funding to UW decreased during the recession and the university had to increase tuition even after doing what it could to tighten its belt.
https://www.aaas.org/page/historical-trends-federal-rd
(https://www.aaas.org/sites/default/files/Agencies;.jpg)
Bottom line: we should fund research and education heavily to remain competitive over the decade time scales. The gains from this investment will help most of us, even if we are not direct recipients of that education. I am beyond the education pipeline and still want to be taxed to pay for this system. As an employer, I need trained scientists coming out of the universities to fill our open job positions.
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Because it's a tax loophole. Employer perks are wage income and should be taxed. If they are not taxed, they are tax loopholes (like your employer-based health insurance, which is the biggest tax loophole in America). It's no different at a university just because the perk happens to be reduced tuition.
Is the bill closing even one CORPORATE tax loophole??? Corporations keep their SALT deduction and get a 20% rate, but all of a sudden the Republicans think it makes sense to take away loopholes for individuals?? They keep the carried interest loophole benefiting hedge fund managers but make tuition waivers for grad students taxable???
Yup. If loopholes are terrible, then this bill doesn't meaningfully address that problem. I'm actually OK with some loopholes going away, but this tax bill seemed designed to close them for the sole purpose of funneling more money to corporations and the 0.1% and to blow up the deficit. It's such a heavy lift that they are left with raising taxes on grad students to even try to raise revenues to make up for the lost revenues from corporations.
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Same here as a grad student. When I did my Ph.D. at a prominent university near Palo Alto, my fellowship certainly did not allow me any sort of a comfortable living. Adding taxes on top of that would have made it pretty unlikely that I could have supported myself without dumpster diving. The Republican plan seems to simply maintain or increase existing corporate tax loopholes & taxing already impoverished grad students seems like a petty fuck-you to grad universities.
And BTW, the conservatives of today don't seem like actual conservatives - they just seem like religious/ethno-nationalists <dons asbestos suit>.
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And why is everyone ignoring the sunset provisions of the tax bill? If doubling the standard deduction is indeed better for everyone, what happens when that goes away in 7 years?
One theory is that the individual tax cuts will be made permanent too, eventually. It is very hard to raise taxes in the US. But they can't write that into this bill, because it costs too much. So, they won't do it now, but they'll do it before they sunset. Isn't that what happened with the bush tax cuts? Then, they will come after all the social programs and "entitlements" because "the country can't afford them". Of course we can't afford them, but we can afford big tax cuts. Not sure this is how it will play out, but my dad is convinced :)
It isn't so easy for universities to just increase stipends to compensate. The money for the increased stipend has to come from somewhere, such as 1) increased tuition for all 2) increased cost to fund a grad student on a research grant 3) endowments (less common). Also, many funding agencies have maximum allowable stipend levels that they will pay. I suspect grad students would just be getting a bill for 2018 because universities can't respond quickly enough. Much research funding comes from federal sources, so increasing the stipend would come from government funds in many cases. Since there are (I assume, but seems like a good assumption) no plans to increase research funding, this will either lead to increased tuition or fewer graduate students doing research. Or both. SAD!
My best guess is that this provision won't survive into law (or at least there will be a grad student exception), but maybe I'm just an optimist.
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Looking at most large universities, they run huge surpluses especially when you account for their endowments growing.
Perhaps they should reduce tuition, this neutering any tax consequences. I did the math with IIRC MIT which showed they could cover all their students costs at their sticker price of tuition and still have a couple hundred mil leftover a year if they withdrew their endowment at a 4% rate.
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taxes going up significantly for grad students. I can see why they are upset.
I'm pretty sure this is a feature and not a bug. Conservatives hate graduate students, educated peoples, and all forms of scientists.
Educated scientists gave us the theory of evolution and birth control. Educated scientists tend to doubt the revealed truth of Divine scripture, like when it says animals could talk and the sun stopped in the sky. Educated scientists question the authority of societally enforced gender discrimination and keep making noises about the wage gap, when they should be telling their womenses to get back in the kitchen. Educated scientists fight against teaching creationism in public schools. Clearly, educated scientists oppose the GOP ideology in every form, so why should the GOP encourage anyone else to become one? Better to just tax them into Oblivion.
So I don't think it's a coincidence. The whole tax plan is targeted at groups they don't like, which is why it is so bad for blue states, and poor people who need health insurance, and small businesses, and graduate students, but great for super wealthy inheritors, big corporations, and real estate developers. It's more politics than policy, but that doesn't mean they won't pass it.
The entire graduate thing would be terrible, especially given the drastic difference in costs depending on the University. I went to a state school for my PhD and after the first year qualified as in-state, so this likely wouldn't really have impacted me. But if I had gone to a private university like Carnegie Melon, or MIT, etc. It would have placed an enormous burden on me. One thing to keep in mind is that hard sciences tend to have much better stipends than other programs. My stipend was $5k/semester and if I got a summer teaching assistanship it was another $2.3k. If I went to a private university my entire stipend would have been paid out in taxes because I was single at the time.
I wonder if private universities could just strategically adjust the cost of tuition for graduate programs specifically.
Maybe?
This is such a weird discussion. Why are the conservatives on this forum arguing about why it's good for people making 30k to suddenly pay a lot more in taxes? I apologize for posting an article with a weird case (married with kid grad student), which is not the situation for many grad students I'd guess. It looks like people who have run the numbers estimate at least an extra 2k a year in taxes for many grad students at private institutions. Can anyone on the the "this tax plan is great!" side of the argument do the magic math that says that a single, no kid grad student doesn't pay more? And why is everyone ignoring the sunset provisions of the tax bill? If doubling the standard deduction is indeed better for everyone, what happens when that goes away in 7 years? Those 2026 grad students are still paying the taxes on their tuition waiver, but they no longer have an increased standard deduction that is supposed to be the spoonful of sugar to make the taxes go down.
Because it's a tax loophole. Employer perks are wage income and should be taxed. If they are not taxed, they are tax loopholes (like your employer-based health insurance, which is the biggest tax loophole in America). It's no different at a university just because the perk happens to be reduced tuition.
Given that we shouldn't have to have employer-based health insurance in America, that seems to be a reasonable concession until we pull our collective heads out of our asses and get with the rest of the world on modern, affordable health care.
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Looking at most large universities, they run huge surpluses especially when you account for their endowments growing.
Perhaps they should reduce tuition, this neutering any tax consequences. I did the math with IIRC MIT which showed they could cover all their students costs at their sticker price of tuition and still have a couple hundred mil leftover a year if they withdrew their endowment at a 4% rate.
endowment funds come with differing stipulations depending on who donated the money. I could donate a million to my alma-mater and say it has to be used for student athlete housing. They can't use it for anything but student athlete housing. Also, most endowments are much more conservative than a 4% rate. The fund has to last as long as the university, not for 30 years and it supports infrastructure/building upgrades on campuses as well, which I'm more than certain aren't cheap.
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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.
Don't have time to read the whole thread, but I agree with this. If someone pays taxes on their income all their lives, why should that money be taxed AGAIN after they die?
Instead, remove the step up in basis (as you said) and maybe even strip off any retirement flavors from the money. So if grandma passes you an IRA, that IRA becomes regular non-tax advantaged money (gets dumped into a taxable brokerage account). Any money that went in untaxed (Trad IRA) gets taxed at that time, as well as the earnings that haven't been taxed yet.
I'd even be in favor of this applying to everyone who gets an inheritance.
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infrastructure/building upgrades on campuses as well, which I'm more than certain aren't cheap.
Are you really defending private universities here? Universities have been engaging in an incredibly wasteful arms race of new building, luxury student comforts and balloning administration staffs for the last 30 years, largely funded by gov't backed, non-dischargable student loans. If school gave back some of that money back by tax assisting graduate student stipends, that would be a *great* outcome.
Instead, they'll probably just raise tuition even further. However, make no mistake, most universities could weather this expense easily if, they were willing to admit that maybe they don't need to build a third athletic center in the hopes of gaining +1 ranking in the next Princeton review.
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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.
Don't have time to read the whole thread, but I agree with this. If someone pays taxes on their income all their lives, why should that money be taxed AGAIN after they die?
Instead, remove the step up in basis (as you said) and maybe even strip off any retirement flavors from the money. So if grandma passes you an IRA, that IRA becomes regular non-tax advantaged money (gets dumped into a taxable brokerage account). Any money that went in untaxed (Trad IRA) gets taxed at that time, as well as the earnings that haven't been taxed yet.
I'd even be in favor of this applying to everyone who gets an inheritance.
Agreed, it seems like the biggest argument in favor of the estate tax is "they're rich, they can afford it". But the end result is massive efforts to shelter assets through life insurance and tax havens and not a whole lot of extra tax revenues. The real winners are insurance companies and tax attorneys.
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Agreed, it seems like the biggest argument in favor of the estate tax is "they're rich, they can afford it".
I think the better argument is that the estate tax is part of mitigating structural inequality. It is wealth redistribution. Taxing the wealthy and wealth redistribution is not something everyone in this country agrees is a good thing, but many (myself included) think that a healthy society has a level of wealth redistribution and limits extreme economic inequality.
If you work your whole life and pay taxes, you don't pay taxes again when you die. You are dead, you aren't doing anything. Whoever is inheriting the money is (indirectly) paying the taxes, which seems appropriate.
Anyway, at least changing the step-up basis would be prudent - seems crazy not to. Unrealized capital gains (not family businesses!) account for a large share of estates that get hit with the estate tax.
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I don't remember if my fellowship stipend was taxed back in the day when I did my masters degree. I was so low-income though that it probably wasn't much tax...don't know.
When my employer paid for another masters degree, it was considered income and I had to pay income tax on it, even though I never received the actual income in money form. The company directly paid the tuition.
I didn't realize stipend payments for graduate degree were not taxed.
They are, we are referring to tuition waivers, not stipends.
Some stipends are seen as payment for teaching and therefore taxed as earned income, including FICA. Some are awards and therefore exempt from FICA. However, they are still income to be reported.
Now that I think about it, I did not have to pay income tax on the fellowship amount that went towards my tuition, only on the stipend. It makes sense now.
But when my employer paid for another masters, I did have to pay income tax on it...weird.
The FICA exemption (including tax free tuition remission) for Graduate Students in for full-time students enrolled in degree programs that are also Graduate Assistants (Research Assistants, Teaching Assistants, etc).
You wages from your employer made you ineligible for the exemption when you were employed.
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Agreed, it seems like the biggest argument in favor of the estate tax is "they're rich, they can afford it".
I think the better argument is "they're dead, they don't need it anymore." Death is the best time to pay taxes. That tax rate should be higher than any tax rate you ever paid while alive.
When you think about it, the whole idea of passing a vast fortune on to someone who hasn't worked a day in their lives seems grossly unjust. I can see a reasonable argument for 100% estate tax.
Like go ahead and put your fortune into a foundation, and then let your kid run the foundation while drawing a salary (and paying taxes on the salary). That's fine. But I don't think you should just be allowed to GIVE somebody billions of tax-free dollars they can't possible use, because that money is clearly income and it should be taxed as such. That kind of enormous transfer or wealth, without any taxation at all, seems fundamentally unjust while we still have homeless people freezing each winter, and kids who don't get enough to eat, and we can't provide basic medical care to our citizens.
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infrastructure/building upgrades on campuses as well, which I'm more than certain aren't cheap.
Are you really defending private universities here? Universities have been engaging in an incredibly wasteful arms race of new building, luxury student comforts and balloning administration staffs for the last 30 years, largely funded by gov't backed, non-dischargable student loans. If school gave back some of that money back by tax assisting graduate student stipends, that would be a *great* outcome.
Instead, they'll probably just raise tuition even further. However, make no mistake, most universities could weather this expense easily if, they were willing to admit that maybe they don't need to build a third athletic center in the hopes of gaining +1 ranking in the next Princeton review.
I don't disagree with you on the fact that universities are building resort style buildings for education purposes and that costs tons of money. What I am saying is it isn't as simple as just drawing down the endowment at a 4% rate. As I said earlier many of the funds in the endowment have very specific guidelines around them. It's not just the universities money to do with it as it pleases. I do believe that they could probably whether the storm of this, by increasing stipends for PhD students, given that most programs have no more than 20-25 active PhD students at any given time. My comment was regarding an endowment easily being able to pay for every single students tuition and then some.
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Agreed, it seems like the biggest argument in favor of the estate tax is "they're rich, they can afford it".
I think the better argument is that the estate tax is part of mitigating structural inequality. It is wealth redistribution. Taxing the wealthy and wealth redistribution is not something everyone in this country agrees is a good thing, but many (myself included) think that a healthy society has a level of wealth redistribution and limits extreme economic inequality.
If you work your whole life and pay taxes, you don't pay taxes again when you die. You are dead, you aren't doing anything. Whoever is inheriting the money is (indirectly) paying the taxes, which seems appropriate.
Anyway, at least changing the step-up basis would be prudent - seems crazy not to. Unrealized capital gains (not family businesses!) account for a large share of estates that get hit with the estate tax.
Sure but how do you justify applying the estate taxes only to the wealthy, without my argument of "they're rich, they can afford it". The fact that you are dead and the one who is doing the inheriting would seem to apply to all inheritances, not just the wealthy.
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Sure but how do you justify applying the estate taxes only to the wealthy
I don't. I think all inheritances should be taxed as income.
Our income tax system is already designed to be progressive, so that poor people pay little or no taxes, and the wealthy pay more. "Because they can afford it." Using income tax rates for inheritances seems like the simplest way to go about this. Did you have income from an inheritance? Then it's income and it gets taxed just like any other income.
I would make the same case for capital gains and dividends, btw. Why do we need so many different tax rates for different types of income?
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Agreed, it seems like the biggest argument in favor of the estate tax is "they're rich, they can afford it".
I think the better argument is that the estate tax is part of mitigating structural inequality. It is wealth redistribution. Taxing the wealthy and wealth redistribution is not something everyone in this country agrees is a good thing, but many (myself included) think that a healthy society has a level of wealth redistribution and limits extreme economic inequality.
If you work your whole life and pay taxes, you don't pay taxes again when you die. You are dead, you aren't doing anything. Whoever is inheriting the money is (indirectly) paying the taxes, which seems appropriate.
Anyway, at least changing the step-up basis would be prudent - seems crazy not to. Unrealized capital gains (not family businesses!) account for a large share of estates that get hit with the estate tax.
Sure but how do you justify applying the estate taxes only to the wealthy, without my argument of "they're rich, they can afford it". The fact that you are dead and the one who is doing the inheriting would seem to apply to all inheritances, not just the wealthy.
The exact same way you justify a graduated tax rate with people in higher brackets paying more. Or luxury goods being taxed at a higher sales tax rate than essentials.
You're right, at that level it does come down to "they're rich, they can afford it". And it's true. And the ultra-rich are the ones where we have to worry about systemic long-term inequality. We really don't want to go back to the era of the landed gentry owning everything and having all the power. It didn't work out very well.
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Anyway, at least changing the step-up basis would be prudent - seems crazy not to. Unrealized capital gains (not family businesses!) account for a large share of estates that get hit with the estate tax.
If you're advocating getting rid of the step-up in basis, I think that's a bad idea from a practical perspective.
When did Grandpa buy those shares? What were the basis figures on the dates of those various purchases? How much was the result of dividend reinvestments? When were those purchases? What was the share count and cost basis of those shares?
A paperwork and logistical nightmare as compared to "what day did Grandpa die? what were the shares worth on that day? Perfect; glad to have that taken care of in 5 minutes."
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infrastructure/building upgrades on campuses as well, which I'm more than certain aren't cheap.
Are you really defending private universities here? Universities have been engaging in an incredibly wasteful arms race of new building, luxury student comforts and balloning administration staffs for the last 30 years, largely funded by gov't backed, non-dischargable student loans. If school gave back some of that money back by tax assisting graduate student stipends, that would be a *great* outcome.
Instead, they'll probably just raise tuition even further. However, make no mistake, most universities could weather this expense easily if, they were willing to admit that maybe they don't need to build a third athletic center in the hopes of gaining +1 ranking in the next Princeton review.
I don't disagree with you on the fact that universities are building resort style buildings for education purposes and that costs tons of money. What I am saying is it isn't as simple as just drawing down the endowment at a 4% rate. As I said earlier many of the funds in the endowment have very specific guidelines around them. It's not just the universities money to do with it as it pleases. I do believe that they could probably whether the storm of this, by increasing stipends for PhD students, given that most programs have no more than 20-25 active PhD students at any given time. My comment was regarding an endowment easily being able to pay for every single students tuition and then some.
I don't know how true this is. My niece is attending the best college in her discipline, Pratt Institute. They have an endowment of 123 million dollars. Their tuition is about $45000 a year and there are about 4500 students attending the school. If they pulled 4% per year that would give them $4,920,000. Divided by the 4500 students, this would allow them to give each student $1093 off their tuition each year. So nowhere near being able to pay for every single student's tuition and then some.
However, a pull of 4% is probably irresponsible since an endowment is supposed to last forever and 4% would eventually require touching the principal. So, I think your statement might be true with some universities but certainly not all and probably not most.
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Sure but how do you justify applying the estate taxes only to the wealthy
I don't. I think all inheritances should be taxed as income.
Our income tax system is already designed to be progressive, so that poor people pay little or no taxes, and the wealthy pay more. "Because they can afford it." Using income tax rates for inheritances seems like the simplest way to go about this. Did you have income from an inheritance? Then it's income and it gets taxed just like any other income.
I would make the same case for capital gains and dividends, btw. Why do we need so many different tax rates for different types of income?
So the same would hold for gifts given to children? At what age should this be enforced? If I pay for my kids grad program should that be taxable?
Dividends and capital gains have theoretically already been taxed at the corporate rate, which is why I believe those are different. A company can't provide a dividend without taking a profit (for very long) and all earnings are taxed as earned income by the corporation you invest in. So theoretically this would be similar to you owning a chain of grocery stores and being taxed on the profit and then being taxed on the profit again when you take a portion of it home. It's just further removed in this instance because you don't own all of the company, but instead a small portion of it.
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Anyway, at least changing the step-up basis would be prudent - seems crazy not to. Unrealized capital gains (not family businesses!) account for a large share of estates that get hit with the estate tax.
If you're advocating getting rid of the step-up in basis, I think that's a bad idea from a practical perspective.
When did Grandpa buy those shares? What were the basis figures on the dates of those various purchases? How much was the result of dividend reinvestments? When were those purchases? What was the share count and cost basis of those shares?
A paperwork and logistical nightmare as compared to "what day did Grandpa die? what were the shares worth on that day? Perfect; glad to have that taken care of in 5 minutes."
I agree with you on this. It seems to make sense to eliminate the step-up in basis but agree it would make for a paperwork nightmare. Since brokers are now required to track cost basis it would make sense to take a blended approach until eventually all shares will either be purchased or have a step-up in basis more recently than when the tracking requirement was implemented. After that the only items which might have issues would be tracking the basis if capital improvements have taken place on property or investments in private companies.
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I don't know how true this is. My niece is attending the best college in her discipline, Pratt Institute. They have an endowment of 123 million dollars. Their tuition is about $45000 a year and there are about 4500 students attending the school. If they pulled 4% per year that would give them $4,920,000. Divided by the 4500 students, this would allow them to give each student $1093 off their tuition each year. So nowhere near being able to pay for every single student's tuition and then some.
This totally depends on the school. Harvard's endowment is 37.6 billion dollars, and they have 22k students at $43k each. So they spend/collect approximately a billion dollars per year in tuition, that's a 2.6% withdrawal rate that would be required to make tuition 100% free.
I'm a Caltech grad, and they have roughly analogous numbers. 2.1 billion dollar endowment, 1000 undergrads at $48k each, which works out to 2.28% SWR required to make tuition 100% free.
Of course the real world is more complicated than that. They're not actually collecting full tuition from every student today, because many of them bring scholarships or work study with them. Many others get university grants, which already come out of the endowment (or the income stream that would otherwise go into the endowment). So in practice it would cost these schools even less than their ~2.5% SWRs to make tuition free, but then again those endowments also have to pay for fixed expenses that may be far greater than the total collected from tuition. Big universities have many streams of income, like research grants, that keep them afloat. At a place like Caltech, the undergrads are basically an afterthought. They're bright and highly motivated cheap labor, but not really the reason the place exists.
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So the same would hold for gifts given to children? At what age should this be enforced? If I pay for my kids grad program should that be taxable?
Of course it should. Income is income. If your 12 year old is out mowing lawns all summer, he's supposed to pay taxes on his income. Even his tips.
In practice kids are usually overlooked by the IRS. I suspect that has more to do with the puny amounts of money involved instead of their ages, though. It's not cost effective to audit a 12 year old for $30 in back taxes. But if that 12 year old inherited a few billion, I'm absolutely sure they would audit for their due.
Dividends and capital gains have theoretically already been taxed at the corporate rate, which is why I believe those are different.
This argument has always confused me. Yes, a corporation pays taxes on their profit. Then they pay their employees, who pay income taxes on that profit when it's converted to income. Then the employee pay sales taxes when he spends his taxed income which came from the taxed profit. Then the company pays corporate taxes on whatever the employee bought after paying sales taxes after paying income taxes after the company paid corporate taxes. ALL money has been taxed before. It gets taxed every time it changes hands.
So it doesn't make sense to say "dividends have already been taxed once" unless you also think you shouldn't have to pay sales tax because "my income has already been taxed once." They've both been taxed before. It's not like you can follow one dollar through the economy as it is traded and spent over and over again, because it is comingled and fungible. We don't tax dollars. We tax transaction events, like payroll or purchases or dividend payouts.
So theoretically this would be similar to you owning a chain of grocery stores and being taxed on the profit and then being taxed on the profit again when you take a portion of it home.
Yes! Exactly! If you're both the owner and the employee, you pay both kinds of taxes! Once on the corporate profits, then again as payroll taxes when you take home income. Then you pay taxes again as the consumer, when you buy something from your own store! Then again as the owner on the profit from the sale from your store to yourself as the consumer! That's how taxes are supposed to work. Every transaction gets taxed, every time money changes hands Uncle Sam gets a cut.
An inheritance is just another transaction. It should get taxed, IMO. The only reason it doesn't is that the super-rich have effectively carved out a little exemption for themselves to protect and preserve their position of privilege, to perpetuate income inequality, to ensure that their families will always be the rich and powerful and that nobody else can challenge that secure position.
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So the same would hold for gifts given to children? At what age should this be enforced? If I pay for my kids grad program should that be taxable?
Of course it should. Income is income. If your 12 year old is out mowing lawns all summer, he's supposed to pay taxes on his income. Even his tips.
I think you missed mizz's point, either intentionally or unintentionally.
If I gift my 8 year old a dinner, presumably that should not be taxable to her.
If I gift her a $10 toy for Christmas, presumably that should not be taxable to her.
If I gift her $1000 into her 529 account, that is currently not taxable (and I believe should not be taxable to her either, and legally, it falls into the gift tax exemption amount).
mizz was specifically talking about gifts given to children, not the child working for income.
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However, a pull of 4% is probably irresponsible since an endowment is supposed to last forever and 4% would eventually require touching the principal. So, I think your statement might be true with some universities but certainly not all and probably not most.
I recall listening to an interview with the head of Stanford's endowment and he used 5% withdrawal rate on their endowment, which makes sense if you use the 4% SWR rule + tax free status of endowments.
Sent from my Pixel using Tapatalk
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Dividends and capital gains have theoretically already been taxed at the corporate rate, which is why I believe those are different.
This argument has always confused me. Yes, a corporation pays taxes on their profit. Then they play their employees, who pay income taxes on that profit when it's converted to income. Then the employee pay sales taxes when he spends his taxed income which came from the taxed profit. Then the company pays corporate taxes on whatever the employee bought after paying sales taxes after paying income taxes after the company paid corporate taxes. ALL money has been taxed before. It gets taxed every time it changes hands.
So it doesn't make sense to say "dividends have already been taxed once" unless you also think you shouldn't have to pay sales tax because "my income has already been taxed once." They've both been taxed before. It's not like you can follow one dollar through the economy as it is traded and spent over and over again, because it is comingled and fungible. We don't tax dollars. We tax transaction events, like payroll or purchases or dividend payouts.
So theoretically this would be similar to you owning a chain of grocery stores and being taxed on the profit and then being taxed on the profit again when you take a portion of it home.
Yes! Exactly! If you're both the owner and the employee, you pay both kinds of taxes! Once on the corporate profits, then again as payroll taxes when you take home income. Then you pay taxes again as the consumer, when you buy something from your own store! Then again as the owner on the profit from the sale from your store to yourself as the consumer! That's how taxes are supposed to work. Every transaction gets taxed, every time money changes hands Uncle Sam gets a cut.
An inheritance is just another transaction. It should get taxed, IMO. The only reason it doesn't is that the super-rich have effectively carved out a little exemption for themselves to protect and preserve their position of privilege, to perpetuate income inequality, to ensure that their families will always be the rich and powerful and that nobody else can challenge that secure position.
First of all comparing a consumption tax (sales tax) to an income tax is like comparing apples to oranges.
Secondly, that's not how ownership works. You do get taxed on an income, but you only need to take what is considered 'a reasonable income' for your position within the company as an owner. If you own a chain of grocery stores you must take a salary, say of....$150k/yr and that is taxed as income, but all the rest of the money can be taken out as profit if need be as it was already taxed at the corporate rate. Plus companies don't claim employees' salary as income, so that money is not taxed as income by the company. It is taxed as income by the employee and is considered an operating expense by the company thus comes out before the company pays taxes on it as income/earnings.
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mizz was specifically talking about gifts given to children, not the child working for income.
We have a gift tax exemption, for children or anyone else. I think it's fair to keep that same limit for inheritances.
As it is now, you can receive gifts of up to $14k without owing taxes, if it comes from a living relative, but $5.5 million if it comes from a dead relative. I think a gift is a gift and they should be treated the same.
But I also think we've already established that what seems obviously reasonable to me will never pass through Congress. Logic is not their strong suit.
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Dividends and capital gains have theoretically already been taxed at the corporate rate, which is why I believe those are different.
This argument has always confused me. Yes, a corporation pays taxes on their profit. Then they play their employees, who pay income taxes on that profit when it's converted to income. Then the employee pay sales taxes when he spends his taxed income which came from the taxed profit. Then the company pays corporate taxes on whatever the employee bought after paying sales taxes after paying income taxes after the company paid corporate taxes. ALL money has been taxed before. It gets taxed every time it changes hands.
So it doesn't make sense to say "dividends have already been taxed once" unless you also think you shouldn't have to pay sales tax because "my income has already been taxed once." They've both been taxed before. It's not like you can follow one dollar through the economy as it is traded and spent over and over again, because it is comingled and fungible. We don't tax dollars. We tax transaction events, like payroll or purchases or dividend payouts.
Aren't employee wages are treated as a liability and count against earnings (before profit)?
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If you're advocating getting rid of the step-up in basis, I think that's a bad idea from a practical perspective.
When did Grandpa buy those shares? What were the basis figures on the dates of those various purchases? How much was the result of dividend reinvestments? When were those purchases? What was the share count and cost basis of those shares?
A paperwork and logistical nightmare as compared to "what day did Grandpa die? what were the shares worth on that day? Perfect; glad to have that taken care of in 5 minutes."
But... if you have repealed the estate tax, no one has ever paid taxes on those capital gains, which could have been growing for 40 years or more. How is that the right answer? Figure out the paperwork or keep the estate tax. Besides, if grandpa was ever going to sell the shares himself, he would have to keep track of all of that and report it. By dying, he gets out of the paperwork and only passes the money on? No, you inherit the stocks and the paperwork mess together.
Right now, this is limited since once you get above the estate tax limit ($10M?), you pay the estate tax. It is not perfect, but it limits the impact and provides some argument for the step up basis.
And yes, under current law gifts, including to children, are taxed (by the giver) if they are above a certain (lifetime) amount.
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mizz was specifically talking about gifts given to children, not the child working for income.
We have a gift tax exemption, for children or anyone else. I think it's fair to keep that same limit for inheritances.
As it is now, you can receive gifts of up to $14k without owing taxes, if it comes from a living relative, but $5.5 million if it comes from a dead relative. I think a gift is a gift and they should be treated the same.
But I also think we've already established that what seems obviously reasonable to me will never pass through Congress. Logic is not their strong suit.
But it counts against your lifetime allowance, which is equal to the threshold for the estate tax. And just to be clear it's 14k/person. So if you have a wife and both parents are still living it's actually $56k/yr. My point was if you enforce a 100% estate tax people will just gift all their money away before they die. So you need to essentially make sure no money exchanges hands at all over a person's lifetime without being taxed.
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Dividends and capital gains have theoretically already been taxed at the corporate rate, which is why I believe those are different.
This argument has always confused me. Yes, a corporation pays taxes on their profit. Then they play their employees, who pay income taxes on that profit when it's converted to income. Then the employee pay sales taxes when he spends his taxed income which came from the taxed profit. Then the company pays corporate taxes on whatever the employee bought after paying sales taxes after paying income taxes after the company paid corporate taxes. ALL money has been taxed before. It gets taxed every time it changes hands.
So it doesn't make sense to say "dividends have already been taxed once" unless you also think you shouldn't have to pay sales tax because "my income has already been taxed once." They've both been taxed before. It's not like you can follow one dollar through the economy as it is traded and spent over and over again, because it is comingled and fungible. We don't tax dollars. We tax transaction events, like payroll or purchases or dividend payouts.
Aren't employee wages are treated as a [business expense] and count against earnings (before profit)?
Yes, they are. In the example above, it was the employee who paid income tax, then sales tax, and then a <potentially different> company paid corporate taxes on the profits earned by that employee's consumption.
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Aren't employee wages are treated as a liability and count against earnings (before profit)?
Sure, but that's just an accounting trick to lower the corporation's tax burden. All employee paychecks are paid with dollars that come from the company's revenue.
And you're still missing the point of circular taxation. All of the company's revenue comes from consumers who have already paid income tax on their earnings. All spendable employee wages are paid from corporate revenue. In between everyone pays sales taxes and property taxes and gas taxes and everything else. All money has been taxed before.
The employee wage deduction, like the individual mortgage deduction, is just an exemption to shelter some income and lower the effective rate. It doesn't mean the money hasn't been taxed, it's just an accounting tool used to pay less.
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mizz was specifically talking about gifts given to children, not the child working for income.
We have a gift tax exemption, for children or anyone else. I think it's fair to keep that same limit for inheritances.
As it is now, you can receive gifts of up to $14k without owing taxes, if it comes from a living relative, but $5.5 million if it comes from a dead relative. I think a gift is a gift and they should be treated the same.
But it counts against your lifetime allowance, which is equal to the threshold for the estate tax. And just to be clear it's 14k/person. So if you have a wife and both parents are still living it's actually $56k/yr. My point was if you enforce a 100% estate tax people will just gift all their money away before they die. So you need to essentially make sure no money exchanges hands at all over a person's lifetime without being taxed.
Any gift below the exemption amount is NOT counted against your lifetime allowance. If you give $14K/yr, it's entirely gift tax (and estate tax impact) free.
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I don't know how true this is. My niece is attending the best college in her discipline, Pratt Institute. They have an endowment of 123 million dollars. Their tuition is about $45000 a year and there are about 4500 students attending the school. If they pulled 4% per year that would give them $4,920,000. Divided by the 4500 students, this would allow them to give each student $1093 off their tuition each year. So nowhere near being able to pay for every single student's tuition and then some.
This totally depends on the school. Harvard's endowment is 37.6 billion dollars, and they have 22k students at $43k each. So they spend/collect approximately a billion dollars per year in tuition, that's a 2.6% withdrawal rate that would be required to make tuition 100% free.
I'm a Caltech grad, and they have roughly analogous numbers. 2.1 billion dollar endowment, 1000 undergrads at $48k each, which works out to 2.28% SWR required to make tuition 100% free.
Of course the real world is more complicated than that. They're not actually collecting full tuition from every student today, because many of them bring scholarships or work study with them. Many others get university grants, which already come out of the endowment (or the income stream that would otherwise go into the endowment). So in practice it would cost these schools even less than their ~2.5% SWRs to make tuition free, but then again those endowments also have to pay for fixed expenses that may be far greater than the total collected from tuition. Big universities have many streams of income, like research grants, that keep them afloat. At a place like Caltech, the undergrads are basically an afterthought. They're bright and highly motivated cheap labor, but not really the reason the place exists.
I agree, this depends on the school. However, Harvard actually has the largest academic endowment in the entire world. So it doesn't make sense to me to look to Harvard and then make statements about all colleges based on Harvard's endowment. (I recognize that this is not what the tax proposal has in it and I'm basically ok with the proposed tax on college endowments that average more than 100,000 per student. I might make it a higher number, but the basic idea of taxing wealth at a higher level is ok from my perspective.)
Here is a link that lists endowments for all colleges and universities:
http://www.nacubo.org/Documents/EndowmentFiles/2016-Endowment-Market-Values.pdf
Looking at it, you can see the Median endowment across the board is $120,330,000. Harvard's endowment is $34,541,893,000, so Harvard has an endowment 287 times greater than what the median college endowment is. It doesn't make sense to dump all colleges in the same pot and declare that they are all the same.
Gondolin said:
most universities could weather this expense easily if, they were willing to admit that maybe they don't need to build a third athletic center in the hopes of gaining +1 ranking in the next Princeton review.
But the fact is that most universities probably couldn't weather this expense easily. What we have seen for the last couple decades has been an erosion in state and federal funds going to universities. At the same time, funds that are made available are often earmarked to be used only for buildings or other hard assets that the people can see their names on. So it gives the illusion that the universities would prefer to build structures rather than programs, when the reverse is generally true.
Research grants are another area where the wealthy schools are the most likely to get grants. So it contributes to a problem where less prestigious schools are scraping to get by, while wealthier schools, which already have large endowments, also get large research grants. This means that there is a perception problem when people look at universities. They hear about how Harvard or MIT or UCLA operate and they think that all universities have similar resources and are making similar choices. That's not the case.
It is as if someone looked at Warren Buffett and then asked my family with our income (approx $73000 per year) or my sister with her income (approx $30,000 in a good year) why we don't contribute as much to charity as Warren Buffett or why we don't exercise the same opportunities Warren Buffett does.
Very wealthy institutions and very wealthy people have options that the median institution or median person does not.
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mizz was specifically talking about gifts given to children, not the child working for income.
We have a gift tax exemption, for children or anyone else. I think it's fair to keep that same limit for inheritances.
As it is now, you can receive gifts of up to $14k without owing taxes, if it comes from a living relative, but $5.5 million if it comes from a dead relative. I think a gift is a gift and they should be treated the same.
But it counts against your lifetime allowance, which is equal to the threshold for the estate tax. And just to be clear it's 14k/person. So if you have a wife and both parents are still living it's actually $56k/yr. My point was if you enforce a 100% estate tax people will just gift all their money away before they die. So you need to essentially make sure no money exchanges hands at all over a person's lifetime without being taxed.
Any gift below the exemption amount is NOT counted against your lifetime allowance. If you give $14K/yr, it's entirely gift tax (and estate tax impact) free.
You are right, anything above the tax free gift is counted. My mistake, it doesn't change the fact that people will just give it away to avoid taxes on it, especially people in the 5-10 million networth range.
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it doesn't change the fact that people will just give it away to avoid taxes on it, especially people in the 5-10 million networth range.
Totally agree on that point. I'm not in that range now, but am overwhelmingly likely to be in that range assuming I avoid an untimely death. I do expect to be forced to do smart things to ensure that the money goes where my wife and I prefer upon our death.
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it doesn't change the fact that people will just give it away to avoid taxes on it, especially people in the 5-10 million networth range.
Perfect! That's exactly what I want to happen. I want a lifetime cap on how much money you can give to your children without incurring ANY taxes, and I think the gift tax exemption amount per year is a fine place to start.
But the current estate tax is approximately 800% of that amount, and the new GOP tax plan would make it an infinite amount. I'm not worried about folks who want to gift a few hundred thousand dollars over decades, I'm worried about the RKOI (https://www.instagram.com/richkidsofinstagram/?hl=en) crowd who inherit billions without ever finishing high school or working a day in their lives. If you're a multibillionaire and want want to make your deadbeat hedonistic wildchild into a multibillionaire too, that kid absolutely should pay regular income taxes on whatever you give him. His "income" shouldn't be treated and different than what the rest of us actually earn.
And (to get back on topic here) that's one of the fundamental problems with both versions of the current GOP tax plan; it strongly favors people who get rich without working over people who get rich by working. Unearned income is taxed at a much lower rate than wage income. Owner profits get low taxes, worker salaries get high taxes. Working is discouraged, in favor of inheriting or passive ownership. That seems like the very definition of promoting wealth inequality.
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it doesn't change the fact that people will just give it away to avoid taxes on it, especially people in the 5-10 million networth range.
Perfect! That's exactly what I want to happen. I want a lifetime cap on how money you can give to your children without incurring ANY taxes, and I think the gift tax exemption amount per year is a fine place to start.
But the current estate tax is approximately 800% of that amount, and the new GOP tax plan would make it an infinite amount. I'm not worried about folks who want to gift a few hundred thousand dollars over decades, I'm worried about the RKOI (https://www.instagram.com/richkidsofinstagram/?hl=en) crowd who inherit billions without ever finishing high school or working a day in their lives. If you're a multibillionaire and want want to make your deadbeat hedonistic wildchild into a multibillionaire too, that kid absolutely should pay regular income taxes on whatever you give him. His "income" shouldn't be treated and different than what the rest of us actually earn.
And (to get back on topic here) that's one of the fundamental problems with both versions of the current GOP tax plan; it strongly favors people who get rich without working over people who get rich by working. Unearned income is taxed at a much lower rate than wage income. Owner profits get low taxes, worker salaries get high taxes. Working is discouraged, in favor of inheriting or passive ownership. That seems like the very definition of promoting wealth inequality.
+1
Well said.
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That seems like the very definition of promoting wealth inequality.
IMO that seems like the Republican MO at this point. I truly hope this doesn't pass - just as with healthcare, there are certainly improvements that can be made, but the GOP plan is NOT it.
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The estate tax should stay. Nobody receiving over $11M is hurting. I'm convinced that getting rid of this tax is meant specifically for the Trump family.
The rich now pay essentially nothing. Get above max FICA for the year and they then pay nothing.
I honestly think we should go back to the WWII tax brackets for the ultra wealthy where the top tax bracket was 94%. Or at least to the brackets when Kennedy was first elected where it was 91%. The GOP and 0.1 percenters keep crying poverty and "we'll have to move jobs overseas" with their paltry nothing percentages in federal taxes. Meanwhile, they're all....as CEO's already moving the jobs overseas. Not just manufacturing jobs, design engineering, software.
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But the fact is that most universities probably couldn't weather this expense easily.
What expense exactly are you referring to? Later posters turned to free tuition for everyone as the benchmark but, my original post was about the expense of tax assisting PhD stipends to offset the tax burden added by treating waived PhD tuition as income.
I think you'll find the numbers much more reasonable when considering $10-15k of expense per PhD rather then $45k sticker price tuition for every student.
Pratt Institute, for example, does not offer PhD programs so their cost would be ~$0.
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But the fact is that most universities probably couldn't weather this expense easily.
What expense exactly are you referring to? Later posters turned to free tuition for everyone as the benchmark but, my original post was about the expense of tax assisting PhD stipends to offset the tax burden added by taxing waived PhD tuition as income.
I think you'll find the numbers much more reasonable when considering $10-15k of expense per PhD rather then $45k sticker price tuition for every student.
Pratt Institute, for example, does not offer PhD programs so their cost would be ~$0.
PhDs aren't the only kind of grad students that receive tuition waivers
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PhDs aren't the only kind of grad students that receive tuition waivers
Such as? And in large numbers? Genuine curiosity - can't think of a field where Masters or JD candidates are given waived tuition.
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PhDs aren't the only kind of grad students that receive tuition waivers
Such as? And in large numbers? Genuine curiosity - can't think of a field where Masters or JD candidates are given waived tuition.
https://www.edvisors.com/student-employment/jobs/tuition-waivers/
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The estate tax should stay. Nobody receiving over $11M is hurting. I'm convinced that getting rid of this tax is meant specifically for the Trump family.
It's not. Getting rid of the estate tax has been a Republican goal for many years. Hence all the propaganda (but it's double taxation!) and misinformation (it's bankrupting the family farmers!) that have been circulating for quite some time.
Repealing it will help the Trumps personally, absolutely. But this is a generic-Republican thing, not a Trump thing. It's what their rich donors demand.
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JLee- what conclusion am I supposed to draw from this link? That tuition waivers exist?
I argued that PhD students get the massive majority of graduate level tuition waivers. Masters/MBA/ JD/MD degrees are major profit centers. These students are not getting waivers or fellowships the come with tuition assistance.
From your own link:
"Teaching and research assistantships were most common among students in doctoral degree programs, where 47.6% received assistantships. In contrast, only 8.3% of students in Master’s degree programs received assistantships"
Hence I still contend that tax assisting PhD students would constitute the bulk of the expense to universities.
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The estate tax should stay. Nobody receiving over $11M is hurting.
Not only should it stay, it should be lowered! Why are we exempting $11 million from estate taxes? That's more cash than anyone needs, because it will fund more than an entire lifetime at median salaries. It's just a gift to the super-rich.
Similarly, why are they trying to lower the corporate tax rate? This is also exactly backwards, at a time when the economy is so strong, unemployment is so low, and corporate profits are at record highs. Now is the time to raise corporate taxes, according to Keynesian economics. Then you can lower them to give the economy some juice if we have another recession, when the boost to corporate earnings might actually help. Right now it won't help, and it just reduces our ability to deal with future economic downturns. Similarly for interest rates, corporate taxes should also be climbing slowly during times as incredibly prosperous as these. Why is this administration doing everything exactly backwards? Is it just to be different than the last administration?
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JLee- what conclusion am I supposed to draw from this link? That tuition waivers exist?
I argued that PhD students get the massive majority of graduate level tuition waivers. Masters/MBA/ JD/MD degrees are major profit centers. These students are not getting waivers or fellowships the come with tuition assistance.
From your own link:
"Teaching and research assistantships were most common among students in doctoral degree programs, where 47.6% received assistantships. In contrast, only 8.3% of students in Master’s degree programs received assistantships"
Hence I still contend that tax assisting PhD students would constitute the bulk of the expense to universities.
That is not quite what you argued. In response to a claim that "PhDs aren't the only kind of grad students that receive tuition waivers", you responded "Such as?" This was followed by the statement that you "can't think of a field where Masters or JD candidates are given waived tuition."
If you meant to say "assisting PhD students constitutes the bulk of the expense to universities," perhaps that is what you should have said.
2014 census data indicates that 11.77% of people have masters degrees and 3.27% have PhD's. I am unsure of the accuracy of those numbers, but it's what I have to work with. Given that, 1.55652% of students received PhD assistantships and .97691% of students received Masters assistantships. We're talking a ratio lower than 1.6:1. Clearly a larger percentage are PhD candidates, but there just aren't that many of them.
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Because it's a tax loophole. Employer perks are wage income and should be taxed. If they are not taxed, they are tax loopholes (like your employer-based health insurance, which is the biggest tax loophole in America). It's no different at a university just because the perk happens to be reduced tuition.
Is the bill closing even one CORPORATE tax loophole??? Corporations keep their SALT deduction and get a 20% rate, but all of a sudden the Republicans think it makes sense to take away loopholes for individuals?? They keep the carried interest loophole benefiting hedge fund managers but make tuition waivers for grad students taxable???
I don't see why the existence of some loopholes makes other loopholes justified. I also am not really worried about corporations: the best corporate income tax rate is 0%. Corporations should only pay tax on the unimproved land value of their property and whatever surtaxes are assigned to their utilities. They shouldn't get a deduction for those taxes anymore than individuals do, because Uncle Sam should not be subsidizing local and state governments through the tax code.
I guess you could say they should pay a VAT too, if support that kind of taxation.
I don't particularly care about the carried interest taxation. I am more interested in imposing a general tax on financial transactions than changing tax codes for hedge funds. Carried interest only seems to be a really huge issue for people who care majorly about income inequality, which is not something I'm interested in.
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Because it's a tax loophole. Employer perks are wage income and should be taxed. If they are not taxed, they are tax loopholes (like your employer-based health insurance, which is the biggest tax loophole in America). It's no different at a university just because the perk happens to be reduced tuition.
Is the bill closing even one CORPORATE tax loophole??? Corporations keep their SALT deduction and get a 20% rate, but all of a sudden the Republicans think it makes sense to take away loopholes for individuals?? They keep the carried interest loophole benefiting hedge fund managers but make tuition waivers for grad students taxable???
I don't see why the existence of some loopholes makes other loopholes justified. I also am not really worried about corporations: the best corporate income tax rate is 0%. Corporations should only pay tax on the unimproved land value of their property and whatever surtaxes are assigned to their utilities. They shouldn't get a deduction for those taxes anymore than individuals do, because Uncle Sam should not be subsidizing local and state governments through the tax code.
I guess you could say they should pay a VAT too, if support that kind of taxation.
I don't particularly care about the carried interest taxation. I am more interested in imposing a general tax on financial transactions than changing tax codes for hedge funds. Carried interest only seems to be a really huge issue for people who care majorly about income inequality, which is not something I'm interested in.
You're dodging the point.
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Because it's a tax loophole. Employer perks are wage income and should be taxed. If they are not taxed, they are tax loopholes (like your employer-based health insurance, which is the biggest tax loophole in America). It's no different at a university just because the perk happens to be reduced tuition.
Is the bill closing even one CORPORATE tax loophole??? Corporations keep their SALT deduction and get a 20% rate, but all of a sudden the Republicans think it makes sense to take away loopholes for individuals?? They keep the carried interest loophole benefiting hedge fund managers but make tuition waivers for grad students taxable???
I don't see why the existence of some loopholes makes other loopholes justified. I also am not really worried about corporations: the best corporate income tax rate is 0%. Corporations should only pay tax on the unimproved land value of their property and whatever surtaxes are assigned to their utilities. They shouldn't get a deduction for those taxes anymore than individuals do, because Uncle Sam should not be subsidizing local and state governments through the tax code.
I guess you could say they should pay a VAT too, if support that kind of taxation.
I don't particularly care about the carried interest taxation. I am more interested in imposing a general tax on financial transactions than changing tax codes for hedge funds. Carried interest only seems to be a really huge issue for people who care majorly about income inequality, which is not something I'm interested in.
You're dodging the point.
How so?
I don't see why the existence of some loopholes makes other loopholes justified.
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Because it's a tax loophole. Employer perks are wage income and should be taxed. If they are not taxed, they are tax loopholes (like your employer-based health insurance, which is the biggest tax loophole in America). It's no different at a university just because the perk happens to be reduced tuition.
Is the bill closing even one CORPORATE tax loophole??? Corporations keep their SALT deduction and get a 20% rate, but all of a sudden the Republicans think it makes sense to take away loopholes for individuals?? They keep the carried interest loophole benefiting hedge fund managers but make tuition waivers for grad students taxable???
I don't see why the existence of some loopholes makes other loopholes justified. I also am not really worried about corporations: the best corporate income tax rate is 0%. Corporations should only pay tax on the unimproved land value of their property and whatever surtaxes are assigned to their utilities. They shouldn't get a deduction for those taxes anymore than individuals do, because Uncle Sam should not be subsidizing local and state governments through the tax code.
I guess you could say they should pay a VAT too, if support that kind of taxation.
I don't particularly care about the carried interest taxation. I am more interested in imposing a general tax on financial transactions than changing tax codes for hedge funds. Carried interest only seems to be a really huge issue for people who care majorly about income inequality, which is not something I'm interested in.
You're dodging the point.
How so?
I don't see why the existence of some loopholes makes other loopholes justified.
If we're writing a new tax bill to close all these alleged loopholes, why are we 1) not closing ANY corporate ones, and 2) lowering the corporate rate further?
Then again, you don't care about income inequality so I suppose you might actually be looking forward to the old days when the .1% lived in castles and everybody else were peasants. Unless, of course, I've misread your post entirely.
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So the same would hold for gifts given to children? At what age should this be enforced? If I pay for my kids grad program should that be taxable?
Of course it should. Income is income. If your 12 year old is out mowing lawns all summer, he's supposed to pay taxes on his income. Even his tips.
I think you missed mizz's point, either intentionally or unintentionally.
If I gift my 8 year old a dinner, presumably that should not be taxable to her.
If I gift her a $10 toy for Christmas, presumably that should not be taxable to her.
If I gift her $1000 into her 529 account, that is currently not taxable (and I believe should not be taxable to her either, and legally, it falls into the gift tax exemption amount).
mizz was specifically talking about gifts given to children, not the child working for income.
Dinner and toys sound like non-taxable fringe benefits
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Interesting development regarding pass-through income. The latest Senate version is likely to include a 20% deduction for pass-through income. The House version works differently, it caps the rate at 25%, whereas the Senate version offers this deduction.
https://www.cnbc.com/2017/11/29/senate-tax-bill-will-reportedly-raise-pass-through-deduction-to-20-percent.html
Meaning small business owners in the 10-15% tax bracket would see a benefit from the Senate plan, compared to the House plan where they would see no benefit at all. Am I correct?
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...Presumably this would this be an above-the-line deduction, reducing AGI, and thus increasing ACA premium tax credit.
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JLee- what conclusion am I supposed to draw from this link? That tuition waivers exist?
I argued that PhD students get the massive majority of graduate level tuition waivers. Masters/MBA/ JD/MD degrees are major profit centers. These students are not getting waivers or fellowships the come with tuition assistance.
From your own link:
"Teaching and research assistantships were most common among students in doctoral degree programs, where 47.6% received assistantships. In contrast, only 8.3% of students in Master’s degree programs received assistantships"
Hence I still contend that tax assisting PhD students would constitute the bulk of the expense to universities.
Personal anecdote. I have a friend currently in a public health PHD, she has been stipend in both her masters and now her PHD program.
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I'm glad they left the LTCG and qualified div rates pretty much unchanged. That and ACA are the key to post-FIRE success. I'm presuming as well that real estate will still be allowed to deduct depreciation, property tax and interest. and
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Anyway, at least changing the step-up basis would be prudent - seems crazy not to. Unrealized capital gains (not family businesses!) account for a large share of estates that get hit with the estate tax.
If you're advocating getting rid of the step-up in basis, I think that's a bad idea from a practical perspective.
When did Grandpa buy those shares? What were the basis figures on the dates of those various purchases? How much was the result of dividend reinvestments? When were those purchases? What was the share count and cost basis of those shares?
A paperwork and logistical nightmare as compared to "what day did Grandpa die? what were the shares worth on that day? Perfect; glad to have that taken care of in 5 minutes."
Can't figure it out? Fine, your basis is $0. Problem solved.
(Incidentally, Grandpa would have run into this problem if he had sold the shares *before* he died, how would that problem be solved? There's no "step up" in basis for people who forgot when they bought shares, or misplaced the paperwork. The best you can do is eyeball when the shares were bought through the company or broker, and use historical data, or if you're lazy, just make the basis $0)
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Agreed, it seems like the biggest argument in favor of the estate tax is "they're rich, they can afford it".
I think the better argument is that the estate tax is part of mitigating structural inequality. It is wealth redistribution. Taxing the wealthy and wealth redistribution is not something everyone in this country agrees is a good thing, but many (myself included) think that a healthy society has a level of wealth redistribution and limits extreme economic inequality.
If you work your whole life and pay taxes, you don't pay taxes again when you die. You are dead, you aren't doing anything. Whoever is inheriting the money is (indirectly) paying the taxes, which seems appropriate.
Anyway, at least changing the step-up basis would be prudent - seems crazy not to. Unrealized capital gains (not family businesses!) account for a large share of estates that get hit with the estate tax.
I agree that limiting extreme wealth inequality is a fine goal for a society, but I'm not sure that an Estate tax is the best way to accomplish that. I also think that, if you DO want to accomplish it with an estate tax, EVERYone should be subject to it. As another poster said above, "they're dead, they don't need that money." Why should ANYone be allowed to pass a pile of money on to their heirs?
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The estate tax should stay. Nobody receiving over $11M is hurting.
Not only should it stay, it should be lowered! Why are we exempting $11 million from estate taxes? That's more cash than anyone needs, because it will fund more than an entire lifetime at median salaries. It's just a gift to the super-rich.
Just curious - do you think the number of beneficiaries should play into it? So, instead of the estate being taxed based on the lump sum, individuals are taxed based on what they receive. The more people to whom it is distributed, the less likelihood it has of hitting the limit.
Here's an example - right now, father in law's estate hovers near the current $6.5mm limit. He has three children who will be beneficiaries. At least half of his estate is real estate and he's directing DH and I to receive the family house, which may be valued at nearly a third (and meaning we'd receive little cash) of the value of the estate. If we had to pay a significant tax upon inheriting it, we'd have to sell or mortgage it to pay taxes.
Anyway, point is, $6.5mm split between 3 people is not the same as if all of it is given to 1 person. It seems like treating the estate tax more like the gift tax would be reasonable.
If one of the goals of an estate tax is to reduce the concentration of wealth, making it a per person tax would encourage the distribution amongst more people (though admittedly, it would probably still be the same family).
Anyway, I have agreed with your arguments about the estate tax, etc. Though selfishly, I'd like to not pay a whole bunch of taxes, I don't think it's right to have huge amounts of wealth concentrated in the hands of so few.
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Although it’s been mentioned over and over again on this thread, the obvious and simple solution to the estate tax is to eliminate the stepped-up basis for everyone. Then you can inherit unlimited wealth for no tax consequences. The tax is only collected when you actually benefit from the asset (sell it). That mythical unicorn, the family farm, could stay in the family indefinitely without tax consequences. Don’t know what the historical tax basis for the asset was? Fine, make it $0. It was free to you anyway. If the dearly departed didn’t bother to keep records on the tax basis how are you harmed by that? But sadly, eliminating the step-up in basis is a fantasy rendered impossible by our current plutocracy. Inconsolably grumpy about current tax plan, in case you can't tell.
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Although it’s been mentioned over and over again on this thread, the obvious and simple solution to the estate tax is to eliminate the stepped-up basis for everyone. Then you can inherit unlimited wealth for no tax consequences. The tax is only collected when you actually benefit from the asset (sell it).
This is reasonable. I don't think the estate tax should be repealed at all, but one can make an argument that it should in the case where the step up basis doesn't exist.
I think it is nuts that the plan is to repeal the estate tax and keep the stepped up basis. This is not something I've seen widely reported in the media. Then again, media attention is somewhat irrelevant since it doesn't really matter what the public thinks. The law will pass or not pass without any say from normal taxpayers.
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Because it's a tax loophole. Employer perks are wage income and should be taxed. If they are not taxed, they are tax loopholes (like your employer-based health insurance, which is the biggest tax loophole in America). It's no different at a university just because the perk happens to be reduced tuition.
Is the bill closing even one CORPORATE tax loophole??? Corporations keep their SALT deduction and get a 20% rate, but all of a sudden the Republicans think it makes sense to take away loopholes for individuals?? They keep the carried interest loophole benefiting hedge fund managers but make tuition waivers for grad students taxable???
I don't see why the existence of some loopholes makes other loopholes justified. I also am not really worried about corporations: the best corporate income tax rate is 0%. Corporations should only pay tax on the unimproved land value of their property and whatever surtaxes are assigned to their utilities. They shouldn't get a deduction for those taxes anymore than individuals do, because Uncle Sam should not be subsidizing local and state governments through the tax code.
I guess you could say they should pay a VAT too, if support that kind of taxation.
I don't particularly care about the carried interest taxation. I am more interested in imposing a general tax on financial transactions than changing tax codes for hedge funds. Carried interest only seems to be a really huge issue for people who care majorly about income inequality, which is not something I'm interested in.
You're dodging the point.
How so?
I don't see why the existence of some loopholes makes other loopholes justified.
If we're writing a new tax bill to close all these alleged loopholes, why are we 1) not closing ANY corporate ones, and 2) lowering the corporate rate further?
Then again, you don't care about income inequality so I suppose you might actually be looking forward to the old days when the .1% lived in castles and everybody else were peasants. Unless, of course, I've misread your post entirely.
It's not a tax bill to close all loopholes. GOP House leadership picked this particular one to make up some of the money on their bill so they can give a tax cut elsewhere. There's probably a bi-partisan tax overhaul bill that will close more loopholes, but this bill obviously isn't it, and the GOP did not even make an attempt at it.
Why would it bother me that the corporate tax rate is going down? I support that. Like I said, I think the corporate income tax rate should be zero. You're also correct that I don't particularly care about income inequality, but even if I did, I don't think the tax code is the place to reduce inequality. We should be raising tax dollars in the least distortionary matter possible. If that means Warren Bufffet is charged 0% tax, it means Warren Buffet doesn't pay tax. You should address inequality on the SPENDING side, by ensuring money goes to poor kids, poor schools, poor whatever, instead of Warren Buffet. This makes intuitive sense to me.
The specific question is why conservatives aren't up in arms about the graduate student hit, though. At least that's the way I read it. It's because it's a tax loophole. It's also not a tax loophole that will affect me much (unlike the tax loophole on medical insurance, which I would like to keep...everyone likes their own tax loopholes).
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Why would it bother me that the corporate tax rate is going down? I support that. Like I said, I think the corporate income tax rate should be zero. You're also correct that I don't particularly care about income inequality, but even if I did, I don't think the tax code is the place to reduce inequality. We should be raising tax dollars in the least distortionary matter possible. If that means Warren Bufffet is charged 0% tax, it means Warren Buffet doesn't pay tax. You should address inequality on the SPENDING side, by ensuring money goes to poor kids, poor schools, poor whatever, instead of Warren Buffet. This makes intuitive sense to me.
The problem with your thinking is that there would be nothing or precious little to spend if corporations and the Warren Buffets of the world pay zero tax. You can address income inequality with spending but the money has to come from somewhere...
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Just wow. This seems like an inconscionable case of kicking US citizens when they are down. I was not aware of this previously. One provision of the tax bill is to place a 20% excise tax on goods sent from Puerto Rico to the mainland.
http://thehill.com/policy/finance/362309-san-juan-mayor-gop-tax-bill-would-be-more-devastating-to-puerto-ricos-economy
This will destroy parts of their economy. Why? What is the possible justification for this? Why would this have even been put into the bill in the first place? The only thing I can think of is if a competitor to some industry on the island wanted more market share and lobbied a representative to slip it in.
Don't forget that PR does not get a voice in congress. Taxation without representation, anyone?
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Don't forget that PR does not get a voice in congress. Taxation without representation, anyone?
Is it taxation without representation?
I thought it was "no taxation and no representation" as PR residents are not federally taxed on PR-sourced income.
Assuming that is the case, it seems reasonable to levy a cross-border tax or some other means of putting PR-based manufacturing companies onto a similar footing as non-PR-based US-based companies.
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Don't forget that PR does not get a voice in congress. Taxation without representation, anyone?
Is it taxation without representation?
I thought it was "no taxation and no representation" as PR residents are not federally taxed on PR-sourced income.
Assuming that is the case, it seems reasonable to levy a cross-border tax or some other means of putting PR-based manufacturing companies onto a similar footing as non-PR-based US-based companies.
...except that corporations and individuals are taxed in PR.
https://tradingeconomics.com/puerto-rico/corporate-tax-rate
https://en.wikipedia.org/wiki/Implications_of_Puerto_Rico%27s_current_political_status#Taxation
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Death should not be an event that our government collects taxes on.
The amount that has been accumulated in one's lifetime is irrelevant.
The money was hard earned & taxed all along the way.
Why not tax corporations %40 each time a CEO retires?
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Death should not be an event that our government collects taxes on.
The amount that has been accumulated in one's lifetime is irrelevant.
The money was hard earned & taxed all along the way.
Why not tax corporations %40 each time a CEO retires?
Not quite. You are forgetting the step up in basis. Any capital gains would go completely untaxed.
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Don't forget that PR does not get a voice in congress. Taxation without representation, anyone?
Is it taxation without representation?
I thought it was "no taxation and no representation" as PR residents are not federally taxed on PR-sourced income.
...except that corporations and individuals are taxed in PR.
https://tradingeconomics.com/puerto-rico/corporate-tax-rate
https://en.wikipedia.org/wiki/Implications_of_Puerto_Rico%27s_current_political_status#Taxation
Your first link details the Puerto Rico taxes imposed (not the federal US government taxes) and your second link says that "Puerto Rico residents who work for the federal government pay US income taxes".
I don't think either of those refute the "no taxation [on PR-sourced income] and no representation" claim. (Yes, they pay into and take out of Social Security; I'll give you that.)
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Senate Republicans, shorter version: "Fuck the poor!" (hat tip to Mel Brooks, History of the Word Part One).
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Senate Republicans, Christmas version: "Are the no prisons? And the workhouses, are they in good working order?"
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Senate Republicans, Christmas version, now with healthcare policy: "Let them die and decrease the surplus population."
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Don't forget that PR does not get a voice in congress. Taxation without representation, anyone?
Is it taxation without representation?
I thought it was "no taxation and no representation" as PR residents are not federally taxed on PR-sourced income.
...except that corporations and individuals are taxed in PR.
https://tradingeconomics.com/puerto-rico/corporate-tax-rate
https://en.wikipedia.org/wiki/Implications_of_Puerto_Rico%27s_current_political_status#Taxation
Your first link details the Puerto Rico taxes imposed (not the federal US government taxes) and your second link says that "Puerto Rico residents who work for the federal government pay US income taxes".
I don't think either of those refute the "no taxation [on PR-sourced income] and no representation" claim. (Yes, they pay into and take out of Social Security; I'll give you that.)
The very first google hit says "Puerto Rican corporations who intend to send funds to the US...pay federal income taxes."
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Don't forget that PR does not get a voice in congress. Taxation without representation, anyone?
Is it taxation without representation?
I thought it was "no taxation and no representation" as PR residents are not federally taxed on PR-sourced income.
...except that corporations and individuals are taxed in PR.
https://tradingeconomics.com/puerto-rico/corporate-tax-rate
https://en.wikipedia.org/wiki/Implications_of_Puerto_Rico%27s_current_political_status#Taxation
Your first link details the Puerto Rico taxes imposed (not the federal US government taxes) and your second link says that "Puerto Rico residents who work for the federal government pay US income taxes".
I don't think either of those refute the "no taxation [on PR-sourced income] and no representation" claim. (Yes, they pay into and take out of Social Security; I'll give you that.)
In short, economic activity that stays within PR is not taxed by the Feds. If it extends beyond, then they pay Fed taxes just like everybody else.
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In short, economic activity that stays within PR is not taxed by the Feds. If it extends beyond, then they pay Fed taxes just like everybody else.
If my economic activity stayed fully within Massachusetts, I would still be taxed federally. The fact that PR doesn't work the same way substantially undermines the "taxation without representation" claim, IMO.
Want representation? Become fully subject to federal taxation (basically, petition to become a state, which has its own quagmire of pros and cons to different constituencies).
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Although it’s been mentioned over and over again on this thread, the obvious and simple solution to the estate tax is to eliminate the stepped-up basis for everyone. Then you can inherit unlimited wealth for no tax consequences. The tax is only collected when you actually benefit from the asset (sell it). That mythical unicorn, the family farm, could stay in the family indefinitely without tax consequences. Don’t know what the historical tax basis for the asset was? Fine, make it $0. It was free to you anyway. If the dearly departed didn’t bother to keep records on the tax basis how are you harmed by that? But sadly, eliminating the step-up in basis is a fantasy rendered impossible by our current plutocracy. Inconsolably grumpy about current tax plan, in case you can't tell.
I completely agree with this. Now that brokerages and investments are tracked via computer it would not be that difficult to calculate the original price paid and tax the gains if/when the investments were sold. It's not like people are walking around with hundreds of stock certificates today and the govt. can't find out how much was paid for them.
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Death should not be an event that our government collects taxes on.
The estate tax is not a tax on death, it is a tax on heirs who receive vast sums on unearned wealth.
An inheritance is income, just like winning the lottery is income. Why are lottery winnings taxed but inheritances are not? The person receiving the money should owe taxes on their income. The dead person owes nothing.
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Now that brokerages and investments are tracked via computer it would not be that difficult to calculate the original price paid and tax the gains if/when the investments were sold. It's not like people are walking around with hundreds of stock certificates today and the govt. can't find out how much was paid for them.
The groundwork is being laid for such a system to be workable, but the data is nowhere near covering the purchases of people who are most likely to die today.
It covers only:
- Shares of stock, including exchange-traded funds (ETFs) that are not treated as regulated investment companies (RICs) for taxation purposes, you acquired on or after January 1, 2011;
- Shares of stock in RICs and stocks acquired in connection with dividend reinvestment plans acquired on or after January 1, 2012;
- Specific debt securities (for example bonds with a fixed rate of interest and fixed maturity date), securities futures contracts, options, rights and warrants purchased or acquired on or after January 1, 2014; and
- All other debt securities (for example zero coupon bonds that convert into interest paying bonds) purchased or acquired on or after January 1, 2016 (this tax information will be reportable on 1099-B forms filed in 2017).
These regulations were passed to reduce the tax compliance slippage, but also sets us up for a reasonable way to eliminate the step-up in basis upon death in 50 years.
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Now that brokerages and investments are tracked via computer it would not be that difficult to calculate the original price paid and tax the gains if/when the investments were sold. It's not like people are walking around with hundreds of stock certificates today and the govt. can't find out how much was paid for them.
The groundwork is being laid for such a system to be workable, but the data is nowhere near covering the purchases of people who are most likely to die today.
It covers only:
- Shares of stock, including exchange-traded funds (ETFs) that are not treated as regulated investment companies (RICs) for taxation purposes, you acquired on or after January 1, 2011;
- Shares of stock in RICs and stocks acquired in connection with dividend reinvestment plans acquired on or after January 1, 2012;
- Specific debt securities (for example bonds with a fixed rate of interest and fixed maturity date), securities futures contracts, options, rights and warrants purchased or acquired on or after January 1, 2014; and
- All other debt securities (for example zero coupon bonds that convert into interest paying bonds) purchased or acquired on or after January 1, 2016 (this tax information will be reportable on 1099-B forms filed in 2017).
These regulations were passed to reduce the tax compliance slippage, but also sets us up for a reasonable way to eliminate the step-up in basis upon death in 50 years.
so given what you are saying is true (I'm not debating it at all) if I am a 75 year old with some of these investments today and I decide to sell them, how do I pay taxes on them if it isn't trackable by the govt? Do I not pay taxes on the gains?
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so given what you are saying is true (I'm not debating it at all) if I am a 75 year old with some of these investments today and I decide to sell them, how do I pay taxes on them if it isn't trackable by the govt? Do I not pay taxes on the gains?
You self-report the basis, calculate the [edit: basis gain] from that, and put it on schedule D. Absent an audit, it's on the honor system.
I used to file a 20+ page schedule D with a generated list of open and close dates (extracted from my online trading records and formatted by excel or python/lisp code). The chance the IRS ever looked at any given line item is approximately zero in my estimation, particularly since I listed some open and close transaction dates as "various", "various ST", or "various LT". I played it entirely straight, but the opportunity for abuse and fraud was rampant.
The reason for the step-up in basis being more practical at death versus before death (IMO) is that before death, you have access to the living taxpayer who might remember when or where they bought the asset, either exactly or approximately. Obviously, in an estate situation, that same inquiry is not possible.
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Now that brokerages and investments are tracked via computer it would not be that difficult to calculate the original price paid and tax the gains if/when the investments were sold. It's not like people are walking around with hundreds of stock certificates today and the govt. can't find out how much was paid for them.
The groundwork is being laid for such a system to be workable, but the data is nowhere near covering the purchases of people who are most likely to die today.
It covers only:
- Shares of stock, including exchange-traded funds (ETFs) that are not treated as regulated investment companies (RICs) for taxation purposes, you acquired on or after January 1, 2011;
- Shares of stock in RICs and stocks acquired in connection with dividend reinvestment plans acquired on or after January 1, 2012;
- Specific debt securities (for example bonds with a fixed rate of interest and fixed maturity date), securities futures contracts, options, rights and warrants purchased or acquired on or after January 1, 2014; and
- All other debt securities (for example zero coupon bonds that convert into interest paying bonds) purchased or acquired on or after January 1, 2016 (this tax information will be reportable on 1099-B forms filed in 2017).
These regulations were passed to reduce the tax compliance slippage, but also sets us up for a reasonable way to eliminate the step-up in basis upon death in 50 years.
so given what you are saying is true (I'm not debating it at all) if I am a 75 year old with some of these investments today and I decide to sell them, how do I pay taxes on them if it isn't trackable by the govt? Do I not pay taxes on the gains?
Presumably the sale would be reported to IRS by your broker with a $0 basis and it would be up to you to show your actual basis. If you can't, you pay taxes on the entire sale proceeds.
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The reason for the step-up in basis being more practical at death versus before death (IMO) is that before death, you have access to the living taxpayer who might remember when or where they bought the asset, either exactly or approximately. Obviously, in an estate situation, that same inquiry is not possible.
I hear you, but lack of paperwork and complexity is no excuse for capital gains incurred during the duration of the now-dead person's life to go untaxed, forever. Do you agree? What do you propose as a solution, if not an estate tax or simply making the basis $0 if you can't figure it out?
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I don't find a loophole that requires the death of a human being to take advantage of to be particularly objectionable or exploitable and would rather the government forgo the taxes on some income than to excessively tax the inheritance (by a zero basis determination) or to create a bunch of wasteful human activity (to guesstimate the basis and potentially audit the same) particularly for those under the stress of the death of a beloved family member.
So, I think I just don't agree with your premise, though I completely understand your position and agree that it has a different though equally logical consistency as mine does.
I think that an estate exemption in the single-digit millions per deceased person (to avoid taxing "nuisance estates") and a step-up in basis for recipients is practical and pragmatic, even if as an engineer, I can identify certain small unfairnesses about that outcome.
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Death should not be an event that our government collects taxes on.
The estate tax is not a tax on death, it is a tax on heirs who receive vast sums on unearned wealth.
Not exactly. The estate tax pays no attention to how much you inherited. It is charged on the total value of the deceased person's estate, and is the same amount whether the whole inheritance goes to one person or is split up across 100 far-flung relatives.
Some states do actually have an "inheritance tax" that is calculated based on how much a living person receives from an estate. Nothing like that currently exists at the federal level.
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Death should not be an event that our government collects taxes on.
The amount that has been accumulated in one's lifetime is irrelevant.
The money was hard earned & taxed all along the way.
We can quibble over your third point, but not your first. The government does not collect taxes on death. That's a ridiculous statement and calling it a death tax is false.
The tax is on your estate. Yes, it is taxed when you die, but it is not a tax on your death. It is a tax on your heir's inheritance.
I don't think it's unreasonable to think that someone who stands to inherit $11m when their parents die has been given a leg up on... everything... in their life. I don't feel bad for people who have to pay more taxes on inheritances over $11m.
If everyone who had an estate of more than $11m gave the excess to the charity of their choice that would be great. We probably both agree that would be better than the government taking it as a tax. But you can't legislate moral responsibility, only rights.
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Death should not be an event that our government collects taxes on.
The amount that has been accumulated in one's lifetime is irrelevant.
The money was hard earned & taxed all along the way.
We can quibble over your third point, but not your first. The government does not collect taxes on death. That's a ridiculous statement and calling it a death tax is false.
The tax is on your estate. Yes, it is taxed when you die, but it is not a tax on your death. It is a tax on your heir's inheritance.
If there's something ridiculous written above, I don't agree with you on which statements are ridiculous.
"My labor isn't taxed; it's an income tax after all."
"My purchases aren't taxed. It's a sales tax, not a purchase tax."
Those both seem equally valid as "It's not a tax on a death event; it's an estate tax."
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You've misunderstood. The estate tax is not an extra tax you pay after death, it is an exemption from the gift tax because of your death. You are allowed to make a one time tax free gift of your estate after death, without being subject to the normal gift taxes on such a transfer. You're welcome!
I would be totally in favor of "repealing" the estate tax if it meant we just went back to using normal gift tax rates. If you want to give huge sums of money to someone, that person should pay the normal taxes on it. no more special treatment just because you died first.
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I think that an estate exemption in the single-digit millions per deceased person (to avoid taxing "nuisance estates") and a step-up in basis for recipients is practical and pragmatic, even if as an engineer, I can identify certain small unfairnesses about that outcome.
I agree with that! Let's let Congress know of our plan! Ha.
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You've misunderstood. The estate tax is not an extra tax you pay after death, it is an exemption from the gift tax because of your death. You are allowed to make a one time tax free gift of your estate after death, without being subject to the normal gift taxes on such a transfer. You're welcome!
I would be totally in favor of "repealing" the estate tax if it meant we just went back to using normal gift tax rates. If you want to give huge sums of money to someone, that person should pay the normal taxes on it. no more special treatment just because you died first.
I think you might misunderstand how the gift tax works. The primary reason it even exists is to limit the opportunity for elderly folks to make an end run around the estate tax by giving away all of their wealth shortly before death. The transfer of the estate value on death is taxed essentially the same way as gifts during life would be.
You start with a large lifetime exemption (currently about $5.5 million, adjusted annually for inflation). You only have to report any gifts that exceed $14k per giver/recipient pair in a year. Any reportable gifts eat into your lifetime exemption. Only after the exemption is exhausted do you start owing any gift taxes on future gifts. Whatever amount of the exemption that remains at death then becomes exempt from estate tax. The transfer of wealth is thus taxed the same whether it happens before or after death. Death does have a nice tax benefit in that the cost basis of appreciated assets gets reset to current market values. Otherwise there's no real difference.
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Death does have a nice tax benefit.
Damn straight, if you die you don't have to worry about taxes.
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You've misunderstood. The estate tax is not an extra tax you pay after death, it is an exemption from the gift tax because of your death. You are allowed to make a one time tax free gift of your estate after death, without being subject to the normal gift taxes on such a transfer. You're welcome!
I would be totally in favor of "repealing" the estate tax if it meant we just went back to using normal gift tax rates. If you want to give huge sums of money to someone, that person should pay the normal taxes on it. no more special treatment just because you died first.
I think you might misunderstand how the gift tax works. The primary reason it even exists is to limit the opportunity for elderly folks to make an end run around the estate tax by giving away all of their wealth shortly before death. The transfer of the estate value on death is taxed essentially the same way as gifts during life would be.
You start with a large lifetime exemption (currently about $5.5 million, adjusted annually for inflation). You only have to report any gifts that exceed $14k per giver/recipient pair in a year. Any reportable gifts eat into your lifetime exemption. Only after the exemption is exhausted do you start owing any gift taxes on future gifts. Whatever amount of the exemption that remains at death then becomes exempt from estate tax. The transfer of wealth is thus taxed the same whether it happens before or after death. Death does have a nice tax benefit in that the cost basis of appreciated assets gets reset to current market values. Otherwise there's no real difference.
Or..."other than erasing capital gains entirely, there's no difference."
Small details.
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Erasing capital gains is worth a few percent of the overall value of the estate, give or take a bit depending on how much the assets have appreciated and what tax bracket the heirs are in. Compared to the strategy of giving your assets to your heirs during life, this advantage is counteracted a bit by the ability to give $14k per year completely free of any tax tracking. I still consider the two taxes to be roughly equivalent. This was the intent all along.
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Corker is holding his party's feet to the fire re: the deficit. It's amazing what not being up for reelection can do to one's spine.
It's tough to find a viable solution if your corporate masters are preventing you from getting off your knees.
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Corker is holding his party's feet to the fire re: the deficit. It's amazing what not being up for reelection can do to one's spine.
It's tough to find a viable solution if your corporate masters are preventing you from getting off your knees.
I certainly hope this dog's breakfast of a bill goes up in flames! Not that our system is good now, but neither the House bill nor the Senate one are an improvement to the system.
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The estate tax should stay. Nobody receiving over $11M is hurting.
Not only should it stay, it should be lowered! Why are we exempting $11 million from estate taxes? That's more cash than anyone needs, because it will fund more than an entire lifetime at median salaries. It's just a gift to the super-rich.
Just curious - do you think the number of beneficiaries should play into it? So, instead of the estate being taxed based on the lump sum, individuals are taxed based on what they receive. The more people to whom it is distributed, the less likelihood it has of hitting the limit.
Here's an example - right now, father in law's estate hovers near the current $6.5mm limit. He has three children who will be beneficiaries. At least half of his estate is real estate and he's directing DH and I to receive the family house, which may be valued at nearly a third (and meaning we'd receive little cash) of the value of the estate. If we had to pay a significant tax upon inheriting it, we'd have to sell or mortgage it to pay taxes.
Anyway, point is, $6.5mm split between 3 people is not the same as if all of it is given to 1 person. It seems like treating the estate tax more like the gift tax would be reasonable.
I was thinking the same thing this morning, and I think it's also a workable solution. Each inheritor pays income tax on the inheritance, and gets a certain exemption amount (like, maybe $500,000 or something similarly low). But, to my mind, the step up in basis would still have to go.
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What a difference a few hours makes. Now they say it is in trouble. The billionaire boys club must be upset.
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PhDs aren't the only kind of grad students that receive tuition waivers
Such as? And in large numbers? Genuine curiosity - can't think of a field where Masters or JD candidates are given waived tuition.
My wife got tuition as part of her TA package as a Master's student in Journalism
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Just curious - do you think the number of beneficiaries should play into it? So, instead of the estate being taxed based on the lump sum, individuals are taxed based on what they receive. The more people to whom it is distributed, the less likelihood it has of hitting the limit.
Here's an example - right now, father in law's estate hovers near the current $6.5mm limit. He has three children who will be beneficiaries. At least half of his estate is real estate and he's directing DH and I to receive the family house, which may be valued at nearly a third (and meaning we'd receive little cash) of the value of the estate. If we had to pay a significant tax upon inheriting it, we'd have to sell or mortgage it to pay taxes.
Anyway, point is, $6.5mm split between 3 people is not the same as if all of it is given to 1 person. It seems like treating the estate tax more like the gift tax would be reasonable.
If one of the goals of an estate tax is to reduce the concentration of wealth, making it a per person tax would encourage the distribution amongst more people (though admittedly, it would probably still be the same family).
Anyway, I have agreed with your arguments about the estate tax, etc. Though selfishly, I'd like to not pay a whole bunch of taxes, I don't think it's right to have huge amounts of wealth concentrated in the hands of so few.
I've never given it much thought but your idea makes a bit of sense to me. We are in a similar situation to you where my in-laws have a fair amount of real estate in a VHCOL area. DH's grandfather specified that he wanted the family property (several acres and a house) to go to my DH and my in-laws plan to follow his wishes, but there is frankly no way we could afford to keep the property paying 40% tax on it. We've always assumed we would sell the land to a developer and do our best to keep the house. But we'd be able to come closer to paying the taxes and keeping a historic family property if we were only paying taxes on the house and land rather than my in-laws entire estate.
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https://www.politico.com/story/2017/11/30/mccain-to-vote-for-gop-tax-bill-270511
The GOP doesn't even yet know what's in its tax bill...still want to vote on it today.
Idiots.
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PhDs aren't the only kind of grad students that receive tuition waivers
Such as? And in large numbers? Genuine curiosity - can't think of a field where Masters or JD candidates are given waived tuition.
My wife got tuition as part of her TA package as a Master's student in Journalism
The University I work at, immediate family members receive tuition benefits for undergraduate degrees. This is a huge benefit for many employees (administration, maintenance, food service, as well as faculty) and a reason why they choose to work at a University, where often times pay is less than working for a for profit company.
Being taxed on the tuition benefit would certainly be a hit for an employee who was counting on putting their children through college without being taxed on $30,000 or so per child of taxable income.
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Just curious - do you think the number of beneficiaries should play into it? So, instead of the estate being taxed based on the lump sum, individuals are taxed based on what they receive. The more people to whom it is distributed, the less likelihood it has of hitting the limit.
Here's an example - right now, father in law's estate hovers near the current $6.5mm limit. He has three children who will be beneficiaries. At least half of his estate is real estate and he's directing DH and I to receive the family house, which may be valued at nearly a third (and meaning we'd receive little cash) of the value of the estate. If we had to pay a significant tax upon inheriting it, we'd have to sell or mortgage it to pay taxes.
Anyway, point is, $6.5mm split between 3 people is not the same as if all of it is given to 1 person. It seems like treating the estate tax more like the gift tax would be reasonable.
If one of the goals of an estate tax is to reduce the concentration of wealth, making it a per person tax would encourage the distribution amongst more people (though admittedly, it would probably still be the same family).
Anyway, I have agreed with your arguments about the estate tax, etc. Though selfishly, I'd like to not pay a whole bunch of taxes, I don't think it's right to have huge amounts of wealth concentrated in the hands of so few.
So you're going to receive a $2 mil + house... your family should be thinking 1) move into the home (and sell yours) or 2) sell the home and keep the $$. If paying taxes on a large property is a hinderance, do you currently have the ability to pay the property taxes and upkeep on this and have it leave it empty as a "2nd home"?
It might be more reasonable for your dad to sell or gift it to you while he is still alive.
I know nothing about the process personally, but if this is true there's a lot of wiggle room in that $2 mil price tag https://legalbeagle.com/6148229-transfer-property-gift.html
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The University I work at, immediate family members receive tuition benefits for undergraduate degrees. This is a huge benefit for many employees (administration, maintenance, food service, as well as faculty) and a reason why they choose to work at a University, where often times pay is less than working for a for profit company.
Being taxed on the tuition benefit would certainly be a hit for an employee who was counting on putting their children through college without being taxed on $30,000 or so per child of taxable income.
It depends on how they structure it too. My understanding is that scholarships (whether need- or merit-based) would remain non-taxable. I think there's some wiggle room with regard to money classification for some of the people who would be affected by the new rules (set up a new "University Family Scholarship").
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The University I work at, immediate family members receive tuition benefits for undergraduate degrees. This is a huge benefit for many employees (administration, maintenance, food service, as well as faculty) and a reason why they choose to work at a University, where often times pay is less than working for a for profit company.
Being taxed on the tuition benefit would certainly be a hit for an employee who was counting on putting their children through college without being taxed on $30,000 or so per child of taxable income.
It depends on how they structure it too. My understanding is that scholarships (whether need- or merit-based) would remain non-taxable. I think there's some wiggle room with regard to money classification for some of the people who would be affected by the new rules (set up a new "University Family Scholarship").
That isn't just restructure. A scholarship has to be funded: there has to be an established pot to move the money around. A tuition waiver does not (usually) require this extra pot.
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The University I work at, immediate family members receive tuition benefits for undergraduate degrees. This is a huge benefit for many employees (administration, maintenance, food service, as well as faculty) and a reason why they choose to work at a University, where often times pay is less than working for a for profit company.
Being taxed on the tuition benefit would certainly be a hit for an employee who was counting on putting their children through college without being taxed on $30,000 or so per child of taxable income.
It depends on how they structure it too. My understanding is that scholarships (whether need- or merit-based) would remain non-taxable. I think there's some wiggle room with regard to money classification for some of the people who would be affected by the new rules (set up a new "University Family Scholarship").
That isn't just restructure. A scholarship has to be funded: there has to be an established pot to move the money around. A tuition waiver does not (usually) require this extra pot.
Yeah, but it's kind of all funny money anyway. I work at a hospital, and we basically self-insure through a third-party administrator. It amounts to sending ourselves a bill and then pretending we paid it.
I'm sure there's a creative solution here that fits within the new box. It's when the employee and the student are the same person that you get less wiggle room.
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https://www.cnbc.com/2017/11/29/it-started-as-a-tax-cut-now-it-could-change-american-life.html
Economists and tax experts are overwhelmingly skeptical that the bills in the House and Senate can generate meaningful job growth and economic expansion. Many view the legislation not as a product of genuine deliberation, but as a transfer of wealth to corporations and affluent individuals — both generous purveyors of campaign contributions. By 2027, people making $40,000 to $50,000 would pay a combined $5.3 billion more in taxes, while the group earning $1 million or more would get a $5.8 billion cut, according to the Joint Committee and the Congressional Budget Office.
https://www.americanprogress.org/issues/economy/news/2017/11/27/443316/millions-working-middle-class-americans-see-tax-increase-senate-gop-tax-plan/
According to the Tax Policy Center, even when benefits to individuals from the bill’s corporate tax cuts are included, 87 million families making less than $200,000 nationally would experience a tax increase under the Senate tax plan by 2027.
Again, this "tax bill" is a steaming pile of shit for nearly all Americans. If you're lucky enough to be making more than $200,000 annually, you win out in 2027. If not...tough luck I guess.
This is no longer a "tax reform" bill or a "tax cut." It's a bunch of bull shit designed by the GOP to benefit their donors. That's it. It's a massive transfer of wealth to the billionaires who fund their campaigns. And they're paying for it by adding $1.5 trillion to the national debt (party of fiscal responsibility, my ass) and kicking the can down the road for the NEXT (next, next, next) generation to pay for it. It's that simple.
The economic environment is not screaming for tax cuts in any way. Record stock numbers, record low unemployment, corporations recording record profit, sitting on record piles of cash. Does anything about the current economic picture scream "TAX CUTS?" Hell no.
This is just another bullshit GOP gimmick like the Bush tax cuts. We had, hard to believe, a budget SURPLUS when W took over and he immediately added hundreds of billions of dollars to the deficit with his tax cuts. Did we see record job growth? Did we see huge economic expansion? No. It's a bunch of bullshit. We got stagnant growth while adding a record number to the deficit. Thanks, W.
Trickle down is a bullshit lie used a talking point by the GOP to make it sound like they care about the "working class people" as a cover to pay off their billionaire donors. That's all this is.
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The University I work at, immediate family members receive tuition benefits for undergraduate degrees. This is a huge benefit for many employees (administration, maintenance, food service, as well as faculty) and a reason why they choose to work at a University, where often times pay is less than working for a for profit company.
Being taxed on the tuition benefit would certainly be a hit for an employee who was counting on putting their children through college without being taxed on $30,000 or so per child of taxable income.
I moved across the country to take a job with a university simply for this benefit for my 3 kids. Now in reality, even if I have to pay taxes on the benefit its still going to be at my marginal rate (what, 12% ?) which is better than paying the 100% of the cost I would have otherwise had to pay. Does it piss me off YES, but its not completely gone I suppose.
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https://www.cnbc.com/2017/11/29/it-started-as-a-tax-cut-now-it-could-change-american-life.html
Economists and tax experts are overwhelmingly skeptical that the bills in the House and Senate can generate meaningful job growth and economic expansion. Many view the legislation not as a product of genuine deliberation, but as a transfer of wealth to corporations and affluent individuals — both generous purveyors of campaign contributions. By 2027, people making $40,000 to $50,000 would pay a combined $5.3 billion more in taxes, while the group earning $1 million or more would get a $5.8 billion cut, according to the Joint Committee and the Congressional Budget Office.
https://www.americanprogress.org/issues/economy/news/2017/11/27/443316/millions-working-middle-class-americans-see-tax-increase-senate-gop-tax-plan/
According to the Tax Policy Center, even when benefits to individuals from the bill’s corporate tax cuts are included, 87 million families making less than $200,000 nationally would experience a tax increase under the Senate tax plan by 2027.
We are in that over 200k group, and it looks like this bill is a wash or involves a 1-3k tax increase for us until 2027, depending on our level of itemization. After that point, the doubled standard deduction goes away AND we still lose SALT. So it seems slightly worse after 2027. I still don't know if personal exemptions are going away after 2027, but we are in an income group for which they are phased out anyway.
This isn't a panic situation for us, more like "well, I hope it doesn't blow up the economy." But, my shrug about the tax changes of +/- a few thousand tells me that the people above us on the income scale are also not scraping by wondering how they will buy crutches for little Timmy if this tax bill doesn't pass. I don't need a tax cut, and I'm guessing Larry Page doesn't either. And, before some edgelord comes in to tell me that I'm free to send my tax cut to the treasury or to them if I don't need it, I'd like to add that I'm OK paying my current taxation level so long as it results in services that we need to help our country function, which doesn't happen if people just turn in tax money when they feel like it. If my cohort's share of the tax bill results in keeping our national parks open, funding CHIP and cancer research, etc., let's make it happen. And if there are spending cuts that are needed, I'd start with the military-so just about the opposite of our current national priorities for taxation and spending.
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The University I work at, immediate family members receive tuition benefits for undergraduate degrees. This is a huge benefit for many employees (administration, maintenance, food service, as well as faculty) and a reason why they choose to work at a University, where often times pay is less than working for a for profit company.
Being taxed on the tuition benefit would certainly be a hit for an employee who was counting on putting their children through college without being taxed on $30,000 or so per child of taxable income.
I moved across the country to take a job with a university simply for this benefit for my 3 kids. Now in reality, even if I have to pay taxes on the benefit its still going to be at my marginal rate (what, 12% ?) which is better than paying the 100% of the cost I would have otherwise had to pay. Does it piss me off YES, but its not completely gone I suppose.
Yes that's true, you still make out way ahead compared to paying full tuition but it just goes along with what most have been saying on this thread. This is just one more example of this tax bill being a tax cut for corporations and the wealthy at the expense of the middle class. In this case higher ed too. This is not what this country needs right now!
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The University I work at, immediate family members receive tuition benefits for undergraduate degrees. This is a huge benefit for many employees (administration, maintenance, food service, as well as faculty) and a reason why they choose to work at a University, where often times pay is less than working for a for profit company.
Being taxed on the tuition benefit would certainly be a hit for an employee who was counting on putting their children through college without being taxed on $30,000 or so per child of taxable income.
I moved across the country to take a job with a university simply for this benefit for my 3 kids. Now in reality, even if I have to pay taxes on the benefit its still going to be at my marginal rate (what, 12% ?) which is better than paying the 100% of the cost I would have otherwise had to pay. Does it piss me off YES, but its not completely gone I suppose.
Yes that's true, you still make out way ahead compared to paying full tuition but it just goes along with what most have been saying on this thread. This is just one more example of this tax bill being a tax cut for corporations and the wealthy at the expense of the middle class. In this case higher ed too. This is not what this country needs right now!
something something ELITISTS something LIBRUL COLLEGE PROFESSORS something IVORY TOWERS something something
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This is no longer a "tax reform" bill or a "tax cut." It's a bunch of bull shit designed by the GOP to benefit their donors. That's it. It's a massive transfer of wealth to the billionaires who fund their campaigns. And they're paying for it by adding $1.5 trillion to the national debt (party of fiscal responsibility, my ass)
That's what we've been saying all along. The GOP tax plan basically only does one thing: it permanently cuts the corporate tax rate by increasing the deficit. Everything else is a sideshow. The individual rate adjustments, the ACA mandate repeal, the tuition wavers, all of that is temporary small potatoes compared to the juicy steak of trillions of new debt to increase the profit margins of companies that currently have record profit margins.
The economy is surging, some say dangerously so, so now is the time to increase corporate tax rates to pay down the national debt, when we have so much surplus cash laying around. You cut taxes to spur growth during a recession, as a way to juice corporate profits, not during a boom. They're doing it exactly backwards, which means we'll have bigger booms and bigger busts instead of government stabilizing the business cycle like it's supposed to.
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According to the Tax Policy Center, even when benefits to individuals from the bill’s corporate tax cuts are included, 87 million families making less than $200,000 nationally would experience a tax increase under the Senate tax plan by 2027.
Again, this "tax bill" is a steaming pile of shit for nearly all Americans. If you're lucky enough to be making more than $200,000 annually, you win out in 2027. If not...tough luck I guess.
We're well over $200K AGI/MAGI and we will see a 5-figure tax increase in all years based on my calculations and projections. The loss of SALT deductions (we pay high 5-figures there, low 6-figures very occasionally) more than offsets the slim marginal rate reduction.
Just because someone says that X million families making less than $200K will see tax increases doesn't imply (and in our case doesn't mean) that those making over that threshold will win.
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We're well over $200K AGI/MAGI and we will see a 5-figure tax increase in all years based on my calculations and projections.
I'm facing that same mystery. This bill is only supposed to increase taxes on middle class people, and be good for the rich, but I'm rich and I don't see the promised benefits yet.
How are my taxes supposed to go down under this bill? Despite a combined income that should put us in the "saves money" category, every scenario I've run results in higher taxes. I think that in practice, this bill is going to raise taxes on a lot more people than expected, like anyone under a half million per year in income.
I guess I'm just not quite rich enough to get the promised tax breaks for the rich?
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I guess I'm just not quite rich enough to get the promised tax breaks for the rich?
This.
You're also not a corporation, strike two.
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According to the Tax Policy Center, even when benefits to individuals from the bill’s corporate tax cuts are included, 87 million families making less than $200,000 nationally would experience a tax increase under the Senate tax plan by 2027.
Again, this "tax bill" is a steaming pile of shit for nearly all Americans. If you're lucky enough to be making more than $200,000 annually, you win out in 2027. If not...tough luck I guess.
We're well over $200K AGI/MAGI and we will see a 5-figure tax increase in all years based on my calculations and projections. The loss of SALT deductions (we pay high 5-figures there, low 6-figures very occasionally) more than offsets the slim marginal rate reduction.
Just because someone says that X million families making less than $200K will see tax increases doesn't imply (and in our case doesn't mean) that those making over that threshold will win.
That is true. On the CBO and JCT scores and reports, they can't possibly detail every possible scenario. 100% making less than $200K will pay more in 2027, above $200K it's more of a gray area, especially if you're losing a big SALT deduction.
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I have a couple of questions.
I see for a married couple the first $24k is at 0% and the 12% upto $90k.
So is that $90k - $24k = $66k x 12% = $7,920 or 12% x $90k = $10,800?
https://www.washingtonpost.com/graphics/2017/business/tax-bill-q-and-a/?utm_term=.a3f9eea9ddb3
Also,
"Tax Preparation
Taxpayers who itemize their returns would no longer be able to deduct the amount that their tax preparation specialist billed them or any similar expenses. Since the tax bill aims to reduce the number of taxpayers who itemize, in theory fewer people should require professional tax help (with the exception of wealthier people, who can afford to lose this break*)."
* Seems like the New York Times is judging!
I have a sole proprietor business, do I lose this deduction?
I hate paying my tax preparer, but an hour in his office and it's done, plus I have someone to fall back on.
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Looks like it's going to pass. Flake folded on his concerns about ballooning the deficit. That means Collins and Corker can vote against it, but Pence will pass it as Senate tiebreaker.
Nevermind that 60% of Americans oppose this plan, a gerrymandered minority is going to ram it through anyway, in a complete betrayal of their own party ideology. It will raise taxes on the middle class and spike the deficit. If I was a Republican, I'd be furious.
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I have a couple of questions.
I see for a married couple the first $24k is at 0% and the 12% upto $90k.
So is that $90k - $24k = $66k x 12% = $7,920 or 12% x $90k = $10,800?
Marginal rate brackets work like the former.
0% on the first $24K, then 12% on the amount 24000.01 through $90K, etc.
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Looks like it's going to pass. Flake folded on his concerns about ballooning the deficit. That means Collins and Corker can vote against it, but Pence will pass it as Senate tiebreaker.
Nevermind that 60% of Americans oppose this plan, a gerrymandered minority is going to ram it through anyway, in a complete betrayal of their own party ideology. It will raise taxes on the middle class and spike the deficit. If I was a Republican, I'd be furious.
Still has to go to Committee to reconcile with the House.
But yes, congrats to them for passing a pile of shit and quite possibly the least popular legislation of all-time.
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I hope that I'm worrying unnecessarily, but I worry this bill is a step towards a financial meltdown.
https://www.washingtonpost.com/news/posteverything/wp/2017/11/30/im-a-depression-historian-the-gop-tax-bill-is-straight-out-of-1929/?utm_term=.76116a90ea0a
Anyway, (slightly premature?) congrats to the GOP, I'm interested to see what the final bill is. I assume it will be closer to the senate version than the house.
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I am in the minority but I am glad this bill will pass. It's not that bad. Corporate tax cuts will lead to increased hiring, increase wages and yes increase dividends for shareholders. This bill will help much more than hurt.
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I am in the minority but I am glad this bill will pass. It's not that bad. Corporate tax cuts will lead to increased hiring, increase wages and yes increase dividends for shareholders. This bill will help much more than hurt.
LMAO you drinking that trickle-down kool aid? Good lord.
MOD EDIT: Read forum rule #1.
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I am in the minority but I am glad this bill will pass. It's not that bad. Corporate tax cuts will lead to increased hiring, increase wages and yes increase dividends for shareholders. This bill will help much more than hurt.
You don't increase the deficit when the economy is up. It gives you nowhere to go when the next recession happens.
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Looks like it's going to pass. Flake folded on his concerns about ballooning the deficit. That means Collins and Corker can vote against it, but Pence will pass it as Senate tiebreaker.
Nevermind that 60% of Americans oppose this plan, a gerrymandered minority is going to ram it through anyway, in a complete betrayal of their own party ideology. It will raise taxes on the middle class and spike the deficit. If I was a Republican, I'd be furious.
Still has to go to Committee to reconcile with the House.
But yes, congrats to them for passing a pile of shit and quite possibly the least popular legislation of all-time.
Not if the House just passes the Senate version. Which IMO is much more likely than reconciliation + problem solving + both houses passing an improved version.
The Republicans just want to "get something done". That's it. It doesn't have to be a good something. They're not trying to please anyone except their ultra-rich donors.
If you're not constrained by ensuring the legislation you pass is "good" or "beneficial", then what is to be gained by going through the reconciliation process? Just have the House pass it, send it to Trump to sign, and pat yourselves on the back for your "win".
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I am in the minority but I am glad this bill will pass. It's not that bad. Corporate tax cuts will lead to increased hiring, increase wages and yes increase dividends for shareholders. This bill will help much more than hurt.
US unemployment is currently tracking at 4.1%. Or will they be hiring more CEOs and upper management?
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I am in the minority but I am glad this bill will pass. It's not that bad. Corporate tax cuts will lead to increased hiring, increase wages and yes increase dividends for shareholders. This bill will help much more than hurt.
You are aware that those corporations are already holding onto more cash than usual?
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Death should not be an event that our government collects taxes on.
The amount that has been accumulated in one's lifetime is irrelevant.
The money was hard earned & taxed all along the way.
We can quibble over your third point, but not your first. The government does not collect taxes on death. That's a ridiculous statement and calling it a death tax is false.
The tax is on your estate. Yes, it is taxed when you die, but it is not a tax on your death. It is a tax on your heir's inheritance.
If there's something ridiculous written above, I don't agree with you on which statements are ridiculous.
"My labor isn't taxed; it's an income tax after all."
"My purchases aren't taxed. It's a sales tax, not a purchase tax."
Those both seem equally valid as "It's not a tax on a death event; it's an estate tax."
Well... everyone who makes an income gets taxed. Some people get reductions/exemptions from the tax based on certain variables, including the amount of income they make, but all labor/income is taxed (unless you are getting paid 'under the counter').
Everyone pays sales/purchase tax. Sure, some items are exempt... but everyone pays tax on taxable items regardless of the cost (unless you make the sale 'under the counter').
No one gets taxed because they die. Some people - those who stand to inherit estates worth more than $11m from a couple - get an extra tax on that inheritance.
I see a big difference, but I guess we will agree to disagree.
Shifting gears...
On NPR last night I heard a Republican senator from Iowa defending the removal of the estate tax by saying we should reward people who are savers. Huh? Wasn't removing the 401K deduction on the table in an early incarnation of this bill? I don't understand how some of these people sleep at night.
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Just have the House pass it, send it to Trump to sign, and pat yourselves on the back for your "win".
In this case, the superficial win will also do real harm to real Americans. You thought your health insurance was expensive now? Just wait until you see next year's premiums after they repeal the individual mandate.
Can you say death spiral?
I love that republicans are doing all of the very things they campaigned so hard against. Their big beautiful tax cut turns out to be tax increase on individuals. Their quest to make healthcare more affordable is making it more expensive. Economically disadvantaged rural voters who were promised a handout are instead having their benefits and deductions crushed. Jared Kushner used a private email server for official business. The people who promised to drain the swamp and lock her up already have four indictments in less than a year. It's delicious irony on every front, and I think the next election will be a bloodbath.
This is what you get when you put amateurs in charge. Don't pretend to be surprised when they fuck everything up. This is exactly what you asked for, America.
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I am in the minority but I am glad this bill will pass. It's not that bad. Corporate tax cuts will lead to increased hiring, increase wages and yes increase dividends for shareholders. This bill will help much more than hurt.
US unemployment is currently tracking at 4.1%. Or will they be hiring more CEOs and upper management?
U3 is there. U6 is about double that, so there's still room for further employment gains. (I don't think either of these bills will substantially change the macro employment picture, but there is more than 4% room for improvement.)
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This is what you get when you put amateurs in charge. Don't pretend to be surprised when they fuck everything up. This is exactly what you asked for, America.
54% of the country did not for Dotard.
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54% of the country did not for Dotard.
While that is true, he still legitimately won the election with a minority of voter support, by the rules those voters agreed to abide by. It doesn't matter if voters were deceived by Russian propaganda on Facebook and Twitter. It doesn't matter that more people voted for Hillary anyway. It doesn't matter if Trump broke the law. America made this happen, ugliness and all, and it deserves what it gets.
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This is what you get when you put amateurs in charge.
It's not having had professional politicians in charge has resulted in an Atlantisian fantasy world of prosperity and good fortune, either.
Don't pretend to be surprised when [the amateurs] fuck everything up. This is exactly what you asked for, America.
54% of the country did not [vote] for Dotard.
~42% of eligible voters didn't even vote, so about 73% of eligible voters didn't vote for the current President.
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This is what you get when you put amateurs in charge.
It's not having had professional politicians in charge has resulted in an Atlantisian fantasy world of prosperity and good fortune, either.
Don't pretend to be surprised when [the amateurs] fuck everything up. This is exactly what you asked for, America.
54% of the country did not [vote] for Dotard.
~42% of eligible voters didn't even vote, so about 73% of eligible voters didn't vote for the current President.
Yes, voter turnout is always pathetic.
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I've seen it several times on this thread, and I just want to point out that anyone discussing the so-called "national debt" needs to realize that it is a Republican/conservative talking point, and there is no need to buy in to it or concede it. Even those who point to federal debt versus GDP are still losing an important dimension.
I wouldn't present a case study here without details of my assets, my liabilities, my income, and my expenses. Also, federal debt doesn't account for other forms of debt, exceed the federal debt, and definitely doesn't take into account the Federal assets or national assets.
As of 2017 Q2 and as reported in the September 2017 Federal Reserve Z.1,
Household/nonprofit assets total $111,415 billion, and liabilities total $15,219 billion, for a net value of $96,195 billion.
Corporate nonfinancial business assets $42,447 billion, liabilities of $19,153, net value of $23,293 billion.
Noncorporate nonfinancial business assets $19,226 billion, liabilities of $7,373, net value of $11,853 billion
Financial busines assets $95,485 billion, liabilities $87,150 billion, net value $8,335 billion
Federal government assets $5,481 billion, liabilities $18,650 billion, net value $(13,169) billion
State and Local governments assets $13,658 billion, liabilities $5,768 billion, net value $7,890 billion
Rest of the world assets $24,222 billion, liabilities $17.941 billion, net value $6,281 billion
Total assets = $311,934 billion
Total liabilities = $171,254 billion
Net worth = $140,680 billion
GDP $18.624 billion (2016)
You're going to have to show me that these number are out of line in some objective way before I'm going to care about one small aspect of them enough to wreak the havoc that Republicans and frankly some Democrats want to cause by slashing Social Security, Medicare, Medicaid, ACA, welfare, research grants, etc.
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Why would household or corporate net worth offset the federal national debt in some way?
When I'm considering my parents' or my neighbor's solvency and net worth, they don't get to add *my* wealth into their calculation.
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I've seen it several times on this thread, and I just want to point out that anyone discussing the so-called "national debt" needs to realize that it is a Republican/conservative talking point, and there is no need to buy in to it or concede it. Even those who point to federal debt versus GDP are still losing an important dimension.
You must be the reason why every republican in the country suddenly wants to increase the deficit by trillions, after so many decades of excoriating democrats for their supposed "out of control spending" (facts to the contrary notwithstanding).
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I've seen it several times on this thread, and I just want to point out that anyone discussing the so-called "national debt" needs to realize that it is a Republican/conservative talking point, and there is no need to buy in to it or concede it. Even those who point to federal debt versus GDP are still losing an important dimension.
You must be the reason why every republican in the country suddenly wants to increase the deficit by trillions, after so many decades of excoriating democrats for their supposed "out of control spending" (facts to the contrary notwithstanding).
The new strategy is drive the debt up and use that as an excuse to cut the government. Sorta like break it and yell "look it doesn't work!" (ACA, Medicare, SS).
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This thread has really devolved but in an effort to counter balance the gibberish I thought some hard data might help. Here is a CBO distributional analysis showing the effects of the bill for different income levels, scroll to page 10. Make of it what you will.
https://www.cbo.gov/system/files/115th-congress-2017-2018/costestimate/reconciliationrecommendationssfc.pdf
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This thread has really devolved but in an effort to counter balance the gibberish I thought some hard data might help. Here is a CBO distributional analysis showing the effects of the bill for different income levels, scroll to page 10. Make of it what you will.
https://www.cbo.gov/system/files/115th-congress-2017-2018/costestimate/reconciliationrecommendationssfc.pdf
+1 Devolved into political mud sliding mostly from one side.
And it all because of some economists guess work of the distant future (10 yr horizon). Economist cannot predic next quarter GDP with accuracy, let alone what will happen in 10 year. 3Q GDP revised several times...but we are putting full faith in estimates that are 10 yrs away. Full faith!
Apt comic:
http://dilbert.com/strip/2017-12-01
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Still has to go to Committee to reconcile with the House.
Kinda, maybe...... With a very close Senate vote, there is always the option that the house will simply take up and pass the Senate bill as written. Since they're adding back in the $10K property tax exemption, and the pass through has become much closer to the house version (23% vs 25%), there may not be any real sticking points. The house reduction to three brackets was more marketing than any true simplification, and the ultimate elimination of the estate tax was mostly vapor-legislation as there would be something like seven years for the Dems to put it back in.
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Economist cannot predic next quarter GDP with accuracy, let alone what will happen in 10 year.
I don't think you have to be an economist to recognizing that just reducing government revenues will increase the deficit.
Republicans have always argued that defecits are bad, and need to be improved by cutting spending. So they do implicitly accept that the budget controls the deficit, and yet somehow today are arguing that cutting revenues does not. It's very confusing, if you're a person who expects logical consistency from your elected leadership.
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I've seen it several times on this thread, and I just want to point out that anyone discussing the so-called "national debt" needs to realize that it is a Republican/conservative talking point, and there is no need to buy in to it or concede it. Even those who point to federal debt versus GDP are still losing an important dimension.
So we can agree that the claim that the "fiscal hawk" Tea Party was totally against budget deficits and definitely not a racist reaction to the first black President was a lie? Cool.
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Why would household or corporate net worth offset the federal national debt in some way?
When I'm considering my parents' or my neighbor's solvency and net worth, they don't get to add *my* wealth into their calculation.
Who said it does? What it does actually represent are net financial assets without a corresponding private liability. No one ever in the history of time* has ever argued that it's impossible to have too much of this, but it would be very ahistorical of anyone to say that these assets and the private sector spending they correspond to don't help the economy in many ways, with the largest two off the top of my head including smoothing out recessions and excessive growth, and investing in priorities that hold value to us but can not or will not be provided by the private sector alone.
*I may be engaging in some hyperbole here
You must be the reason why every republican in the country suddenly wants to increase the deficit by trillions, after so many decades of excoriating democrats for their supposed "out of control spending" (facts to the contrary notwithstanding).
I'm usually attuned to snark/sarcasm, and I'm still a little baffled by this statement and maybe I'm misreading, but I am _not_ the reason why, I think those reason have been well documented here and elsewhere. Republicans want to take from the large majority and give to the tiny wealthy minority, and they also have ideological and moral disagreements with political and social equality. My point is that deficits and the national debt are not bogeymen, they are legitimate and helpful economic tools, their use over the past 80+ years is directly correlated with our financial and economic success as a country (as so to many others around the world), and it's bad rhetoric to seize upon. And I would like to point out that Democrats often bend over backwards to appease the debt naysayers almost as much as Republicans, hence no public option on the ACA, dismantling welfare, etc.
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Devolved into political mud sliding mostly from one side.
And it all because of some economists guess work of the distant future (10 yr horizon). Economist cannot predic next quarter GDP with accuracy, let alone what will happen in 10 year. 3Q GDP revised several times...but we are putting full faith in estimates that are 10 yrs away. Full faith!
Apt comic:
http://dilbert.com/strip/2017-12-01
I enjoy Dilbert as much as the next man, but you should know that Scott Adams trolled hard for Trump this election season (mostly in his blog, a bit in the comic). It was huge bundle of specious reasoning, propaganda, and slightly-wattered-down conspiracy theories. He's also a global warming denier from the same anti-intellectual reasoning ("forecasters can't even get the weather right a week from now, you're telling me they know with confidence that the Earth is long-term warming?!").
Sometimes, like in markets and climate and other chaotic systems, it's much easier to measure and predict long-term general trends then it is short-term ones.
Or do you not believe that repealing the Estate tax is a huge give-away to the ultra-wealthy? Is intentionally running up the deficit during a reasonably prosperous time not just going to result in harder pushes to slash Medicaid / Medicare / Social Security in the next economic downturn?
So you know, enjoy the comic. But consider the source. Maybe he's not a good counter to "one-sided mud slinging". And maybe take Mr. "Well I'm not convinced about Global Warming and therefore the evidence for Global Warming is unconvincing and therefore it's reasonable to believe whatever I want" with a grain of salt.
Edit: Speaking of which, if you think it's at all a coincidence that he published that comic today then you're crazy. He has turned himself into a hardcore Republican propagandist, where reasoning, expertise, and evidence all don't matter as long as you can mock your opponents and be more "persuasive".
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Why would household or corporate net worth offset the federal national debt in some way?
Who said it does?
Um, you did when you added those figures together and compared them.
Perhaps I misunderstand what you were trying to say in your post, but if you add your and my and other Americans' private assets and liabilities to the government's assets and liabilities and declare that we have positive net worth overall, I think you're saying that that is a sensible and valid way to look at the situation.
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And it all because of some economists guess work of the distant future (10 yr horizon). Economist cannot predic next quarter GDP with accuracy, let alone what will happen in 10 year. 3Q GDP revised several times...but we are putting full faith in estimates that are 10 yrs away. Full faith!
This is why nobody on this forum is willing to wager their future on something like the 4% SWR. That would be crazy to trust that kind of long term forecasting! /s
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Why would household or corporate net worth offset the federal national debt in some way?
Who said it does?
Um, you did when you added those figures together and compared them.
Perhaps I misunderstand what you were trying to say in your post, but if you add your and my and other Americans' private assets and liabilities to the government's assets and liabilities and declare that we have positive net worth overall, I think you're saying that that is a sensible and valid way to look at the situation.
That's how I read it. Watch out...the government is going to seize all of our assets and liabilities to pay down the debt. Is that the strategy?
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For those who like to follow along (even though it is totally unnecessary and won't know what the final bill looks like until it is all over) but don't have time/desire to lives stream debates, Market Watch is providing occasional updates as things progress: http://blogs.marketwatch.com/capitolreport/2017/12/01/republican-tax-bill-heads-for-senate-vote-live-updates/
It includes a rumor that the AMT might be coming back - that would be quite surprising. Disclaimer - none of this is final!
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For those who like to follow along (even though it is totally unnecessary and won't know what the final bill looks like until it is all over) but don't have time/desire to lives stream debates, Market Watch is providing occasional updates as things progress: http://blogs.marketwatch.com/capitolreport/2017/12/01/republican-tax-bill-heads-for-senate-vote-live-updates/
It includes a rumor that the AMT might be coming back - that would be quite surprising. Disclaimer - none of this is final!
I'm really perplexed by that. At the same level? Meaning that if you were an AMT payer before (with disregarded mainstream deductions for SALT, which will not be denied everyone), you're not allowed to benefit from the tax bracket changes? Seems like that would have some meaningful effect on the percentage of taxpayers who realize a "cut" here.
Either way, seems hard to reconcile with the drive to simplify the tax system.
I just used Market Watch's tax calculator to compare the two proposals (I have know idea if they're keeping it current), and I seem to be looking at very different outcomes under the two alternative proposals (a 0.6% increase under the House bill and a 7.0% cut under whatever Market Watch thinks the Senate proposal is). I was surprised by that degree of difference.
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I found several reports suggesting that it would be a "modified" AMT with higher thresholds and larger exemptions. It would almost have to be if they don't want to immediately cancel the tax reductions for a large number of upper middle class workers.
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Chuck the Schmuck is still desperately trying to plead his case but it's all but already law, other than going to conference committee. I hope you all don't shed too many tears when you pay fewer taxes next year.
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One report I read of last minute amendments said that there is an exemption from the endowment tax that is specific to one (well connected) college in Michigan.
And cruise ports in Alaska.
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Chuck the Schmuck is still desperately trying to plead his case but it's all but already law, other than going to conference committee. I hope you all don't shed too many tears when you pay fewer taxes next year.
Incredibly unlikely for me. I assumed that the R's tax bill would pass. Knowing that the increase in the standard deduction would smack the living heck out of the below-the-line charitable giving deduction (and therefore charitable giving itself since they're highly correlated), I took Taxes' advice and opened a DAF and gave a bunch to charity. My taxes are going to be incredibly low this year. I hope you enjoy the tears of those around you when the Republican's "starve the beast" strategy comes home to roost and the most vulnerable people in society are suffering for it.
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It's coming:
https://www.c-span.org/video/?438001-101/us-senate-headed-final-vote-gop-tax-reform&live
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Updated bill is ready. It is on the Senate finance committee site, but the news orgs have searchable PDFs instead of images.
https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rXqXuQfYbRas/v0
The removal of my pet loophole seems to have been dropped (combining the 457b limit) if I'm reading it correctly. Not that it changes my position...
I can't tell what they did with the grad student taxable tuition thing.
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Updated bill is ready. It is on the Senate finance committee site, but the news orgs have searchable PDFs instead of images.
https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rXqXuQfYbRas/v0
The removal of my pet loophole seems to have been dropped (combining the 457b limit) if I'm reading it correctly. Not that it changes my position...
I can't tell what they did with the grad student taxable tuition thing.
No one can tell anything. They distributed all 500 pages four hours ago, and have already marked up that version with hand-written changes. No one knows what's actually in this bill. No one has actually read it. Republicans just shut down a Democratic motion to postone the vote until Monday to give people a chance to actually read it. Looks like they'e trying to pass it tonight, consequences be damned.
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The amendments discussed so far are kinda cute. Rubio and Cruz wanted larger child tax credits and expanded 529s, respectively.
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The amendments discussed so far are kinda cute. Rubio and Cruz wanted larger child tax credits and expanded 529s, respectively.
Cruz's amendment isn't for "expanded" 529s, it's to allow Christian home-schoolers to tax shelter any income they spend on homeschooling, including the fraction of their home allocated to homeschooling and all of the food supplied during the "school day". It's an ugly farce.
Just another federal giveaway to the religious right. Move along, there's nothing new to see here.
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Updated bill is ready. It is on the Senate finance committee site, but the news orgs have searchable PDFs instead of images.
https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rXqXuQfYbRas/v0
The removal of my pet loophole seems to have been dropped (combining the 457b limit) if I'm reading it correctly. Not that it changes my position...
I can't tell what they did with the grad student taxable tuition thing.
No one can tell anything. They distributed all 500 pages four hours ago, and have already marked up that version with hand-written changes. No one knows what's actually in this bill. No one has actually read it. Republicans just shut down a Democratic motion to postone the vote until Monday to give people a chance to actually read it. Looks like they'e trying to pass it tonight, consequences be damned.
"A great national debate now begins. It should not be a partisan debate, for the authors of tax reform come from all parties, and all of us want greater fairness, incentives, and simplicity in taxation." - Ronald Reagan
Oh how low and how despicably the Republicans have fallen.
"Oh but Obamacare - that was debated for well over a year and had many open hearings and expert testimony and industry representatives all having plenty of time to weigh in - was also passed in a rushed final vote, so really both parties are the same so you might as well vote Republican." -Republicans
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Updated bill is ready. It is on the Senate finance committee site, but the news orgs have searchable PDFs instead of images.
https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rXqXuQfYbRas/v0
The removal of my pet loophole seems to have been dropped (combining the 457b limit) if I'm reading it correctly. Not that it changes my position...
I can't tell what they did with the grad student taxable tuition thing.
Which particular loophole are you speaking of? And how did they propose to eliminate it? (I haven't kept up with all the iterations of it - waiting until it's closer to final, as I assume it'll keep changing right up until near the end.)
You have the right approach by not keeping up! There was a proposal to combine the 18k limit for 457(b) with the (currently separate) 18k limit for a 401k/403b. There isn't a good reason for these to be separate (IMO) and I didn't think there was any political will (aka lobbyists) to save it. My spouse has access to both, so I was interested and watching this.
If you had a handful of things you hated in the senate bill, it is not impossible to see if they are still in this latest thing, if you knew where they were in the last released bill. But most of us rely on news summaries (including me, for the other things I hated).
The amendments discussed so far are kinda cute. Rubio and Cruz wanted larger child tax credits and expanded 529s, respectively.
So, why are these particular amendments being debated when a bunch of stuff seemed to change behind closed doors and were simply presented as part of the new bill? This is confusing.
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The amendments discussed so far are kinda cute. Rubio and Cruz wanted larger child tax credits and expanded 529s, respectively.
So, why are these particular amendments being debated when a bunch of stuff seemed to change behind closed doors and were simply presented as part of the new bill? This is confusing.
Not a legislative expert, but my understanding is that amendments are proposed by Senators directly, then a committee determines whether it's worth "debating" (just giving it airtime, really) on the floor. This process happens in parallel to the normal bill drafting process.
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The amendments discussed so far are kinda cute. Rubio and Cruz wanted larger child tax credits and expanded 529s, respectively.
So, why are these particular amendments being debated when a bunch of stuff seemed to change behind closed doors and were simply presented as part of the new bill? This is confusing.
Not a legislative expert, but my understanding is that amendments are proposed by Senators directly, then a committee determines whether it's worth "debating" (just giving it airtime, really) on the floor. This process happens in parallel to the normal bill drafting process.
It's a politics thing. The "behind closed doors" bits are the actual serious parts. The Rubio-Cruz child tax credits that are not behind closed doors are so that Rubio and Cruz can go back and say "Hey at least we tried. Vote for us again, we're one of the good Republicans". They know it'll never be added and they don't care because that's not the point.
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51-49 pass. On to the House. An I gonna get my $4,000 raise this year, or next???
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What a shit show!
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At least our 401ks will ride high for a while longer. It is going to be an interesting time for sure.
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Wow, just wow. I've read somewhere that AMT is back?
Anyway, as many of us were saying before, it's all about the corporate rate cut to 20%. The rest is just window dressing. Window dressing specifically designed to hurt us all.
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Anyway, at least changing the step-up basis would be prudent - seems crazy not to. Unrealized capital gains (not family businesses!) account for a large share of estates that get hit with the estate tax.
If you're advocating getting rid of the step-up in basis, I think that's a bad idea from a practical perspective.
When did Grandpa buy those shares? What were the basis figures on the dates of those various purchases? How much was the result of dividend reinvestments? When were those purchases? What was the share count and cost basis of those shares?
A paperwork and logistical nightmare as compared to "what day did Grandpa die? what were the shares worth on that day? Perfect; glad to have that taken care of in 5 minutes."
Sounds pretty simple to me: if it is worth it to you to keep track, you will. Since when is laziness a valid reason to be sloppy. When alive, grandpa needed to keep track of the cost basis if he wanted to sell in order to not pay a tax on the purchase price. Why upon death is that information suddenly lost? This is especially true in today's world of electronic data storage. Your broker already does this work for you.
Not to mention the fact that an old grandpa will have unrealized earnings that will most likely dwarf the sale price. If is was purchased so long ago that the records are lost, it is probably upwards of 90% unrealized gains anyway. Unless grandpa was a day trader, so then he kept track of those things.
I sure can see why the step-up is a desired outcome, but needed because of piss poor accounting? You didn't sell me.
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Are there any changes to 401K/403B or other retirement vehicles in the senate plan? I know there where some changes proposed, but I do not know what got in and what was left out.
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Senate added a nice windfall for pass thru entities. For a few years anyway...
"Most businesses in the United States are organized as “pass through” companies (sole proprietorships, partnerships, LLCs and S corporations) where the income from the business is “passed through” to the owners and taxed at their individual tax rate. Under this bill, most pass-through businesses wouldn't have to pay tax on 23 percent of their income. The idea is to give mom-and-pop shops a sizable tax break. But there are limitations. Law firms, doctor's offices and other “service businesses” that earn over $250,000 wouldn't be eligible for the deduction. Other really large pass-through businesses would have a limit on how much they can deduct." -WaPo
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Not if the House just passes the Senate version. Which IMO is much more likely than reconciliation + problem solving + both houses passing an improved version.
+1 on this thought. Most likely House R's already have the votes to pass as is in order to keep a revised bill out of the senate that they could screw up.
I think that was why McCain voted no on ACA repeal. He knew whatever was passed would be the bill, not just the beginning of negotiations.Tax cuts are much easier, because they believe if it turns out to be a disaster, they can always raise them again, figuring the D's will go along with any tax increase.
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Anyway, at least changing the step-up basis would be prudent - seems crazy not to. Unrealized capital gains (not family businesses!) account for a large share of estates that get hit with the estate tax.
If you're advocating getting rid of the step-up in basis, I think that's a bad idea from a practical perspective.
When did Grandpa buy those shares? What were the basis figures on the dates of those various purchases? How much was the result of dividend reinvestments? When were those purchases? What was the share count and cost basis of those shares?
A paperwork and logistical nightmare as compared to "what day did Grandpa die? what were the shares worth on that day? Perfect; glad to have that taken care of in 5 minutes."
Sounds pretty simple to me: if it is worth it to you to keep track, you will. Since when is laziness a valid reason to be sloppy. When alive, grandpa needed to keep track of the cost basis if he wanted to sell in order to not pay a tax on the purchase price. Why upon death is that information suddenly lost? This is especially true in today's world of electronic data storage. Your broker already does this work for you.
My broker is only obligated to do that for shares purchased in the last few years (I cited the exact cutoff up thread).
Not to mention the fact that an old grandpa will have unrealized earnings that will most likely dwarf the sale price. If is was purchased so long ago that the records are lost, it is probably upwards of 90% unrealized gains anyway. Unless grandpa was a day trader, so then he kept track of those things.
I sure can see why the step-up is a desired outcome, but needed because of piss poor accounting?
If the shares were purchased prior to the requirement for basis tracking by the broker and grandpa knew that he was never going to sell them in his lifetime and that there would be a step-up in basis on death, it's perfectly reasonable accounting to not track the basis. (This happens to be the situation we found ourselves in upon my grandfather's death last year. He bought shares in companies all through his life [as a coal miner, so no multi-million dollar estate here] and I'm not sure he ever sold anything.)
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I am unbelievably disgusted with Susan Collins right now. I really thought she might hold out against this monstrosity.
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Just more proof Republicans don't give a shit about you. Or democracy. This was all about paying off their billionaire donors. That's it. Fuck them.
And goddammit stop voting GOP. These assholes have no idea how to govern, don't care about anyone but themselves and the top 0.1%. Remember the complaints from them about Obamacare being passed too quickly? That pesky legislation that had numerous public hearings, mark ups, debate...that one. They just passed a bill no one has even read, written by Wall Street lobbyists, and are happy about it.
Fuck them all. Stop voting GOP.
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Anyway, at least changing the step-up basis would be prudent - seems crazy not to. Unrealized capital gains (not family businesses!) account for a large share of estates that get hit with the estate tax.
If you're advocating getting rid of the step-up in basis, I think that's a bad idea from a practical perspective.
When did Grandpa buy those shares? What were the basis figures on the dates of those various purchases? How much was the result of dividend reinvestments? When were those purchases? What was the share count and cost basis of those shares?
A paperwork and logistical nightmare as compared to "what day did Grandpa die? what were the shares worth on that day? Perfect; glad to have that taken care of in 5 minutes."
Sounds pretty simple to me: if it is worth it to you to keep track, you will. Since when is laziness a valid reason to be sloppy. When alive, grandpa needed to keep track of the cost basis if he wanted to sell in order to not pay a tax on the purchase price. Why upon death is that information suddenly lost? This is especially true in today's world of electronic data storage. Your broker already does this work for you.
My broker is only obligated to do that for shares purchased in the last few years (I cited the exact cutoff up thread).
Not to mention the fact that an old grandpa will have unrealized earnings that will most likely dwarf the sale price. If is was purchased so long ago that the records are lost, it is probably upwards of 90% unrealized gains anyway. Unless grandpa was a day trader, so then he kept track of those things.
I sure can see why the step-up is a desired outcome, but needed because of piss poor accounting?
If the shares were purchased prior to the requirement for basis tracking by the broker and grandpa knew that he was never going to sell them in his lifetime and that there would be a step-up in basis on death, it's perfectly reasonable accounting to not track the basis. (This happens to be the situation we found ourselves in upon my grandfather's death last year. He bought shares in companies all through his life [as a coal miner, so no multi-million dollar estate here] and I'm not sure he ever sold anything.)
After I posted I noticed I missed an entire page of posts I have since read. Thank you for the detail on the dates those transaction records were required. Should have been decades ago. Seems to me there should be a way to come up with a reasonable compromise other than throwing up my hands and saying, fuck it, I can't figure this shit out. Maybe allow step-up for items purchased prior to the forced recording, or maybe use the arbitrary date of purchase to be the mandatory recording date, unless evidence exists of the actual date.The problem with the latter solution is that it picks an arbitrary and false purchase date, just like the current step-up rule does. Solving a problem by doing more of it. I think I have the makings of the start of my political career :)
So then is your opinion that yes, lack of records is a perfectly valid reason to step-up a cost basis, avoiding paying taxes on millions(or billions) of unrealized gains, but only once they die?
Perfectly valid opinion I simply disagree with. Thank you for the discussion. Have a great weekend.
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Does anyone know how the House/Senate bills treat Form 709?
If you can gift today and use your lifetime exemption while still alive, and the lifetime exemption limit is removed(house version), doesn't that effectively mean there is no such thing as a tax on any gift, allowing trillions to transfer tax free the first day the bill is law?
If I read correctly, Senate version doubles the current limit, while house version eliminated the limit.
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Just more proof Republicans don't give a shit about you. Or democracy. This was all about paying off their billionaire donors. That's it. Fuck them.
And goddammit stop voting GOP. These assholes have no idea how to govern, don't care about anyone but themselves and the top 0.1%. Remember the complaints from them about Obamacare being passed too quickly? That pesky legislation that had numerous public hearings, mark ups, debate...that one. They just passed a bill no one has even read, written by Wall Street lobbyists, and are happy about it.
Fuck them all. Stop voting GOP.
I haven't voted for a GOP candidate since a couple votes for McCain in the 1990s (and one vote for a GOP congressperson I despised, to prevent a libertarian whom I despised more from having a shot in a seat that no Dem could ever win).
But at least there used to be some GOP sanity prior to the Great Derangement that began with Clinton's election.
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So then is your opinion that yes, lack of records is a perfectly valid reason to step-up a cost basis, avoiding paying taxes on millions(or billions) of unrealized gains, but only once they die?
Perfectly valid opinion I simply disagree with. Thank you for the discussion. Have a great weekend.
Basically, yes. Pragmatism and ease for a great many people with small sums over perfect fairness and a one-shot exploit for some. Your position is also perfectly reasonable and consistent; good weekend to you as well!
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So if the corporate tax rate is now set at 20% instead of 35%...then the effective tax rate for them will all probably be ... ? (if they're not already receiving a refund)?
Slightly off topic but how long will it be before this helps to contribute to the next economic crash/correction? Assuming we're probably due or close to that anyway...
And about that debt...I'm not an economist, but for those in the know here: since we're experiencing the good times now, wouldn't it be smarter to pay off some debt now instead of adding to it? Just wondering...
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So in summary we'll all pay a little less tax?
What happens to the backdoor/mega-backdoor Roth conversions?
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So if the corporate tax rate is now set at 20% instead of 35%...then the effective tax rate for them will all probably be ... ? (if they're not already receiving a refund)?
Slightly off topic but how long will it be before this helps to contribute to the next economic crash/correction? Assuming we're probably due or close to that anyway...
And about that debt...I'm not an economist, but for those in the know here: since we're experiencing the good times now, wouldn't it be smarter to pay off some debt now instead of adding to it? Just wondering...
But you see that would assume we are acting on logic. This is not logic, this is about pandering to well heeled interest groups and brainwashing a very ill informed electorate that have drunk the Kool-Aid a long time ago..
Drain the swamp.. Riiight.
It is amazing just how poor people vote against their interests though.
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So in summary we'll all pay a little less tax?
What happens to the backdoor/mega-backdoor Roth conversions?
Many will, initially; far fewer will over time, as many will instead see taxes rise, assuming the same real income. Whether the trivial savings for most who see cuts will even make up for the other effects they experience remains to be seen.
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But you see that would assume we are acting on logic.
Who's this "we"?
This is what happens when they don't put me in charge...
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Senate added a nice windfall for pass thru entities. For a few years anyway...
"Most businesses in the United States are organized as “pass through” companies (sole proprietorships, partnerships, LLCs and S corporations) where the income from the business is “passed through” to the owners and taxed at their individual tax rate. Under this bill, most pass-through businesses wouldn't have to pay tax on 23 percent of their income. The idea is to give mom-and-pop shops a sizable tax break. But there are limitations. Law firms, doctor's offices and other “service businesses” that earn over $250,000 wouldn't be eligible for the deduction. Other really large pass-through businesses would have a limit on how much they can deduct." -WaPo
I am a passthrough business what do you mean by we don't have to pay tax on 23 percent of our income I know there will be a decrease but how did you get to 23%?
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Perfectly valid opinion I simply disagree with. Thank you for the discussion. Have a great weekend.
Your position is also perfectly reasonable and consistent; good weekend to you as well!
I'm pretty sure this means the internet is broken this morning.
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I'm pretty sure this means the internet is broken this morning.
It will be repaired quickly, no doubt. It always is... ;)
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I am trying to figure out what my tax rate will be with this new tax plan, I am a LLC and file as an s corp as a passthrough to individual return and currently pay tax at an single individual tax rate.
Income 200k plus, single.
Would my entire 200k now be 25% taxed on personal side or how is this going to work?
Appreciate any help on understanding this!
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Does this bill still kill tax lots by imposing FIFO sales? Tried a few keywords, couldn't find a reference to it.
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Senate added a nice windfall for pass thru entities. For a few years anyway...
"Most businesses in the United States are organized as “pass through” companies (sole proprietorships, partnerships, LLCs and S corporations) where the income from the business is “passed through” to the owners and taxed at their individual tax rate. Under this bill, most pass-through businesses wouldn't have to pay tax on 23 percent of their income. The idea is to give mom-and-pop shops a sizable tax break. But there are limitations. Law firms, doctor's offices and other “service businesses” that earn over $250,000 wouldn't be eligible for the deduction. Other really large pass-through businesses would have a limit on how much they can deduct." -WaPo
I am a passthrough business what do you mean by we don't have to pay tax on 23 percent of our income I know there will be a decrease but how did you get to 23%?
That's the number in the Senate version.
Take advantage of it now. It was a disaster, as Kansas showed, and rates will go up again when revenues hit the floor.
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Senate added a nice windfall for pass thru entities. For a few years anyway...
"Most businesses in the United States are organized as “pass through” companies (sole proprietorships, partnerships, LLCs and S corporations) where the income from the business is “passed through” to the owners and taxed at their individual tax rate. Under this bill, most pass-through businesses wouldn't have to pay tax on 23 percent of their income. The idea is to give mom-and-pop shops a sizable tax break. But there are limitations. Law firms, doctor's offices and other “service businesses” that earn over $250,000 wouldn't be eligible for the deduction. Other really large pass-through businesses would have a limit on how much they can deduct." -WaPo
I am a passthrough business what do you mean by we don't have to pay tax on 23 percent of our income I know there will be a decrease but how did you get to 23%?
I was just quoting the Washington Post... I read another paragraph on a different news site and it confirms the 23%. Basically the income you show on your k-1 you get to reduce by 23%... Then are taxed normally on the rest. Kinda slick.
But I'm not holding my breath. Seems to me that the Senate, rather than debating the things they disagreed about, just added into the bill everything in question and punted it back to Congress.
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I am trying to figure out what my tax rate will be with this new tax plan, I am a LLC and file as an s corp as a passthrough to individual return and currently pay tax at an single individual tax rate.
Income 200k plus, single.
Would my entire 200k now be 25% taxed on personal side or how is this going to work?
Appreciate any help on understanding this!
No, 23% of your income is a deduction, per the Senate. The rest is taxed normally.
Save it for your old age medical bills, though, since Medicare will be cut.
Tax simplification at work. </s>
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So in summary we'll all pay a little less tax?
What happens to the backdoor/mega-backdoor Roth conversions?
My husband and I make a lot less than many people here. We will have our taxes go up by $2500 mostly because of losing the daycare FSA and therefore losing much of the savers credit because we now need more taxable income to pay for daycare. This assumes none of the changes from last night effect us because I have no finished reading all of them.
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I am trying to figure out what my tax rate will be with this new tax plan, I am a LLC and file as an s corp as a passthrough to individual return and currently pay tax at an single individual tax rate.
Income 200k plus, single.
Would my entire 200k now be 25% taxed on personal side or how is this going to work?
Appreciate any help on understanding this!
No, 23% of your income is a deduction, per the Senate. The rest is taxed normally.
Save it for your old age medical bills, though, since Medicare will be cut.
Tax simplification at work. </s>
But is it a deduction that would be disallowed under the proposed AMT? I wonder how many Senators who voted in favor of the bill could answer that question.
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My husband and I make a lot less than many people here. We will have our taxes go up by $2500 mostly because of losing the daycare FSA and therefore losing much of the savers credit because we now need more taxable income to pay for daycare.
Perfect! You should write a thank-you letter to Paul Ryan, expressing your gratitude for all of that new freedom.
I mean not your freedom in particular, because like all dirty poor people this is going to suck for you, but gratitude that you have so much more freedom because billionaires will now have lower taxes and that's got to be good for America, right? #MAGA?
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because of losing the daycare FSA.
That is being removed? I don't have kids, but wow. I can't find this in the current Senate bill, but that doesn't mean it is not there. Not sure exactly what I'm looking for. Same with tuition benefits being taxable.
Here are a few things I noted:
- The AMT is back, but with higher exemptions.
- The estate tax remains, but is doubled. I can't quite figure out what they did with the gift tax - maybe increased it or left it alone.
- Retirement plans have minor changes. Some language about 457(e) that seems benign or helpful for anyone that has ever heard of a 457e. Roth IRA re-characterizations are no longer allowed, but this is different than a conversion (which is what you need for backdoor Roth).
As people have said, this is not yet final until the house and senate approve a unified bill.
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Perfectly valid opinion I simply disagree with. Thank you for the discussion. Have a great weekend.
Your position is also perfectly reasonable and consistent; good weekend to you as well!
I'm pretty sure this means the internet is broken this morning.
Thank's Obama.
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The AMT numbers don't make sense. They would still result in a joint filer at the top of the 24% bracket paying AMT, even if they're not claiming anything other than the standard deduction. The whole AMT concept is designed to limit deductions and force some level of tax payments. If somebody isn't deducting anything, I don't understand how they could still have to pay the AMT.
I tried to decipher the inflation adjustments, and it may be that the thresholds published in the bill (exemption and phaseout threshold), are in 2011 dollars, which will then be escalated to 2018 equivalents. That would "almost" eliminate the AMT for the situation I described above. I will be interested in hearing others' understanding of the revised AMT for individuals.
Edit: I just ran the comparison of the published AMT thresholds against the original Senate brackets. In this case, the AMT stays just below the 25% bracket top. Do you suppose that when they wedged the AMT revival in at the eleventh hour they forgot to take into account their earlier amendment to reduce the brackets. Nah, that would never happen in Washington.........would it?
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I am trying to plan a post (apocalyptic) republican tax plan...
I live in a HCOLA (Bay Area). You cannot find many homes less than $1,000,000....Now that we can no longer deduct all mortgage interest, I'm thinking there may be downward pressure on housing prices--meaning I can no longer count on my home being what it was worth. Therefore:
I will NOT be paying down my 30 year mortgage (i.e. making extra payments). Instead I will wait and see what happens with housing prices, thus sharing the risk of downward pressure with the Bank. Further since repubs value business over people, I'm going to be making a "business decision" should this event occur. I will be banking ALL money that could have gone to my housing payment AND if prices fall I will make a "business default" decision and walk from my home and pay cash for a depressed property.
Just trying to figure out what is best for me under this "me first" republican tax plan...
Any other ideas? I'd like to know because the notion that we are looking out for the common good has flown out the window...
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Any other ideas?
The best game plan under this potential tax future is to just be a multimillionaire. Be sure to earn at least $500k per year, preferably as a self employed person.
Better yet, be Ivanka Trump and just inherit your money. Don't show any earned income at all, just profits to the business you own (but don't work at, so you don't have any salary).
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Any other ideas?
The past game plan under this potential tax future is to just be a multimillionaire. Be sure to earn at least $500k per year, preferably as a self employed person.
Better yet, be Ivanka Trump and just inherit your money. Don't show any earned income at all, just profits to the business you own (but don't work at, so you don't have any salary).
Even before this gift to the well-off, I looked at people's tax returns as part of my profession. It always amazed me how many showed "a loss," but still managed to pay all their bills, have a beautiful home, and drive incredible cars....I'm obviously not doing it right.
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Even before this gift to the well-off, I looked at people's tax returns as part of my profession. It always amazed me how many showed "a loss," but still managed to pay all their bills, have a beautiful home, and drive incredible cars....I'm obviously not doing it right.
Goodwill loss that can then be applied as a carryforward NOL?
Or, do a "trump" and build a hotel/rental unit and declare bankruptcy before you pay your GC/subs.
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Even before this gift to the well-off, I looked at people's tax returns as part of my profession. It always amazed me how many showed "a loss," but still managed to pay all their bills, have a beautiful home, and drive incredible cars....I'm obviously not doing it right.
I think you are doing it right. Those business expenses/deductions only help to consume more, but not to save anything and work towards FI. Those people are slaves to their own lifestyle!
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Sol cares about the little people too much. At which point do you stop feeling sorry for the electorate that keeps getting shat on but comes back for more?
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So in summary we'll all pay a little less tax?
What happens to the backdoor/mega-backdoor Roth conversions?
My husband and I make a lot less than many people here. We will have our taxes go up by $2500 mostly because of losing the daycare FSA and therefore losing much of the savers credit because we now need more taxable income to pay for daycare. This assumes none of the changes from last night effect us because I have no finished reading all of them.
Source? I use a dependent care FSA as well, and that would suck hard.
The last thing I saw said they might remove that and move everyone to deducting it at the end of the year?
God fucking dammit this bill is a black hole.
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Sol cares about the little people too much. At which point do you stop feeling sorry for the electorate that keeps getting shat on but comes back for more?
Who asked you to feel sorry?
As one of the "little people" I keep being scolded about voting against my best interests. The scolds don't know what my best interests are. They think they know, but they don't, because they don't know me.
We "little people" have our own powers, our own wisdoms, and our own virtues. Don't feel sorry for us, it's unpleasant and patronizing, and annoying. We want jobs; then we'll take it from there.
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Sol cares about the little people too much. At which point do you stop feeling sorry for the electorate that keeps getting shat on but comes back for more?
Who asked you to feel sorry?
As one of the "little people" I keep being scolded about voting against my best interests. The scolds don't know what my best interests are. They think they know, but they don't, because they don't know me.
We "little people" have our own powers, our own wisdoms, and our own virtues. Don't feel sorry for us, it's unpleasant and patronizing, and annoying. We want jobs; then we'll take it from there.
Limiting my question to federal government, do the statements that I emphasized in your quote mean that you think that Republican policies will lead to more jobs for the "little people"?
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Your reasons are your own, and I won't presume to know them, but I can all but guarantee that unless you're a member of the 40 or so richest families in the US, this tax bill will not be in your best interest.
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In this draft: https://www.budget.senate.gov/imo/media/doc/MCG17B31.pdf of the Senate bill (which, as mentioned above, may have little relation to whatever got passed), it seems they eliminated the separate 457(b) limit on page 296.
All that wording basically results 457(b) being included in the total 401k, etc limits.
They also eliminated the catch-up contributions to 457(b) plans a little further down.
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Your reasons are your own, and I won't presume to know them, but I can all but guarantee that unless you're a member of the 40 or so richest families in the US, this tax bill will not be in your best interest.
Wise Virgin may be one of those red state voters who has been convinced that welfare for the rich makes everyone more free, despite the poverty that plagues them. It's not really that hard to convince people to vote for things that make them more poor, if you can appeal to their patriotism.
Russia is very good at this. Some of the people there LOVE the fact that their oligarchs can get so vastly wealthy (by robbing the national coffers). They think it reflects positively on Russia that so many of their citizens are the wealthiest people on Earth. And Putin rode a bear shirtless! Of course they don't really have democracy or a free press, so maintaining this illusion is much easier there.
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Sol cares about the little people too much. At which point do you stop feeling sorry for the electorate that keeps getting shat on but comes back for more?
Who asked you to feel sorry?
As one of the "little people" I keep being scolded about voting against my best interests. The scolds don't know what my best interests are. They think they know, but they don't, because they don't know me.
We "little people" have our own powers, our own wisdoms, and our own virtues. Don't feel sorry for us, it's unpleasant and patronizing, and annoying. We want jobs; then we'll take it from there.
Limiting my question to federal government, do the statements that I emphasized in your quote mean that you think that Republican policies will lead to more jobs for the "little people"?
I think it will be similar to the tax cuts of Reagan's time, which I remember very well. The animal spirits will run for the next four or five years, after which they will tire, and there will be a hangover of malaise (either mild or severe, depending upon circumstances), and people will hunt for different arrangements to address that day's problems.
If you are convinced of the goodness of your ideas, wait for that time, and influence policy then. If you truly understand the problems of the electorate, your ideas will prevail.
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Your reasons are your own, and I won't presume to know them, but I can all but guarantee that unless you're a member of the 40 or so richest families in the US, this tax bill will not be in your best interest.
Wise Virgin may be one of those red state voters who has been convinced that welfare for the rich makes everyone more free, despite the poverty that plagues them. It's not really that hard to convince people to vote for things that make them more poor, if you can appeal to their patriotism.
Russia is very good at this. Some of the people there LOVE the fact that their oligarchs can get so vastly wealthy (by robbing the national coffers). They think it reflects positively on Russia that so many of their citizens are the wealthiest people on Earth. And Putin rode a bear shirtless! Of course they don't really have democracy or a free press, so maintaining this illusion is much easier there.
You don't have to talk about me in the third person, Sol, I'm right here. I'm little, but I'm not too little to see, if you want to.
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The response and the tone of the posters in here is such weak sauce.
So many personal attacks.
You all should cut the nonsense out. This site is about FIRE and how to achieve these goals. Stop the petty stuff. Talk about how we can work this new tax plan to our advantage to achieve our goals.
This is stuff you CAN control.
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I think it will be similar to the tax cuts of Reagan's time, which I remember very well. The animal spirits will run for the next four or five years, after which they will tire, and there will be a hangover of malaise (either mild or severe, depending upon circumstances), and people will hunt for different arrangements to address that day's problems.
If you are convinced of the goodness of your ideas, wait for that time, and influence policy then. If you truly understand the problems of the electorate, your ideas will prevail.
Perhaps. But the Reagan years were not as good as either the Carter or Clinton years for job creation, notwithstanding the tax cuts. That there seems to be a common belief to the contrary is one of the reasons I have my doubts about how honestly the electorate considers its problems and evaluates proposed solutions.
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The response and the tone of the posters in here is such weak sauce.
So many personal attacks.
You all should cut the nonsense out. This site is about FIRE and how to achieve these goals. Stop the petty stuff. Talk about how we can work this new tax plan to our advantage to achieve our goals.
This is stuff you CAN control.
Nice of you to set everyone straight. You better get to work on dozens of other threads right away LOL.
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The response and the tone of the posters in here is such weak sauce.
So many personal attacks.
You all should cut the nonsense out. This site is about FIRE and how to achieve these goals. Stop the petty stuff. Talk about how we can work this new tax plan to our advantage to achieve our goals.
This is stuff you CAN control.
Nice of you to set everyone straight. You better get to work on dozens of other threads right away LOL.
Most threads aren’t like this... unless you are reading general melodramatic political posts in Off Topic.
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You all should cut the nonsense out. This site is about FIRE and how to achieve these goals. Stop the petty stuff. Talk about how we can work this new tax plan to our advantage to achieve our goals.
This is stuff you CAN control.
I can offer something along these lines that no one else has mentioned yet. I can tell you how to get rich under this Republican tax plan, and in the national circumstances current today, and with the current mood.
Invest in the central two-thirds of the United States.
The day of capitalists running around the world looking for a third-world person poor and miserable enough to work in their sweatshop is past. The day of sitting on the west coast and on the east coast and making the easy money, that day is challenged and sliding away. You can read the bill, but if you want to make money, read the signs of these times.
Now send me a dollar for my newsletter. :)
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Hello clarkevii! Welcome to the internet!
Talk about how we can work this new tax plan to our advantage to achieve our goals.
This is stuff you CAN control.
Any suggestions on how I should work this plan to my advantage then? I don't make that much money nor do I stand to inherit vast wealth someday. Suggesting that I can work this tax plan to my advantage is akin to suggesting that it'll create more jobs, or that it's going to trickle down for the masses. That, IMHO, is weak sauce.
Actually...keep a stash for the inevitable crash. Ask Kansas and Oklahoma.
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You all should cut the nonsense out. This site is about FIRE and how to achieve these goals. Stop the petty stuff. Talk about how we can work this new tax plan to our advantage to achieve our goals.
This is stuff you CAN control.
Well since it appears that all my relevant deductions are gone, I can now take advantage of the new planby taking in new non legal children for a $500 deduction, or a parent for a $300 deduction. How many people do you recommend I take in to truly maximize this scheme?
Just think, with new lower retirement limits for all the public sector, now more of us can claim to be "maximizing our retirement accounts!" So much winning. Bigly.
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In this draft: https://www.budget.senate.gov/imo/media/doc/MCG17B31.pdf of the Senate bill (which, as mentioned above, may have little relation to whatever got passed), it seems they eliminated the separate 457(b) limit on page 296.
The bill that passed the senate is very different than that draft (which doesn't include the AMT or estate tax). The bill that passed does not include this change. You can look up the section number to cross reference. You can find the text of the bill that passed here (searchable pdf) from bloomberg: https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rXqXuQfYbRas/v0
I thought it was on the Senate Finance website, but looks like a broken link at the moment. That seems fitting.
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Ways to take advantage of the tax plan:
Try to get convert your job into a pass-through corporation, if at all possible, and especially if your marginal tax rate is above whatever tax rate they end up setting for those corporations. They may exclude "service professionals" like lawyers, doctors, accountants, etc. Some sources say there may be an exception to that exclusion if you make <$500k. Stay tuned to that.
Other ways to win:
1. if you care enough about this, move to a low-income-tax state. State governments don't do anything useful other than run prisons to confine murderers, occasionally fix a pothole in the interstate highways and find abused children foster homes. Personally I'll fork over the extra money to live in California instead of Texas, but may consider Florida as a backup.
2. Buy a cheaper house in a cheaper neighborhood. Good roads are for sissies. But seriously, you probably own too much house.
3. All you people factoring in the existence of Social Security and Medicare when you are >65yo, don't. The job creators "investing" in "middle America" may want that for their pockets also.
4. Work for some organization that has a deferred-compensation 457(b) plan. Seriously, if your employer doesn't have this, they suck. No matter how much free coffee they give you in the cafeteria, it's not $18,000 worth.
Anyone have other suggestions? (Snark allowed, but as long as its sandwiched into a suggestion - snark - suggestion format).
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In this draft: https://www.budget.senate.gov/imo/media/doc/MCG17B31.pdf of the Senate bill (which, as mentioned above, may have little relation to whatever got passed), it seems they eliminated the separate 457(b) limit on page 296.
The bill that passed the senate is very different than that draft (which doesn't include the AMT or estate tax). The bill that passed does not include this change. You can look up the section number to cross reference. You can find the text of the bill that passed here (searchable pdf) from bloomberg: https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rXqXuQfYbRas/v0
I thought it was on the Senate Finance website, but looks like a broken link at the moment. That seems fitting.
Awesome! My favorite undeserved benefit persists! Thanks everyone else!
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In this draft: https://www.budget.senate.gov/imo/media/doc/MCG17B31.pdf of the Senate bill (which, as mentioned above, may have little relation to whatever got passed), it seems they eliminated the separate 457(b) limit on page 296.
The bill that passed the senate is very different than that draft (which doesn't include the AMT or estate tax). The bill that passed does not include this change. You can look up the section number to cross reference. You can find the text of the bill that passed here (searchable pdf) from bloomberg: https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rXqXuQfYbRas/v0
I thought it was on the Senate Finance website, but looks like a broken link at the moment. That seems fitting.
Awesome! My favorite undeserved benefit persists! Thanks everyone else!
Yes! I agree. This is gold for those of us with 457s
Does anyone know if the Savers Tax credit survived? I usually get at least $400 of this underserved money.
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Just more proof Republicans don't give a shit about you. Or democracy. This was all about paying off their billionaire donors. That's it. Fuck them.
And goddammit stop voting GOP. These assholes have no idea how to govern, don't care about anyone but themselves and the top 0.1%. Remember the complaints from them about Obamacare being passed too quickly? That pesky legislation that had numerous public hearings, mark ups, debate...that one. They just passed a bill no one has even read, written by Wall Street lobbyists, and are happy about it.
Fuck them all. Stop voting GOP.
Looks like someone forgot to take their Xanax. Thanks for the advice but I will continue to vote GOP as long as people like Schumer (my senator, FML) continue to remain completely out of touch with reality.
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I think it will be similar to the tax cuts of Reagan's time, which I remember very well.
I hope not. The national debt tripled, the US went from a creditor nation to a debtor nation, and then Reagan signed the largest peacetime tax increase in US history.
As GHWB said, it was "voodoo economics."
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Ways to take advantage of the tax plan:
Try to get convert your job into a pass-through corporation, if at all possible, and especially if your marginal tax rate is above whatever tax rate they end up setting for those corporations. They may exclude "service professionals" like lawyers, doctors, accountants, etc. Some sources say there may be an exception to that exclusion if you make <$500k. Stay tuned to that.
Yeah, jump on this. It'll only last a few years until they fix it.
It also looks like rental income will be included in this giveaway.
4. Work for some organization that has a deferred-compensation 457(b) plan. Seriously, if your employer doesn't have this, they suck. No matter how much free coffee they give you in the cafeteria, it's not $18,000 worth.
Aren't these only for not-for-profits? I would've loved to had one.
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I think it will be similar to the tax cuts of Reagan's time, which I remember very well.
I hope not. The national debt tripled, the US went from a creditor nation to a debtor nation, and then Reagan signed the largest peacetime tax increase in US history.
As GHWB said, it was "voodoo economics."
Do you consider the expense of the massive defense buildup that won the Cold War? How we outspent the Soviet Union until it collapsed without a shot being fired?
Seems nowadays people think the 1980s were about nothing but money. They were not. They were lived under daily threat of nuclear annihilation.
Maybe an apt comparison to Reagan's deficits would be the massive deficit spending under GW Bush/Obama to keep our financial ship afloat during the great recession. That was some voodoo economics too. It wasn't so long ago the markets were cowering in paralysis in case the Federal Reserve raised interest rates a quarter of a point. How quickly we forget.
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Other ways to win:
1. if you care enough about this, move to a low-income-tax state. State governments don't do anything useful other than run prisons to confine murderers, occasionally fix a pothole in the interstate highways and find abused children foster homes. Personally I'll fork over the extra money to live in California instead of Texas, but may consider Florida as a backup.
36% of my state's budget goes to education. Another 20% went to Medicaid. Only 2% went towards prisons. You may want to rethink your opinion of state government usefulness..
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Do you consider the expense of the massive defense buildup that won the Cold War? How we outspent the Soviet Union until it collapsed without a shot being fired?
Seems nowadays people think the 1980s were about nothing but money. They were not. They were lived under daily threat of nuclear annihilation.
Maybe an apt comparison to Reagan's deficits would be the massive deficit spending under GW Bush/Obama to keep our financial ship afloat during the great recession. That was some voodoo economics too. It wasn't so long ago the markets were cowering in paralysis in case the Federal Reserve raised interest rates a quarter of a point. How quickly we forget.
So....the debt increase that will result from these tax breaks that are really constructed to greatly enrich the wealthiest Americans is like cold war spending? Come on man, we're not even getting a non functioning "Star Wars" system with this debt.
I suppose the similarity is that maybe we are under daily threat again of some nuclear destruction from another Red State.
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I am trying to plan a post (apocalyptic) republican tax plan...
I live in a HCOLA (Bay Area). You cannot find many homes less than $1,000,000....Now that we can no longer deduct all mortgage interest, I'm thinking there may be downward pressure on housing prices--meaning I can no longer count on my home being what it was worth. Therefore:
I will NOT be paying down my 30 year mortgage (i.e. making extra payments). Instead I will wait and see what happens with housing prices, thus sharing the risk of downward pressure with the Bank. Further since repubs value business over people, I'm going to be making a "business decision" should this event occur. I will be banking ALL money that could have gone to my housing payment AND if prices fall I will make a "business default" decision and walk from my home and pay cash for a depressed property.
Just trying to figure out what is best for me under this "me first" republican tax plan...
Any other ideas? I'd like to know because the notion that we are looking out for the common good has flown out the window...
You could do this but you will have sever tax consequences, bad credit, and they can potentially take from your other assets except in a few sheltered vehicles such as retirement accounts. You could have lasting negative reprocussions for years.
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Do you consider the expense of the massive defense buildup that won the Cold War? How we outspent the Soviet Union until it collapsed without a shot being fired?
Seems nowadays people think the 1980s were about nothing but money. They were not. They were lived under daily threat of nuclear annihilation.
Maybe an apt comparison to Reagan's deficits would be the massive deficit spending under GW Bush/Obama to keep our financial ship afloat during the great recession. That was some voodoo economics too. It wasn't so long ago the markets were cowering in paralysis in case the Federal Reserve raised interest rates a quarter of a point. How quickly we forget.
So....the debt increase that will result from these tax breaks that are really constructed to greatly enrich the wealthiest Americans is like cold war spending? Come on man, we're not even getting a non functioning "Star Wars" system with this debt.
I suppose the similarity is that maybe we are under daily threat again of some nuclear destruction from another Red State.
The debt is going to increase anyway. You know that, right?
When Ronald Reagan ran for president in 1980, he made the case that the national debt was at a frightening level and would exponentially increase. 1980 was 37 years ago.
Today the national debt is at a frightening level and will exponentially increase.
The math for paying it off does not work. Maybe 10 years and a trillion dollars or so ago we would've had a chance to do something meaningful about it, except, well, Iraq War and great recession. This debt will never be paid off and it will eventually have to be settled by devaluation of the currency or the sale of hard assets.
Or we can try to grow economically, and buy ourselves time, and possibly reorganize and reprioritize.
This Republican tax plan should be viewed as more than a tax plan, it's also a geopolitical power maneuver to keep us relevant and check the influence of competitors. Similar to "Star Wars."
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Does anyone know how the new AMT is supposed to work? It would seem to me that someone taking just the standard deduction could still pay AMT under the Senate bill - so effectively, the AMT simply takes away the benefit of the new lower tax brackets for people above the threshold?
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I actually enjoy all the bitchin and gripes about this tax plan. However, most of you guys are much smarter than me. Any suggestions on how we work the final law to our advantage is appreciated.
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Well, my accountant just told me I get around a $12,000 punch in the wallet from this lovely new tax plan.
I hope Wise Virgin enjoys his/her extra $7.69 per week in each paycheck. ($400 average tax cut/52 paychecks).
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I searched the document on Bloomburg for any mention of the savers credit. Nothing found. So I'm hoping it is unchanged.
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Don't forget the black hole which is the war/conflict in Afghanistan.
Loss of lives ... drain on taxpayer's money .... no clear goal ... no end in sight.
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Well, my accountant just told me I get around a $12,000 punch in the wallet from this lovely new tax plan.
I hope Wise Virgin enjoys his/her extra $7.69 per week in each paycheck. ($400 average tax cut/52 paychecks).
I find that really hard to believe unless you have 4+ kids, a gigantic mortgage or some insane property taxes. Show us some numbers.
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Well, my accountant just told me I get around a $12,000 punch in the wallet from this lovely new tax plan.
I hope Wise Virgin enjoys his/her extra $7.69 per week in each paycheck. ($400 average tax cut/52 paychecks).
Can you explain how?
I'm going to be saving about $1500 (give or take depending on House or Senate bill) a year due to the tax plan. And I hardy pay any taxes.... like 3% of Gross Adjusted Income. BUT I live in Texas in a lowish cost of living area.
Are most of the people getting punched in the wallet because they count on the mortgage and property tax deductions?
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Does anyone know how the new AMT is supposed to work? It would seem to me that someone taking just the standard deduction could still pay AMT under the Senate bill - so effectively, the AMT simply takes away the benefit of the new lower tax brackets for people above the threshold?
I also went through an example last night that shows that I would pay the AMT under the Senate bill, even if I take the standard deduction. If your effective tax rate is less than 28%, and income is basically from W-2 income, there’s a zone where you seem to be subject to AMT without any itemized deductions. I don’t know whether that’s the “intent.” It seems like an oddity to apply an “alternative” system in that case. An obvious “fix” would be to exclude taxpayers who elect the standard deduction. I didn’t look closely, because it doesn’t apply to me, but it seems that income that qualifies for the pass-through treatment is not proposed to be added back for AMT purposes.
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I estimate I will save about $1800. Seems that would be the case for the typical mustacian.
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Well, my accountant just told me I get around a $12,000 punch in the wallet from this lovely new tax plan.
I hope Wise Virgin enjoys his/her extra $7.69 per week in each paycheck. ($400 average tax cut/52 paychecks).
Can you explain how?
I'm going to be saving about $1500 (give or take depending on House or Senate bill) a year due to the tax plan. And I hardy pay any taxes.... like 3% of Gross Adjusted Income. BUT I live in Texas in a lowish cost of living area.
Are most of the people getting punched in the wallet because they count on the mortgage and property tax deductions?
Have you been taking the sales tax deduction?
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Are most of the people getting punched in the wallet because they count on the mortgage and property tax deductions?
Yes, and the personal and dependent exemptions that we're losing.
We were able to itemize far more than 24k, and now we can't anymore. For 2018 it will be about $10-12k of income that I will have to pay taxes on that was previously sheltered. The increased child tax credit takes some of the sting out of it, but that's s temporary measure and will be phasing out over the next few years.
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Ways to take advantage of the tax plan:
Try to get convert your job into a pass-through corporation, if at all possible, and especially if your marginal tax rate is above whatever tax rate they end up setting for those corporations. They may exclude "service professionals" like lawyers, doctors, accountants, etc. Some sources say there may be an exception to that exclusion if you make <$500k. Stay tuned to that.
Anyone have other suggestions? (Snark allowed, but as long as its sandwiched into a suggestion - snark - suggestion format).
I suspect many service professionals will explore whether their business isn’t just providing disqualified professional services, but also consists of owning office space and equipment that can be put in a separate entity and then leased to their professional service business, and owning an administrative support service that provides contract workers to their professional service business (e.g., secretarial services, legal assistants, nurses, etc.).
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Does anyone know how the new AMT is supposed to work? It would seem to me that someone taking just the standard deduction could still pay AMT under the Senate bill - so effectively, the AMT simply takes away the benefit of the new lower tax brackets for people above the threshold?
I also went through an example last night that shows that I would pay the AMT under the Senate bill, even if I take the standard deduction. If your effective tax rate is less than 28%, and income is basically from W-2 income, there’s a zone where you seem to be subject to AMT without any itemized deductions. I don’t know whether that’s the “intent.” It seems like an oddity to apply an “alternative” system in that case. An obvious “fix” would be to exclude taxpayers who elect the standard deduction. I didn’t look closely, because it doesn’t apply to me, but it seems that income that qualifies for the pass-through treatment is not proposed to be added back for AMT purposes.
The 'decision' to keep the AMT seems awfully strange when they talk big about 'simplification' of the tax code. This really sucks and was obviously a backroom deal to make the deficit numbers look better.
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Are most of the people getting punched in the wallet because they count on the mortgage and property tax deductions?
Yes, and the personal and dependent exemptions that we're losing.
We were able to itemize far more than 24k, and now we can't anymore. For 2018 it will be about $10-12k of income that I will have to pay taxes on that was previously sheltered. The increased child tax credit takes some of the sting out of it, but that's s temporary measure and will be phasing out over the next few years.
An odd effect of that, although not directly relevant to Sol in WA, is that many who lose the ability to itemize will consequently pay higher state income taxes, too.
My state allows either a very modest standard deduction (on the order of $4,300 for MFJ) or the balance of the taxpayer’s federal itemized deductions after subtracting this state’s income taxes. So those who had been itemizing (just under 50%), but no longer can, will see their state taxable income increased by the amount by which their previously itemized deductions (other than state income tax) would have exceeded that $4,300 standard deduction.
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Well, my accountant just told me I get around a $12,000 punch in the wallet from this lovely new tax plan.
I hope Wise Virgin enjoys his/her extra $7.69 per week in each paycheck. ($400 average tax cut/52 paychecks).
I find that really hard to believe unless you have 4+ kids, a gigantic mortgage or some insane property taxes. Show us some numbers.
I am single, no kids, live in NY, very high property taxes, and I make high 6 figures/low 7 figures (my income is variable because I'm self-employed). I am a consultant so no special treatment for my pass through.
Yeah I can afford it. If it were being used to give the middle middle class a meaningful tax break, or to pay for health care or infrastructure or educational initiatives I'd be fine with that. But I don't like money siphoned out of my pocket to give to the ultra-wealthy and corporations.
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Are most of the people getting punched in the wallet because they count on the mortgage and property tax deductions?
Yes, and the personal and dependent exemptions that we're losing.
We were able to itemize far more than 24k, and now we can't anymore. For 2018 it will be about $10-12k of income that I will have to pay taxes on that was previously sheltered. The increased child tax credit takes some of the sting out of it, but that's s temporary measure and will be phasing out over the next few years.
An odd effect of that, although not directly relevant to Sol in WA, is that many who lose the ability to itemize will consequently pay higher state income taxes, too.
My state allows either a very modest standard deduction (on the order of $4,300 for MFJ) or the balance of the taxpayer’s federal itemized deductions after subtracting this state’s income taxes. So those who had been itemizing (just under 50%), but no longer can, will see their state taxable income increased by the amount by which their previously itemized deductions (other than state income tax) would have exceeded that $4,300 standard deduction.
I posted this in another thread but it seems like taking better advantage of 401K/403B plans will become a much more important tool to reduce income. The majority of people that have a 401K/403B plan currently do not come anywhere near maxing them out.
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Ways to take advantage of the tax plan:
Try to get convert your job into a pass-through corporation, if at all possible, and especially if your marginal tax rate is above whatever tax rate they end up setting for those corporations. They may exclude "service professionals" like lawyers, doctors, accountants, etc. Some sources say there may be an exception to that exclusion if you make <$500k. Stay tuned to that.
Anyone have other suggestions? (Snark allowed, but as long as its sandwiched into a suggestion - snark - suggestion format).
I suspect many service professionals will explore whether their business isn’t just providing disqualified professional services, but also consists of owning office space and equipment that can be put in a separate entity and then leased to their professional service business, and owning an administrative support service that provides contract workers to their professional service business (e.g., secretarial services, legal assistants, nurses, etc.).
I don't understand what you're saying, or I'm misunderstanding the tax plan. Presumably it will still allow for pass through business expenses to be deducted.
This tax plan is just awful.
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We make a fair bit less than Wrecks, but using some online calculators (of uncertain accuracy), I estimated this plan will cost us over $20K per year with the loss of SALT and capping of property tax deductions and there isn't much in the way of marginal rate reduction to offset.
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4. Work for some organization that has a deferred-compensation 457(b) plan. Seriously, if your employer doesn't have this, they suck. No matter how much free coffee they give you in the cafeteria, it's not $18,000 worth.
We have this 457(b), but AFAICT the account is paid out in full and taxed as soon as you quit your job, so you'll still be taxed at a high rate and won't be able to slowly roll into a Roth. What's the point?
Is this bill taking effect for the 2017 tax year?
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We make a fair bit less than Wrecks, but using some online calculators (of uncertain accuracy), I estimated this plan will cost us over $20K per year with the loss of SALT and capping of property tax deductions and there isn't much in the way of marginal rate reduction to offset.
$12k was the very, very conservative estimate. It's likely it will be a whole lot more. And for what? For what?
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We make a fair bit less than Wrecks, but using some online calculators (of uncertain accuracy), I estimated this plan will cost us over $20K per year with the loss of SALT and capping of property tax deductions and there isn't much in the way of marginal rate reduction to offset.
$12k was the very, very conservative estimate. It's likely it will be a whole lot more. And for what? For what?
Exactly! We sure aren't worried about where our next meal is coming from, but these "cuts" seem non-existent for most people and I'd be happier paying my tax increase if it was to reduce/eliminate the deficit. Instead, it seems like "screw over those blue state assholes who don't support us".
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4. Work for some organization that has a deferred-compensation 457(b) plan. Seriously, if your employer doesn't have this, they suck. No matter how much free coffee they give you in the cafeteria, it's not $18,000 worth.
We have this 457(b), but AFAICT the account is paid out in full and taxed as soon as you quit your job, so you'll still be taxed at a high rate and won't be able to slowly roll into a Roth. What's the point?
That seems highly unlikely. You could potentially get hit with a major tax bill. I know with mine that when I leave my employer, I am free to do whatever I want. Leave it in the account or start taking distributions without penalty, regardless of age.
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4. Work for some organization that has a deferred-compensation 457(b) plan. Seriously, if your employer doesn't have this, they suck. No matter how much free coffee they give you in the cafeteria, it's not $18,000 worth.
Okay--I'm lucky enough to have this. I've had a hard time keeping up with this tax bill.
1. Can I continue to contribute the MAX to my 457 AND 403bs?
2. Can I continue to utilize the 50 plus catch up provision in BOTH?
These were things I was doing before this plan. Am I missing anything here???
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4. Work for some organization that has a deferred-compensation 457(b) plan. Seriously, if your employer doesn't have this, they suck. No matter how much free coffee they give you in the cafeteria, it's not $18,000 worth.
Okay--I'm lucky enough to have this. I've had a hard time keeping up with this tax bill.
1. Can I continue to contribute the MAX to my 457 AND 403bs?
2. Can I continue to utilize the 50 plus catch up provision in BOTH?
These were things I was doing before this plan. Am I missing anything here???
1. Yes
2. Yes
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Don't forget the black hole which is the war/conflict in Afghanistan.
Loss of lives ... drain on taxpayer's money .... no clear goal ... no end in sight.
GW Bush made several large decisions of very poor quality.
The peace dividend that should have addressed the deficit/debt - Bill Clinton made a start on that as he was leaving office - was squandered by the turn of administrations. To pay off a debt of this magnitude would require decades of steady consistent prudent decisions.
Our political system is not exactly set up to provide us with decades of steady consistent prudent decisions, we change out our representatives every two years, our senators every six, our presidents with their own agendas every four to eight.
Also the world doesn't hold still. If there were a Jeopardy! question in the 1970s that was "A hermit communist paranoid nation with a standing army in uniform in the millions and nuclear weapons" the answer would have been "What is China?" China was granted most favored nation trade status to interest it in washing machines, fashion, and capitalism instead of war. It seems to have worked. "Star Wars" type policies are expensive.
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Ways to take advantage of the tax plan:
Try to get convert your job into a pass-through corporation, if at all possible, and especially if your marginal tax rate is above whatever tax rate they end up setting for those corporations. They may exclude "service professionals" like lawyers, doctors, accountants, etc. Some sources say there may be an exception to that exclusion if you make <$500k. Stay tuned to that.
Anyone have other suggestions? (Snark allowed, but as long as its sandwiched into a suggestion - snark - suggestion format).
I suspect many service professionals will explore whether their business isn’t just providing disqualified professional services, but also consists of owning office space and equipment that can be put in a separate entity and then leased to their professional service business, and owning an administrative support service that provides contract workers to their professional service business (e.g., secretarial services, legal assistants, nurses, etc.).
I don't understand what you're saying, or I'm misunderstanding the tax plan. Presumably it will still allow for pass through business expenses to be deducted.
This tax plan is just awful.
Right, but deducting the expenses from your disqualified professional services business leaves the taxpayer with net income that’s all taxed at the regular rate. Splitting the business into two pieces—one that is strictly the disqualified professional services and one that does everything else—should let the TP get some of the overall net income into the “everything else” business, on which the TP may then exclude a portion of the net income under the pass-through treatment.
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It's a good time to be a standard deduction taxpayer! We're looking at an immediate $5,000 cut. We thank you, other taxpayers and future generations, for your sacrifice to our own welfare. We'll be sure to keep her family in our thoughts and prayers.
Now we just need Congress to repeal FICA and we may finally have enough oxygen to create jobs for the hard working men and women of this country.
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Do you consider the expense of the massive defense buildup that won the Cold War? How we outspent the Soviet Union until it collapsed without a shot being fired?
As Reagan learned, and as Governor Brownback learned, and as the current Congress will learn, you can't cut tax revenues drastically and hope to grow your way into more tax revenues.
http://www.businessinsider.com/kansas-experiment-with-tax-cutting-failed-on-its-own-terms-2017-6
https://www.npr.org/2017/06/07/531886684/the-kansas-tax-cut-experiment-comes-to-an-end-as-lawmakers-vote-to-raise-taxes
Kansas lawmakers have voted to roll back a series of major tax cuts that became an example for conservative lawmakers around the country but didn't deliver the growth and prosperity promised by Gov. Sam Brownback, a Republican.
A coalition of conservative Republicans, some of whom voted for sweeping tax cuts in 2012 or defended them in the years since, sided with moderates and Democrats to override Brownback's veto of a $1.2 billion tax increase.
It didn't work in the 80s, it didn't work from 2012-2017, and it won't work in 2018-2020.
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Right, but deducting the expenses from your disqualified professional services business leaves the taxpayer with net income that’s all taxed at the regular rate. Splitting the business into two pieces—one that is strictly the disqualified professional services and one that does everything else—should let the TP get some of the overall net income into the “everything else” business, on which the TP may then exclude a portion of the net income under the pass-through treatment.
Is the exemption based on revenue or net income? If it's revenue, the lease arrangement is a good plan and would be easy to set up.
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Do you consider the expense of the massive defense buildup that won the Cold War? How we outspent the Soviet Union until it collapsed without a shot being fired?
As Reagan learned, and as Governor Brownback learned, and as the current Congress will learn, you can't cut tax revenues drastically and hope to grow your way into more tax revenues.
http://www.businessinsider.com/kansas-experiment-with-tax-cutting-failed-on-its-own-terms-2017-6
https://www.npr.org/2017/06/07/531886684/the-kansas-tax-cut-experiment-comes-to-an-end-as-lawmakers-vote-to-raise-taxes
Kansas lawmakers have voted to roll back a series of major tax cuts that became an example for conservative lawmakers around the country but didn't deliver the growth and prosperity promised by Gov. Sam Brownback, a Republican.
A coalition of conservative Republicans, some of whom voted for sweeping tax cuts in 2012 or defended them in the years since, sided with moderates and Democrats to override Brownback's veto of a $1.2 billion tax increase.
It didn't work in the 80s, it didn't work from 2012-2017, and it won't work in 2018-2020.
Well I can tell you my service providers are going to be paying less in taxes...because I'm cutting back on all of them. Already cut my housekeeper back to every other week--that's $3750 out of her pocket. Cut my assistant back to 10 hours per week--that's $15,600 out of her pocket. And I plan on cutting the lawn guy back to once a month next year, so roughly $1500 out of his pocket.
Doesn't seem like a great way to grow revenue, does it? I assume other people who are in the 38% who will actually see a tax increase from this bill will also be cutting back. Taking money out of the hands of spenders is generally a poor way to grow the economy.
So if anything this is even worse than previous tax cuts for the economy. Previous tax cuts may have been, at most, neutral for the economy. This one is actually going to hurt.
[And before you say anything about my service providers sounding extravagant--I am self-employed and work 70+ hours a week]
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Ways to take advantage of the tax plan:
Try to get convert your job into a pass-through corporation, if at all possible, and especially if your marginal tax rate is above whatever tax rate they end up setting for those corporations. They may exclude "service professionals" like lawyers, doctors, accountants, etc. Some sources say there may be an exception to that exclusion if you make <$500k. Stay tuned to that.
Anyone have other suggestions? (Snark allowed, but as long as its sandwiched into a suggestion - snark - suggestion format).
I suspect many service professionals will explore whether their business isn’t just providing disqualified professional services, but also consists of owning office space and equipment that can be put in a separate entity and then leased to their professional service business, and owning an administrative support service that provides contract workers to their professional service business (e.g., secretarial services, legal assistants, nurses, etc.).
I don't understand what you're saying, or I'm misunderstanding the tax plan. Presumably it will still allow for pass through business expenses to be deducted.
This tax plan is just awful.
Right, but deducting the expenses from your disqualified professional services business leaves the taxpayer with net income that’s all taxed at the regular rate. Splitting the business into two pieces—one that is strictly the disqualified professional services and one that does everything else—should let the TP get some of the overall net income into the “everything else” business, on which the TP may then exclude a portion of the net income under the pass-through treatment.
Ah, got it. Unfortunately I don't have "other services" other than my renting my brain :-)
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I think all of our understanding is that passive income from an LLC is going to be taxed at a much lower rate than active income.
So what about active passthroughs agreeing to share revenue. For example, I'd invest in active passthrough B, generating passive income taxed at a lower rate. Passthrough B would invest in passthrough C, same deal. Passthrough C would invest in me.
So everyone is generating passive income.
Just trying to figure a way out from under the hammer. Can anyone explain to me WHY active passthroughs get preferentially screwed?
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I think all of our understanding is that passive income from an LLC is going to be taxed at a much lower rate than active income.
So what about active passthroughs agreeing to share revenue. For example, I'd invest in active passthrough B, generating passive income taxed at a lower rate. Passthrough B would invest in passthrough C, same deal. Passthrough C would invest in me.
So everyone is generating passive income.
Just trying to figure a way out from under the hammer. Can anyone explain to me WHY active passthroughs get preferentially screwed?
I presumed it's because we're typically a highly-educated group and Real Americans don't trust us.
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You can find the text of the bill that passed here (searchable pdf) from bloomberg: https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rXqXuQfYbRas/v0
Awesome! My favorite undeserved benefit persists! Thanks everyone else!
Yes! I agree. This is gold for those of us with 457s
Not sure I understand... what is proposed to change with 457s? What "undeserved benefit" do you mean, the ability to have a 457 along with 401k?
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We make a fair bit less than Wrecks, but using some online calculators (of uncertain accuracy), I estimated this plan will cost us over $20K per year with the loss of SALT and capping of property tax deductions and there isn't much in the way of marginal rate reduction to offset.
We have to be careful about what we're talking about. Are you paying $20k in extra taxes, or are you losing $20k in deductions (and thus paying $5k in extra taxes at 25% on that 20k)?
Someone asked for numbers? A family like mine, with two parents and three kids and a house, could previously claim 20k in personal and dependent exemptions, plus 10k in mortgage interest, plus 5k in property taxes, plus about $1k in sales tax (my state takes the sales tax deduction instead of the state income tax deduction), plus whatever you donate to charity. So that was previously an easy $36k of tax-free income before even touching your 401k contributions.
The new plan keeps the mortgage interest but repeals all of the rest, so this family will only be able to itemize 10k instead of 36k. That means they will have to take the new 24k standard deduction. 24k is 12k less than the 36k they were sheltering the previous year, so they'll pay 25% taxes on that extra 12k of income, or a $4k tax increase.
The child tax credit would erase $3k of that $4k, at least for the first few years until it is scheduled to phase out. The changes in the brackets would also save us a few hundred. The net effect is that our taxes should only go up by a few hundred dollars per year, next year, but then much more in later years as the child tax credit is phased out and the new lower inflation adjustments kick in to force down the brackets.
But think about all of the secondary effects of this new plan. Charitable deductions are no longer deductible, so charities will receive less. Whatever happend to "compassionate conservates"? Mortgage interest is technically not revoked, but since all of the other deductions and exemptions are revoked the mortgage interest one is worthless unless you have more than 24k of mortgage interest, which restricts it to a very narrow band of people who live in high tax states and own home between about 700k and 1mil dollars. State sales and income taxes lose their deductible status, which has a whole long list of add-on effects that I'm still working through but which don't look good for anyone. I don't think Republicans, or anyone else really, has spent the time to think through all of these repercussions. It will be an interesting next few weeks as all of this comes to light.
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Does anyone know how the new AMT is supposed to work? It would seem to me that someone taking just the standard deduction could still pay AMT under the Senate bill - so effectively, the AMT simply takes away the benefit of the new lower tax brackets for people above the threshold?
I also went through an example last night that shows that I would pay the AMT under the Senate bill, even if I take the standard deduction. If your effective tax rate is less than 28%, and income is basically from W-2 income, there’s a zone where you seem to be subject to AMT without any itemized deductions. I don’t know whether that’s the “intent.” It seems like an oddity to apply an “alternative” system in that case. An obvious “fix” would be to exclude taxpayers who elect the standard deduction. I didn’t look closely, because it doesn’t apply to me, but it seems that income that qualifies for the pass-through treatment is not proposed to be added back for AMT purposes.
You folks may have missed my earlier post regarding AMT.
The AMT numbers don't make sense. They would still result in a joint filer at the top of the 24% bracket paying AMT, even if they're not claiming anything other than the standard deduction. The whole AMT concept is designed to limit deductions and force some level of tax payments. If somebody isn't deducting anything, I don't understand how they could still have to pay the AMT.
I tried to decipher the inflation adjustments, and it may be that the thresholds published in the bill (exemption and phaseout threshold), are in 2011 dollars, which will then be escalated to 2018 equivalents. That would "almost" eliminate the AMT for the situation I described above. I will be interested in hearing others' understanding of the revised AMT for individuals.
Edit: I just ran the comparison of the published AMT thresholds against the original Senate brackets. In this case, the AMT stays just below the 25% bracket top. Do you suppose that when they wedged the AMT revival in at the eleventh hour they forgot to take into account their earlier amendment to reduce the brackets. Nah, that would never happen in Washington.........would it?
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We make a fair bit less than Wrecks, but using some online calculators (of uncertain accuracy), I estimated this plan will cost us over $20K per year with the loss of SALT and capping of property tax deductions and there isn't much in the way of marginal rate reduction to offset.
$12k was the very, very conservative estimate. It's likely it will be a whole lot more. And for what? For what?
For the aristocracy!
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We make a fair bit less than Wrecks, but using some online calculators (of uncertain accuracy), I estimated this plan will cost us over $20K per year with the loss of SALT and capping of property tax deductions and there isn't much in the way of marginal rate reduction to offset.
We have to be careful about what we're talking about. Are you paying $20k in extra taxes, or are you losing $20k in deductions (and thus paying $5k in extra taxes at 25% on that 20k)?
The former is what I implied and what I mean.
We paid a hair over $63K in state taxes in 2016 as an example. That was perhaps slightly higher than the prior years but was not a particularly unusual year. (From the above, you can conclude that our marginal rate is also higher than 25%.)
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Ways to take advantage of the tax plan:
Try to get convert your job into a pass-through corporation, if at all possible, and especially if your marginal tax rate is above whatever tax rate they end up setting for those corporations. They may exclude "service professionals" like lawyers, doctors, accountants, etc. Some sources say there may be an exception to that exclusion if you make <$500k. Stay tuned to that.
Anyone have other suggestions? (Snark allowed, but as long as its sandwiched into a suggestion - snark - suggestion format).
I suspect many service professionals will explore whether their business isn’t just providing disqualified professional services, but also consists of owning office space and equipment that can be put in a separate entity and then leased to their professional service business, and owning an administrative support service that provides contract workers to their professional service business (e.g., secretarial services, legal assistants, nurses, etc.).
That's a really good idea!
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We have this 457(b), but AFAICT the account is paid out in full and taxed as soon as you quit your job, so you'll still be taxed at a high rate and won't be able to slowly roll into a Roth. What's the point?
Is this bill taking effect for the 2017 tax year?
You can roll the 457b into an IRA and withdraw it slowly over time, just like a 401k. It is not taxed in full at the time of retirement (at least not my parents' ones).
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Anyone know if the long-term capital gains rates changed at all?
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I found a site that calculates the impact of the House and the Senate tax plan.
Check out: http://taxplancalculator.com/calc
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I found a site that calculates the impact of the House and the Senate tax plan.
Check out: http://taxplancalculator.com/calc
Please note that calculator is VERY simplified, and apparently simplified in a biased way. It doesn't account for 401k or 457b contributions, so you have to manually subtract those off of your income. It doesn't account for dividend or capital gains income. It doesn't account for health insurance subsidies or the impact of repealing the individual mandate on next year's premiums (aka the death spiral). It doesn't account for HSA or FSA contributions, or student loans or tuition wavers, or rental expenses, or any of a thousand other things that might totally change your taxes due. And most importantly, it only applies to 2018 but the brackets and exemptions (in the Senate plan) start phasing out immediately so this calculator gives you the best case scenario, not your real situation in the future.
It also very incorrectly estimated my current SALT deductions, like it thinks I can currently deduct $12k, when in reality it's more like $3k. That $9k difference shifts the baseline dramatically. That site says the new plan should save me $2k in 2018, but it's assuming I'm currently deducting $9k more than I really am. That's falsely giving me credit for almost $3k of taxes paid, making the current situation look worse than reality and the GOP tax plan look better than reality (and then suggesting it will save me $2k instead of costing me $1k) by artificially inflating the amount I currently pay. I'm not sure if this is deliberate obfuscation by a biased programmer, or just a really shitty estimation tool, but it means you really have to double check the "current tax system" results against your 2016 return pretty carefully to see if they have any idea wtf they're talking about.
I'm also really struggling to disentangle the effects of owning rental properties of various sorts in this new plan.
With that said, it does do a nice job of summarizing the changes to exemptions and brackets of the House and Senate versions. In my cases, that means being forced into the new standard deduction despite the errors mentioned above. Unfortunately, it doesn't provide much help translating that shift to the standard deduction into the secondary impacts of the loss deductibility for things like charitable donations, mortgage interest, and property taxes, and the resulting complications to things like rental depreciation, 529 contributions, EITC or simplified FAFSA eligibility, and the dramatic income reductions that accompany FIREing off of a crazy high savings rate.
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I found a site that calculates the impact of the House and the Senate tax plan.
Check out: http://taxplancalculator.com/calc
In addition to the points Sol raised, it doesn't address the AMT in a useful way, and seems really misleading if one enters one's current AMT payment.
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We make a fair bit less than Wrecks, but using some online calculators (of uncertain accuracy), I estimated this plan will cost us over $20K per year with the loss of SALT and capping of property tax deductions and there isn't much in the way of marginal rate reduction to offset.
We have to be careful about what we're talking about. Are you paying $20k in extra taxes, or are you losing $20k in deductions (and thus paying $5k in extra taxes at 25% on that 20k)?
Someone asked for numbers?......... It will be an interesting next few weeks as all of this comes to light.
Thanks for sharing your thinking, Sol. I think it will be an interesting 18 months. Until we get through the tax filing season for 2018, I don’t think we will have a clear picture. I will be interested to see if this creates a recession in blue America, if only because people pull back because of uncertainty and adjustment.
The main thing I am doing is pulling deductions forward into this year and thinking about whether I want to switch my TSP contributions to Roth.
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We make a fair bit less than Wrecks, but using some online calculators (of uncertain accuracy), I estimated this plan will cost us over $20K per year with the loss of SALT and capping of property tax deductions and there isn't much in the way of marginal rate reduction to offset.
We have to be careful about what we're talking about. Are you paying $20k in extra taxes, or are you losing $20k in deductions (and thus paying $5k in extra taxes at 25% on that 20k)?
Someone asked for numbers?......... It will be an interesting next few weeks as all of this comes to light.
Thanks for sharing your thinking, Sol. I think it will be an interesting 18 months. Until we get through the tax filing season for 2018, I don’t think we will have a clear picture. I will be interested to see if this creates a recession in blue America, if only because people pull back because of uncertainty and adjustment.
The main thing I am doing is pulling deductions forward into this year and thinking about whether I want to switch my TSP contributions to Roth.
What deductions are you pulling forward into this year?
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I found a site that calculates the impact of the House and the Senate tax plan.
Check out: http://taxplancalculator.com/calc
VERY simplified, indeed!
Ignored EITC (fully refundable), ignored AOTC (partially refundable), made it appear that the House and Senate versions have fully refundable family credits (there's a caveat that things might not be as they appear, but I'm pretty certain only the first $1k of the CTC may be refundable, not the other portions), ignores the Retirement Saver's credit...
This calculator makes it appear that I'd get a larger refund with both the House and the Senate versions, but as they haven't increased or added any new refundable credits that I'm aware of, at best my refund will be exactly the same. For now, until things begin expiring.
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We make a fair bit less than Wrecks, but using some online calculators (of uncertain accuracy), I estimated this plan will cost us over $20K per year with the loss of SALT and capping of property tax deductions and there isn't much in the way of marginal rate reduction to offset.
We have to be careful about what we're talking about. Are you paying $20k in extra taxes, or are you losing $20k in deductions (and thus paying $5k in extra taxes at 25% on that 20k)?
Someone asked for numbers?......... It will be an interesting next few weeks as all of this comes to light.
Thanks for sharing your thinking, Sol. I think it will be an interesting 18 months. Until we get through the tax filing season for 2018, I don’t think we will have a clear picture. I will be interested to see if this creates a recession in blue America, if only because people pull back because of uncertainty and adjustment.
The main thing I am doing is pulling deductions forward into this year and thinking about whether I want to switch my TSP contributions to Roth.
What deductions are you pulling forward into this year?
Charitable. We have a multiyear planned gift, plus contributions we would ordinarily make in the first six months of 2018. Saving those as deductions will save about $4000 in taxes.
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The debt is going to increase anyway. You know that, right?
This Republican tax plan should be viewed as more than a tax plan, it's also a geopolitical power maneuver to keep us relevant and check the influence of competitors. Similar to "Star Wars."
So, the debt is going to increase anyway, so give the wealthiest more money? That makes no sense.
Neither does that last quoted statement. What about the tax plan is going to keep the United States relevant exactly?
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I'm also really struggling to disentangle the effects of owning rental properties of various sorts in this new plan.
As far as I have been able to find thus far, not much for the little guys. The real estate CPA's doc https://docs.google.com/document/d/1wXgWAnxAvPcUVK2a8Ixlqvpts6pirkDZ49Jba5Cmzwc/edit#heading=h.27o9199n8kgc
had everyone worried when the House plan initially made real estate active income subject to SE taxes. That bit didn't made it in the passed House bill and is not in the Senate bill at all. The rehab credit is being severely reduced (senate) or eliminated (house).
If your rental business is big enough, S corps may be attractive enough that some folks decide to switch over. Also bonus depreciation from 50% increased to 100% and property amort is decreasing to 25 years (big deal for commercial that was 39 years). There are some wording changes around 1031 seeming to eliminate the already winnowed down possibility of use for vacation houses.
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Thanks for sharing your thinking, Sol. I think it will be an interesting 18 months. Until we get through the tax filing season for 2018, I don’t think we will have a clear picture. I will be interested to see if this creates a recession in blue America, if only because people pull back because of uncertainty and adjustment.
I was thinking the same thing. There's probably a fair chance that consumer spending will decrease in Q1 of next year as everyone absorbs changes in their tax situation. Corporations will be living it up, and exec bonuses will increase, but consumers can't be immediately sure if they'll be paying more or less.
The main thing I am doing is pulling deductions forward into this year and thinking about whether I want to switch my TSP contributions to Roth.
I'm also pulling forward charitable gifts.
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Are most of the people getting punched in the wallet because they count on the mortgage and property tax deductions?
Yes, and the personal and dependent exemptions that we're losing.
We were able to itemize far more than 24k, and now we can't anymore. For 2018 it will be about $10-12k of income that I will have to pay taxes on that was previously sheltered. The increased child tax credit takes some of the sting out of it, but that's s temporary measure and will be phasing out over the next few years.
An odd effect of that, although not directly relevant to Sol in WA, is that many who lose the ability to itemize will consequently pay higher state income taxes, too.
My state allows either a very modest standard deduction (on the order of $4,300 for MFJ) or the balance of the taxpayer’s federal itemized deductions after subtracting this state’s income taxes. So those who had been itemizing (just under 50%), but no longer can, will see their state taxable income increased by the amount by which their previously itemized deductions (other than state income tax) would have exceeded that $4,300 standard deduction.
So glad someone finally noticed that...AGI will be higher for many which will definitely increase SALT taxes. Will be the case for us in NY...not complaining, just wondered how that is not being addressed in the media.
No systemic thinking used in journalism...
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So glad someone finally noticed that...AGI will be higher for many which will definitely increase SALT taxes.
This bill is FULL of those kind of hidden repercussions, that haven't yet been widely reported by the press. I consider this to be one of the more minor ones, but you're right that the plan tries to lower tax bracket rates but increase the amount of income you pay those rates on, and that's roughly a wash for federal taxes but it has a whole host of secondary consequences associated with increasing your AGI, including increasing your state taxes due.
Also changing your EITC and FAFSA eligibility. Also changing your long term capital gains taxes. And a bunch of others. Basically any credit or exemption that is tied to or phased out by your income is suddenly going to change, and none of the tax evaluations I have seen published so far have taken any of that into account. But the short version is pretty obvious; by increasing your AGI you're going to get fewer benefits.
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Sol cares about the little people too much. At which point do you stop feeling sorry for the electorate that keeps getting shat on but comes back for more?
Who asked you to feel sorry?
As one of the "little people" I keep being scolded about voting against my best interests. The scolds don't know what my best interests are. They think they know, but they don't, because they don't know me.
We "little people" have our own powers, our own wisdoms, and our own virtues. Don't feel sorry for us, it's unpleasant and patronizing, and annoying. We want jobs; then we'll take it from there.
+1...they must misunderstand their desire to conform to the one true narrative listed on the pages on the NY Times as the only true version of life. I have seen that somewhere else...under Stalin! 'Conform to what we tell you is good for you'...'yes, comrads!' Is the only acceptable answer. Yes, I saw and heard that in my formative years growing up under socialism....Sad! I am for freedom of though for everyone! Go, wise virgin!
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Do you consider the expense of the massive defense buildup that won the Cold War? How we outspent the Soviet Union until it collapsed without a shot being fired?
As Reagan learned, and as Governor Brownback learned, and as the current Congress will learn, you can't cut tax revenues drastically and hope to grow your way into more tax revenues.
http://www.businessinsider.com/kansas-experiment-with-tax-cutting-failed-on-its-own-terms-2017-6
https://www.npr.org/2017/06/07/531886684/the-kansas-tax-cut-experiment-comes-to-an-end-as-lawmakers-vote-to-raise-taxes
Kansas lawmakers have voted to roll back a series of major tax cuts that became an example for conservative lawmakers around the country but didn't deliver the growth and prosperity promised by Gov. Sam Brownback, a Republican.
A coalition of conservative Republicans, some of whom voted for sweeping tax cuts in 2012 or defended them in the years since, sided with moderates and Democrats to override Brownback's veto of a $1.2 billion tax increase.
It didn't work in the 80s, it didn't work from 2012-2017, and it won't work in 2018-2020.
Well I can tell you my service providers are going to be paying less in taxes...because I'm cutting back on all of them. Already cut my housekeeper back to every other week--that's $3750 out of her pocket. Cut my assistant back to 10 hours per week--that's $15,600 out of her pocket. And I plan on cutting the lawn guy back to once a month next year, so roughly $1500 out of his pocket.
Doesn't seem like a great way to grow revenue, does it? I assume other people who are in the 38% who will actually see a tax increase from this bill will also be cutting back. Taking money out of the hands of spenders is generally a poor way to grow the economy.
So if anything this is even worse than previous tax cuts for the economy. Previous tax cuts may have been, at most, neutral for the economy. This one is actually going to hurt.
[And before you say anything about my service providers sounding extravagant--I am self-employed and work 70+ hours a week]
So are you actually advocating that people like you in the 1% of income should play less tax? That it is not fair that the people who create jobs for others are taxed more?
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I found a site that calculates the impact of the House and the Senate tax plan.
Check out: http://taxplancalculator.com/calc
Please note that calculator is VERY simplified, and apparently simplified in a biased way. It doesn't account for 401k or 457b contributions, so you have to manually subtract those off of your income. It doesn't account for dividend or capital gains income. It doesn't account for health insurance subsidies or the impact of repealing the individual mandate on next year's premiums (aka the death spiral). It doesn't account for HSA or FSA contributions, or student loans or tuition wavers, or rental expenses, or any of a thousand other things that might totally change your taxes due. And most importantly, it only applies to 2018 but the brackets and exemptions (in the Senate plan) start phasing out immediately so this calculator gives you the best case scenario, not your real situation in the future.
It also very incorrectly estimated my current SALT deductions, like it thinks I can currently deduct $12k, when in reality it's more like $3k. That $9k difference shifts the baseline dramatically. That site says the new plan should save me $2k in 2018, but it's assuming I'm currently deducting $9k more than I really am. That's falsely giving me credit for almost $3k of taxes paid, making the current situation look worse than reality and the GOP tax plan look better than reality (and then suggesting it will save me $2k instead of costing me $1k) by artificially inflating the amount I currently pay. I'm not sure if this is deliberate obfuscation by a biased programmer, or just a really shitty estimation tool, but it means you really have to double check the "current tax system" results against your 2016 return pretty carefully to see if they have any idea wtf they're talking about.
I'm also really struggling to disentangle the effects of owning rental properties of various sorts in this new plan.
With that said, it does do a nice job of summarizing the changes to exemptions and brackets of the House and Senate versions. In my cases, that means being forced into the new standard deduction despite the errors mentioned above. Unfortunately, it doesn't provide much help translating that shift to the standard deduction into the secondary impacts of the loss deductibility for things like charitable donations, mortgage interest, and property taxes, and the resulting complications to things like rental depreciation, 529 contributions, EITC or simplified FAFSA eligibility, and the dramatic income reductions that accompany FIREing off of a crazy high savings rate.
SOL, your 4k extra in tax will be offset by child credit of $1600 each (for 3 kids), not $1000 per your estimate, to completely erase the 4k.
Perhaps you did not take that into account the increase in child credit.
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SOL, your 4k extra in tax will be offset by child credit of $1600 each (for 3 kids), not $1000 per your estimate, to completely erase the 4k.
Perhaps you did not take that into account the increase in child credit.
If you run the calculator, you'll see that it definitely does take into account the expanded child tax credits. That's the whole gimmick. Making those temporarily larger is how they make the bill look like a tax cut in the short term, even though it's a tax increase for most folks in the long term.
I found a site that calculates the impact of the House and the Senate tax plan.
Check out: http://taxplancalculator.com/calc
Please note that calculator is VERY simplified
I spent some more time with that calculator, trying to force it to give me more realistic numbers. Because it reports artificially high SALT taxes under the current tax system, I had to modify the "other deductions" box down to a fake (lower) number to get my total deductions to line up. I think I can make it work, by putting my AGI in the "income" box and manually adjusting the deductions box until they add up to the right total, even if the breakdown is wrong.
Doing it this way at least gives me numbers that look right, under the current system. The taxable income, deductions, and tax bill boxes on the results page all line up correctly with my actual 2016 return. Since I'm assuming I'll be forced into the standard deduction under either the House or the Senate bill, and lose it all anyway, I'm not sure it matters.
So strictly on the brackets side, this plan looks like it would save my family about $4k in 2018, on about $100k of taxable income. It would increase our taxable income by about $9k, which is very close to what I was calculating by other methods, but it taxes that new higher income at a lower effective rate by adjusting the bracket cutoffs. Unfortunately, every penny of that $4k advantage is due to the expanded child tax credit which is temporary and will phase out over time, taking us back to where we started. And the new inflation adjustments will push up the bracket rates over time, of course, but at least in the first year that calculator says this plan would save us money on taxes. It will require a separate analysis to figure out what it will cost us in increased health care premiums due to repealing the individual mandate.
And all of this assumes that both our HSA and FSA would stay deducible, which I'm not entirely clear on yet. What else is in this tax bill that would raise your AGI?
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The debt is going to increase anyway. You know that, right?
This Republican tax plan should be viewed as more than a tax plan, it's also a geopolitical power maneuver to keep us relevant and check the influence of competitors. Similar to "Star Wars."
So, the debt is going to increase anyway, so give the wealthiest more money? That makes no sense.
Neither does that last quoted statement. What about the tax plan is going to keep the United States relevant exactly?
Reduction in the corporate rate and repatriation of funds held out of the country.
As a thought experiment, imagine yourself as a competitor to the United States, as things are now, and alternatively as they would be under the new plan. Which do you like better?
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Sol, 25% of 12 is 3, so afaik you'll get a 1.8k credit (for now). Otherwise I agree with you.
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Well... everyone who makes an income gets taxed. Some people get reductions/exemptions from the tax based on certain variables, including the amount of income they make, but all labor/income is taxed (unless you are getting paid 'under the counter').
False. 45% of Americans pay $0 in income tax. If you pay $0 income tax, you made an income that was not taxed. Period.
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I have a couple of questions.
I see for a married couple the first $24k is at 0% and the 12% upto $90k.
So is that $90k - $24k = $66k x 12% = $7,920 or 12% x $90k = $10,800?
https://www.washingtonpost.com/graphics/2017/business/tax-bill-q-and-a/?utm_term=.a3f9eea9ddb3
Also,
"Tax Preparation
Taxpayers who itemize their returns would no longer be able to deduct the amount that their tax preparation specialist billed them or any similar expenses. Since the tax bill aims to reduce the number of taxpayers who itemize, in theory fewer people should require professional tax help (with the exception of wealthier people, who can afford to lose this break*)."
* Seems like the New York Times is judging!
I have a sole proprietor business, do I lose this deduction?
I hate paying my tax preparer, but an hour in his office and it's done, plus I have someone to fall back on.
Not sure if this has been answered yet, but no, you don't lose this. What you reference is people who deduct tax preparer fees on Schedule A, but as a Sole Proprietor, you'd deduct them on Schedule C as a business expense.
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I am single, no kids, live in NY, very high property taxes, and I make high 6 figures/low 7 figures (my income is variable because I'm self-employed). I am a consultant so no special treatment for my pass through.
Yeah I can afford it. If it were being used to give the middle middle class a meaningful tax break, or to pay for health care or infrastructure or educational initiatives I'd be fine with that. But I don't like money siphoned out of my pocket to give to the ultra-wealthy and corporations.
There's a little cognitive dissonance here. You make about $1 million a year. You ARE the ultra-wealthy.
http://www.globalrichlist.com/
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Well... everyone who makes an income gets taxed. Some people get reductions/exemptions from the tax based on certain variables, including the amount of income they make, but all labor/income is taxed (unless you are getting paid 'under the counter').
False. 45% of Americans pay $0 in income tax. If you pay $0 income tax, you made an income that was not taxed. Period.
Most people get paid on a W-2, so they still pay FICA regardless of their federal income tax rate. They also pay state and local taxes, sales tax, property tax, DMV taxes, etc.
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I am single, no kids, live in NY, very high property taxes, and I make high 6 figures/low 7 figures (my income is variable because I'm self-employed). I am a consultant so no special treatment for my pass through.
Yeah I can afford it. If it were being used to give the middle middle class a meaningful tax break, or to pay for health care or infrastructure or educational initiatives I'd be fine with that. But I don't like money siphoned out of my pocket to give to the ultra-wealthy and corporations.
There's a little cognitive dissonance here. You make about $1 million a year. You ARE the ultra-wealthy.
High income doesn't necessarily mean ultra-wealthy.
Wealth is about assets; high income that stops if you stop working isn't nearly the same thing.
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I haven't read all the details about the tax plan, but on the surface, it seems like a big gift to any "FIRE"-early-retiree in a LCOL area.... Back-of-the-napkin calculations seem to indicate almost no tax burden for some folks who have a smallish/modest amount of investment income to cover reasonable LCOL living expenses.
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Today the national debt is at a frightening level and will exponentially increase.
The math for paying it off does not work. Maybe 10 years and a trillion dollars or so ago we would've had a chance to do something meaningful about it, except, well, Iraq War and great recession. This debt will never be paid off and it will eventually have to be settled by devaluation of the currency or the sale of hard assets.
Or we can try to grow economically, and buy ourselves time, and possibly reorganize and reprioritize.
This Republican tax plan should be viewed as more than a tax plan, it's also a geopolitical power maneuver to keep us relevant and check the influence of competitors. Similar to "Star Wars."
This is complete nonsense. In order for "growing economically" to "buy us time" before the debt day-of-reckoning, the tax plan would have to reduce the deficit. Even given Republicans most optimistic (to put it charitably) assumptions about how much this will grow the economy, this plan increases the deficit in a time of relative prosperity. Never mind what it'll do in the next economic downturn. This can only possibly make the crisis bigger and sooner.
Sure the corporations may be sitting pretty thanks to their next-to-non-existent (since the bill leaves all their loopholes their tax rate will be in the teens or possibly single-digits) tax rate - and have plenty of money to relocate to wherever they want - but the country will be in ruins.
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I am single, no kids, live in NY, very high property taxes, and I make high 6 figures/low 7 figures (my income is variable because I'm self-employed). I am a consultant so no special treatment for my pass through.
Yeah I can afford it. If it were being used to give the middle middle class a meaningful tax break, or to pay for health care or infrastructure or educational initiatives I'd be fine with that. But I don't like money siphoned out of my pocket to give to the ultra-wealthy and corporations.
There's a little cognitive dissonance here. You make about $1 million a year. You ARE the ultra-wealthy.
High income doesn't necessarily mean ultra-wealthy.
Wealth is about assets; high income that stops if you stop working isn't nearly the same thing.
Once a single year's income makes you wealthy (and you've had that income for the better part of a decade), I don't see how you can possibly be not wealthy. Many here would retire after 1-2 years of his income, complaining that an extra 1‰ of his income his going to the ultra wealthy is the height of cognitive dissonance.
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The child tax credit is temporary by definition, unless you are raising Peter Pan.
There is a sweet spot in the new laws for higher middle class incomes - those that did not receive any credit before, could now be receiving the full increased credit. So a family with three kids could be $6,000 better off before even taking into account the shift in brackets (senate plan is 2K per child).
Having actually run the numbers (not using an online calculator), I come out about 3K better off under the House plan, and about 3.3K better off under Senate plan. This is despite losing my itemized deductions, only having 1 child, and getting screwed on the HOH bracket shift (which NOBODY is talking about).
Larger families that don't itemize will do even better. To me, this is a significant tax break to the middle class.
Tip: make sure you pay your Jan mortgage payment before Dec 31 to increase your deduction for 2017, as it may not be deductible in 2018.
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Did they change the capital gains exclusion timeframe from the 2of5 years to 5of8 years? I was mentioned earlier, but I haven't seen any mention of it since the vote.
Also, I noticed that the Estate tax wasn't repealed, but the amount for exclusion was doubled. Seems like a reasonable compromise to me.
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Unfortunately, every penny of that $4k advantage is due to the expanded child tax credit which is temporary and will phase out over time, taking us back to where we started.
The child tax credit is always temporary...on a per family basis ;-)
(Our nipper turns 16 in 2023. That'll do it for us).
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Did they change the capital gains exclusion timeframe from the 2of5 years to 5of8 years? I was mentioned earlier, but I haven't seen any mention of it since the vote.
Everything I've seen says yes, the change from 2/5 to 5/8 stayed.
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+1...they must misunderstand their desire to conform to the one true narrative listed on the pages on the NY Times as the only true version of life. I have seen that somewhere else...under Stalin! 'Conform to what we tell you is good for you'...'yes, comrads!' Is the only acceptable answer. Yes, I saw and heard that in my formative years growing up under socialism....Sad! I am for freedom of though for everyone! Go, wise virgin!
A common alt-right troll tactic is to dismiss all criticism with "stop being thought police" "I thought this was a free country" false equivalence. No one is telling you or Wise what to think, you just have to be able to defend it or you'll continue to be ignored.
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Well... everyone who makes an income gets taxed. Some people get reductions/exemptions from the tax based on certain variables, including the amount of income they make, but all labor/income is taxed (unless you are getting paid 'under the counter').
False. 45% of Americans pay $0 in income tax. If you pay $0 income tax, you made an income that was not taxed. Period.
I'm not accountant so maybe I'm missing something, but are you saying those 45% of Americans don't have to fill out a W2 form and aren't legally required to claim their income every year to be taxed? My understanding is they do. And of course a significant amount of those people pay a payroll tax (or self employment tax), which makes that 45% completely wrong.
Very few people who inherit estates have to pay estate tax. The only people that do are ones with estates valued more than $11m. So it's not a death tax, and the people who call it that are either confused or are being disingenuous.
If you want to call me disingenuous because I say everyone's income (being paid legally) is taxable although some people are exempt from having to pay tax on their income... I can live with that. We, too, can agree to disagree.
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You all should cut the nonsense out. This site is about FIRE and how to achieve these goals. Stop the petty stuff. Talk about how we can work this new tax plan to our advantage to achieve our goals.
This is stuff you CAN control.
I can offer something along these lines that no one else has mentioned yet. I can tell you how to get rich under this Republican tax plan, and in the national circumstances current today, and with the current mood.
Invest in the central two-thirds of the United States.
The day of capitalists running around the world looking for a third-world person poor and miserable enough to work in their sweatshop is past. The day of sitting on the west coast and on the east coast and making the easy money, that day is challenged and sliding away. You can read the bill, but if you want to make money, read the signs of these times.
Now send me a dollar for me newsletter. :)
Globalization is not magically going away for better or worse. Short of NAFTA falling apart or a trade war due to some new taxes. But those will just cause striff, not end it all together.
Tech bubbles like the bay look like they have peaked. And I agree a lot of new Midwestern cities are seeing job explosions as people are looking for areas with better cost of living and good jobs like Texas or Minnesota. But the reality is the bulk of the money will remain on the coasts. Because wealthy people want to live by the ocean and in our largest cities which act as traveling hubs.
The new taxes changes are annoying for some, but for the ultra wealthy in Cali and New York there are plenty of perks in their to make up for say changes to the mortgage tax break.
The reality though remains for most working folk that if you are trained in an industry that is growing you will continue to do well.
If people are hoping this will give more power to red States they should be careful what they wish for. Every year I go back to Texas I see more and more hall marks of West coast city culture moving there as big engineering firms hire more engineers from around the globe.
But to a degree I would say big companies, like Amazon, agree with your comment that we should invest in Midwestern states. We will see how that goes and Eric the current tech bubbles pops...
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Do you consider the expense of the massive defense buildup that won the Cold War? How we outspent the Soviet Union until it collapsed without a shot being fired?
As Reagan learned, and as Governor Brownback learned, and as the current Congress will learn, you can't cut tax revenues drastically and hope to grow your way into more tax revenues.
http://www.businessinsider.com/kansas-experiment-with-tax-cutting-failed-on-its-own-terms-2017-6
https://www.npr.org/2017/06/07/531886684/the-kansas-tax-cut-experiment-comes-to-an-end-as-lawmakers-vote-to-raise-taxes
Kansas lawmakers have voted to roll back a series of major tax cuts that became an example for conservative lawmakers around the country but didn't deliver the growth and prosperity promised by Gov. Sam Brownback, a Republican.
A coalition of conservative Republicans, some of whom voted for sweeping tax cuts in 2012 or defended them in the years since, sided with moderates and Democrats to override Brownback's veto of a $1.2 billion tax increase.
It didn't work in the 80s, it didn't work from 2012-2017, and it won't work in 2018-2020.
Well I can tell you my service providers are going to be paying less in taxes...because I'm cutting back on all of them. Already cut my housekeeper back to every other week--that's $3750 out of her pocket. Cut my assistant back to 10 hours per week--that's $15,600 out of her pocket. And I plan on cutting the lawn guy back to once a month next year, so roughly $1500 out of his pocket.
Doesn't seem like a great way to grow revenue, does it? I assume other people who are in the 38% who will actually see a tax increase from this bill will also be cutting back. Taking money out of the hands of spenders is generally a poor way to grow the economy.
So if anything this is even worse than previous tax cuts for the economy. Previous tax cuts may have been, at most, neutral for the economy. This one is actually going to hurt.
[And before you say anything about my service providers sounding extravagant--I am self-employed and work 70+ hours a week]
So are you actually advocating that people like you in the 1% of income should play less tax? That it is not fair that the people who create jobs for others are taxed more?
Clarify? You are not making sense.
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It's a good time to be a standard deduction taxpayer! We're looking at an immediate $5,000 cut. We thank you, other taxpayers and future generations, for your sacrifice to our own welfare. We'll be sure to keep her family in our thoughts and prayers.
Now we just need Congress to repeal FICA and we may finally have enough oxygen to create jobs for the hard working men and women of this country.
Yes if you are not heavily itimizing this will be a break. But the people that helps remains the same. The extra deduction is peanuts for people making around $110k a year or less.
But if you are well into the mid $100k the extra deductions are still worth twice as much. My most recent calcs showed the Republican plan at least in year one is about equivalent to owning half a million home and itimizing in 2017 in California.
The phase outs concern me but not sure if all those will really happen.
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I am single, no kids, live in NY, very high property taxes, and I make high 6 figures/low 7 figures (my income is variable because I'm self-employed). I am a consultant so no special treatment for my pass through.
Yeah I can afford it. If it were being used to give the middle middle class a meaningful tax break, or to pay for health care or infrastructure or educational initiatives I'd be fine with that. But I don't like money siphoned out of my pocket to give to the ultra-wealthy and corporations.
There's a little cognitive dissonance here. You make about $1 million a year. You ARE the ultra-wealthy.
High income doesn't necessarily mean ultra-wealthy.
Wealth is about assets; high income that stops if you stop working isn't nearly the same thing.
Once a single year's income makes you wealthy (and you've had that income for the better part of a decade), I don't see how you can possibly be not wealthy. Many here would retire after 1-2 years of his income, complaining that an extra 1‰ of his income his going to the ultra wealthy is the height of cognitive dissonance.
I think you may have poor reading comprehension.
My income is in the 99.8th percentile according to the WSJ. Yes, I make a lot of money.
My taxes are going up. Way up, thanks to this bill. Primarily due to loss of state and local taxes as well as a number of other deductions that I use.
That money is being siphoned out of my pocket and given to the ultra wealthy--the 1% of the 0.1%.
As I said before, my taxes going up to support something of value, such as health care, a real tax, permanent tax cut for the middle class, infrastructure, etc. would be fine with me. I am NOT OKAY with paying substantially more in taxes to give it to the idle rich.
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+1...they must misunderstand their desire to conform to the one true narrative listed on the pages on the NY Times as the only true version of life. I have seen that somewhere else...under Stalin! 'Conform to what we tell you is good for you'...'yes, comrads!' Is the only acceptable answer. Yes, I saw and heard that in my formative years growing up under socialism....Sad! I am for freedom of though for everyone! Go, wise virgin!
A common alt-right troll tactic is to dismiss all criticism with "stop being thought police" "I thought this was a free country" false equivalence. No one is telling you or Wise what to think, you just have to be able to defend it or you'll continue to be ignored.
You seem to agree with my point and provide ample evidence for it. By dismissing my lived-in experience under a totalitarian system with thought control in place
which seems vaguely similar to what I observe in my own circumstances now, only strengthens my point.
Don't tell others what is good for them...the communist party is usually the one that tells you what is in your best interest. But again, how you would be familiar with that??
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As I said before, my taxes going up to support something of value, such as health care, a real tax, permanent tax cut for the middle class, infrastructure, etc. would be fine with me. I am NOT OKAY with paying substantially more in taxes to give it to the idle rich.
Would it be fair to say you have qualms with the spending priority, rather than the level of taxation in the new tax bill?
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As I said before, my taxes going up to support something of value, such as health care, a real tax, permanent tax cut for the middle class, infrastructure, etc. would be fine with me. I am NOT OKAY with paying substantially more in taxes to give it to the idle rich.
Would it be fair to say you have qualms with the spending priority, rather than the level of taxation in the new tax bill?
I don't think I can be any more clear.
And if your next argument is that tax cuts for "job creators" will grow the economy, as has been discussed ad nauseum it has been proven over and over that they don't. Further, there is absolutely no reason to further stimulate the economy.
I also find it absolutely repulsive that this bill provides generous tax breaks for passive pass throughs but specifically excludes those who work for their money.
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At this point I just find this funny. Because the studies coming out very clearly show families pulling in well over $100k doing well from this and everyone below that line getting only a token sub $500 a year break... Which I imagine encompasses a whole big chunk of die hard Trumpers.
But I am sure we will all go out and hire more people with our new found wealth and not simply pump stock prices to gasp, make us all more money...
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You all should cut the nonsense out. This site is about FIRE and how to achieve these goals. Stop the petty stuff. Talk about how we can work this new tax plan to our advantage to achieve our goals.
This is stuff you CAN control.
I can offer something along these lines that no one else has mentioned yet. I can tell you how to get rich under this Republican tax plan, and in the national circumstances current today, and with the current mood.
Invest in the central two-thirds of the United States.
The day of capitalists running around the world looking for a third-world person poor and miserable enough to work in their sweatshop is past. The day of sitting on the west coast and on the east coast and making the easy money, that day is challenged and sliding away. You can read the bill, but if you want to make money, read the signs of these times.
Now send me a dollar for me newsletter. :)
Globalization is not magically going away for better or worse. Short of NAFTA falling apart or a trade war due to some new taxes. But those will just cause striff, not end it all together.
Tech bubbles like the bay look like they have peaked. And I agree a lot of new Midwestern cities are seeing job explosions as people are looking for areas with better cost of living and good jobs like Texas or Minnesota. But the reality is the bulk of the money will remain on the coasts. Because wealthy people want to live by the ocean and in our largest cities which act as traveling hubs.
The new taxes changes are annoying for some, but for the ultra wealthy in Cali and New York there are plenty of perks in their to make up for say changes to the mortgage tax break.
The reality though remains for most working folk that if you are trained in an industry that is growing you will continue to do well.
If people are hoping this will give more power to red States they should be careful what they wish for. Every year I go back to Texas I see more and more hall marks of West coast city culture moving there as big engineering firms hire more engineers from around the globe.
But to a degree I would say big companies, like Amazon, agree with your comment that we should invest in Midwestern states. We will see how that goes and Eric the current tech bubbles pops...
Well said!
One example of benefit (sparked by a conversation with a colleague) - this plan would be of some benefit to a lot of singles who rent - think of our of college grads. They don't itemize usually and don't make tons. So doubling standard deduction is a boon.
But overall is a marginal benefit for most - 1-2K better off...its not all that great, but not terrible.
The hope is that big growth will come from the business side through investment and capital formation. The bill provides incentives for that - lets see those will work.
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As I said before, my taxes going up to support something of value, such as health care, a real tax, permanent tax cut for the middle class, infrastructure, etc. would be fine with me. I am NOT OKAY with paying substantially more in taxes to give it to the idle rich.
Would it be fair to say you have qualms with the spending priority, rather than the level of taxation in the new tax bill?
I don't think I can be any more clear.
And if your next argument is that tax cuts for "job creators" will grow the economy, as has been discussed ad nauseum it has been proven over and over that they don't. Further, there is absolutely no reason to further stimulate the economy.
I also find it absolutely repulsive that this bill provides generous tax breaks for passive pass throughs but specifically excludes those who work for their money.
Wait, what? I wasn't arguing, just trying to reword what you said in a way that made more sense to me. I think we agree, mostly.
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You seem to agree with my point and provide ample evidence for it. By dismissing my lived-in experience under a totalitarian system with thought control in place
which seems vaguely similar to what I observe in my own circumstances now, only strengthens my point.
You're comparing living under Stalin to criticism on an internet message forum?!?
I'm dismissing the comparison. It's nonsense.
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The hope is that big growth will come from the business side through investment and capital formation. The bill provides incentives for that - lets see those will work.
So the record corporate profits/cash-in-hand up to this point ... that wasn't enough incentive for new capital spending? Why would their previous plan of "hoard cash and buy back shares" change because they're giving less money to the government?
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As I said before, my taxes going up to support something of value, such as health care, a real tax, permanent tax cut for the middle class, infrastructure, etc. would be fine with me. I am NOT OKAY with paying substantially more in taxes to give it to the idle rich.
Would it be fair to say you have qualms with the spending priority, rather than the level of taxation in the new tax bill?
I don't think I can be any more clear.
And if your next argument is that tax cuts for "job creators" will grow the economy, as has been discussed ad nauseum it has been proven over and over that they don't. Further, there is absolutely no reason to further stimulate the economy.
I also find it absolutely repulsive that this bill provides generous tax breaks for passive pass throughs but specifically excludes those who work for their money.
Wait, what? I wasn't arguing, just trying to reword what you said in a way that made more sense to me. I think we agree, mostly.
Sorry, I am extremely aggravated by this whole thing. My apologies.
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One example of benefit (sparked by a conversation with a colleague) - this plan would be of some benefit to a lot of singles who rent - think of our of college grads. They don't itemize usually and don't make tons. So doubling standard deduction is a boon.
I agree with this, and think it is generally a good thing.
Still, can we stop referring to it as "doubling standard deduction" and just say increasing the standard deduction or "doubling the SD while simultaneously removing the Personal Exemption"
For a single the SD + Personal Exemption (which really functioned like a secondary SD) for 2018 would be 10,400. The new tax plan increases this to either 12,000 or 12,200.
I know those here know this. I still think we should frame the potential benefits of this appropriately. An increase in the SD will have a modest impact on singles.
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+1...they must misunderstand their desire to conform to the one true narrative listed on the pages on the NY Times as the only true version of life. I have seen that somewhere else...under Stalin! 'Conform to what we tell you is good for you'...'yes, comrads!' Is the only acceptable answer. Yes, I saw and heard that in my formative years growing up under socialism....Sad! I am for freedom of though for everyone! Go, wise virgin!
A common alt-right troll tactic is to dismiss all criticism with "stop being thought police" "I thought this was a free country" false equivalence. No one is telling you or Wise what to think, you just have to be able to defend it or you'll continue to be ignored.
You seem to agree with my point and provide ample evidence for it. By dismissing my lived-in experience under a totalitarian system with thought control in place
which seems vaguely similar to what I observe in my own circumstances now, only strengthens my point.
Don't tell others what is good for them...the communist party is usually the one that tells you what is in your best interest. But again, how you would be familiar with that??
Wow, responding to being called out for false equivalence by doing exactly the same thing again is a bold move.
Let's try this again. No one is telling you what to think. Sol and I (and others) have no authority over you in any way whatsoever. Everyone is on equal footing here, and if you want people to pay attention to what you have to say then you (like everyone else) must be able to back it up. With reasoning and evidence, not easily disprovable magical thinking and propaganda.
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+1...they must misunderstand their desire to conform to the one true narrative listed on the pages on the NY Times as the only true version of life. I have seen that somewhere else...under Stalin! 'Conform to what we tell you is good for you'...'yes, comrads!' Is the only acceptable answer. Yes, I saw and heard that in my formative years growing up under socialism....Sad! I am for freedom of though for everyone! Go, wise virgin!
A common alt-right troll tactic is to dismiss all criticism with "stop being thought police" "I thought this was a free country" false equivalence. No one is telling you or Wise what to think, you just have to be able to defend it or you'll continue to be ignored.
You seem to agree with my point and provide ample evidence for it. By dismissing my lived-in experience under a totalitarian system with thought control in place
which seems vaguely similar to what I observe in my own circumstances now, only strengthens my point.
Don't tell others what is good for them...the communist party is usually the one that tells you what is in your best interest. But again, how you would be familiar with that??
Wow, responding to being called out for false equivalence by doing exactly the same thing again is a bold move.
Let's try this again. No one is telling you what to think. Sol and I (and others) have no authority over you in any way whatsoever. Everyone is on equal footing here, and if you want people to pay attention to what you have to say then you (like everyone else) must be able to back it up. With reasoning and evidence, not easily disprovable magical thinking and propaganda.
I don’t think that the problem with communism was that they told people what to think. Nearly everyone with a philosophy or motivation does that. The difference between followers of Epictetus or Buddha or Jesus telling you what or how to think and Stalinist Russia is that Russian communists backed up their directives with guns. Very few followers of Plato are willing to back up their recommendations with a gun to the head. And from what I’ve observed, exactly none of the mustachians have that ability or inclination.
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One example of benefit (sparked by a conversation with a colleague) - this plan would be of some benefit to a lot of singles who rent - think of our of college grads. They don't itemize usually and don't make tons. So doubling standard deduction is a boon.
I agree with this, and think it is generally a good thing.
Still, can we stop referring to it as "doubling standard deduction" and just say increasing the standard deduction or "doubling the SD while simultaneously removing the Personal Exemption"
For a single the SD + Personal Exemption (which really functioned like a secondary SD) for 2018 would be 10,400. The new tax plan increases this to either 12,000 or 12,200.
I know those here know this. I still think we should frame the potential benefits of this appropriately. An increase in the SD will have a modest impact on singles.
Just to add some numbers to your example, a single making 50K a year would get a tax cut of around $1270 under the Senate bill, same single making 100K a year sees a tax cut of around $2480.
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One example of benefit (sparked by a conversation with a colleague) - this plan would be of some benefit to a lot of singles who rent - think of our of college grads. They don't itemize usually and don't make tons. So doubling standard deduction is a boon.
I agree with this, and think it is generally a good thing.
Still, can we stop referring to it as "doubling standard deduction" and just say increasing the standard deduction or "doubling the SD while simultaneously removing the Personal Exemption"
For a single the SD + Personal Exemption (which really functioned like a secondary SD) for 2018 would be 10,400. The new tax plan increases this to either 12,000 or 12,200.
I know those here know this. I still think we should frame the potential benefits of this appropriately. An increase in the SD will have a modest impact on singles.
Good point. But also the tax rate would be at 12% rather than 15% for example, and it also include the $300 of flexible family credit (as I understand it). So a bit bigger benefit than just sheltering an additional $1800 of income, but not really great.
Yes, 2K is not great in a world where the iPhone X is $1000... but it is also equivalent or a little more than our small 2.75% yearly "raise."
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I don’t think that the problem with communism was that they told people what to think. Nearly everyone with a philosophy or motivation does that. The difference between followers of Epictetus or Buddha or Jesus telling you what or how to think and Stalinist Russia is that Russian communists backed up their directives with guns. Very few followers of Plato are willing to back up their recommendations with a gun to the head. And from what I’ve observed, exactly none of the mustachians have that ability or inclination.
Agreed, except that they are two different things with different terminology. Alt-righters intentionally confuse them so that they don't actually have to argue on the merits of facts, but there's no reason we have to concede the point and let them get away with it.
"Telling you what to think" implies force and authority and control. Perhaps a gun to the head, or maybe just a vague implied threat.
What the followers of Epictetus or Buddha or Jesus would do would be "evangelism" or "convincing" or "persuasion" (unless of course we're going back to the dark ages of Crusades and Inquisitions the like. Then yes obviously that would be "telling you what to think"). "Hey I think I know a truth, let me try to convince you that it's true." That's not "telling" someone what to think, and there's no reason we should allow the distinction to be muddled.
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Tech bubbles like the bay look like they have peaked.
We will see how that goes and Eric the current tech bubbles pops...
How many decades can something carry on and still be (usefully characterized as) a bubble?
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+1...they must misunderstand their desire to conform to the one true narrative listed on the pages on the NY Times as the only true version of life. I have seen that somewhere else...under Stalin! 'Conform to what we tell you is good for you'...'yes, comrads!' Is the only acceptable answer. Yes, I saw and heard that in my formative years growing up under socialism....Sad! I am for freedom of though for everyone! Go, wise virgin!
A common alt-right troll tactic is to dismiss all criticism with "stop being thought police" "I thought this was a free country" false equivalence. No one is telling you or Wise what to think, you just have to be able to defend it or you'll continue to be ignored.
You seem to agree with my point and provide ample evidence for it. By dismissing my lived-in experience under a totalitarian system with thought control in place
which seems vaguely similar to what I observe in my own circumstances now, only strengthens my point.
Don't tell others what is good for them...the communist party is usually the one that tells you what is in your best interest. But again, how you would be familiar with that??
Wow, responding to being called out for false equivalence by doing exactly the same thing again is a bold move.
Let's try this again. No one is telling you what to think. Sol and I (and others) have no authority over you in any way whatsoever. Everyone is on equal footing here, and if you want people to pay attention to what you have to say then you (like everyone else) must be able to back it up. With reasoning and evidence, not easily disprovable magical thinking and propaganda.
Right, not on this board. But if you are so confident that we live at the present moment in a free-to-express your opinion society, I dare you to ware a red MAGA hat on the NYC subway or in a bar. No guns, but fist fights have been known to occur...Even if you don't fear for your safety, it will be an extremely uncomfortable experience. Maybe the same for someone wearing a Hillary button in deep red Montana or Idaho...
https://nypost.com/2017/03/19/i-made-150-just-by-wearing-a-trump-hat/
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Does anyone know if treatment of 414h plans is addressed in either the house or senate bills? I currently max a 403b, a 457b, and defer 6% of my salary into a 414h (plus an 8% employer match), so I'm wondering what will happen to that latter shelter.
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+1...they must misunderstand their desire to conform to the one true narrative listed on the pages on the NY Times as the only true version of life. I have seen that somewhere else...under Stalin! 'Conform to what we tell you is good for you'...'yes, comrads!' Is the only acceptable answer. Yes, I saw and heard that in my formative years growing up under socialism....Sad! I am for freedom of though for everyone! Go, wise virgin!
A common alt-right troll tactic is to dismiss all criticism with "stop being thought police" "I thought this was a free country" false equivalence. No one is telling you or Wise what to think, you just have to be able to defend it or you'll continue to be ignored.
You seem to agree with my point and provide ample evidence for it. By dismissing my lived-in experience under a totalitarian system with thought control in place
which seems vaguely similar to what I observe in my own circumstances now, only strengthens my point.
Don't tell others what is good for them...the communist party is usually the one that tells you what is in your best interest. But again, how you would be familiar with that??
Wow, responding to being called out for false equivalence by doing exactly the same thing again is a bold move.
Let's try this again. No one is telling you what to think. Sol and I (and others) have no authority over you in any way whatsoever. Everyone is on equal footing here, and if you want people to pay attention to what you have to say then you (like everyone else) must be able to back it up. With reasoning and evidence, not easily disprovable magical thinking and propaganda.
Right, not on this board. But if you are so confident that we live at the present moment in a free-to-express your opinion society, I dare you to ware a red MAGA hat on the NYC subway or in a bar. No guns, but fist fights have been known to occur...Even if you don't fear for your safety, it will be an extremely uncomfortable experience. Maybe the same for someone wearing a Hillary button in deep red Montana or Idaho...
https://nypost.com/2017/03/19/i-made-150-just-by-wearing-a-trump-hat/
It is even easier to provoke people into hateful acts by being an out and proud gay person in Idaho or a Jew in certain parts of this country or a Muslim just about anywhere in the South or Midwest. Or, if you want to get your beating quick and hard, go to Ohio State and cheer for Michigan's football team.
Individual hooliganism is not the same as Stalinist Russia and you should not diminish the horror of that era by making this comparison. It is vile.
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It is even easier to provoke people into hateful acts by being an out and proud gay person in Idaho or a Jew in certain parts of this country or a Muslim just about anywhere in the South or Midwest. Or, if you want to get your beating quick and hard, go to Ohio State and cheer for Michigan's football team.
Individual hooliganism is not the same as Stalinist Russia and you should not diminish the horror of that era by making this comparison. It is vile.
Another important distinction: these are all the actions of private citizens, not the state.
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One example of benefit (sparked by a conversation with a colleague) - this plan would be of some benefit to a lot of singles who rent - think of our of college grads. They don't itemize usually and don't make tons. So doubling standard deduction is a boon.
I agree with this, and think it is generally a good thing.
Still, can we stop referring to it as "doubling standard deduction" and just say increasing the standard deduction or "doubling the SD while simultaneously removing the Personal Exemption"
For a single the SD + Personal Exemption (which really functioned like a secondary SD) for 2018 would be 10,400. The new tax plan increases this to either 12,000 or 12,200.
I know those here know this. I still think we should frame the potential benefits of this appropriately. An increase in the SD will have a modest impact on singles.
Just to add some numbers to your example, a single making 50K a year would get a tax cut of around $1270 under the Senate bill, same single making 100K a year sees a tax cut of around $2480.
I'm single earning about 60k and have been a standard deduction user. The tax bill will save me a grand total of $270, and once the sunset clauses kick in I'll be paying substantial more. I'd rather pay more so that people like my friend who currently makes heavy use of the medical deductions won't be penalized for genetic predispositions.
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One example of benefit (sparked by a conversation with a colleague) - this plan would be of some benefit to a lot of singles who rent - think of our of college grads. They don't itemize usually and don't make tons. So doubling standard deduction is a boon.
I agree with this, and think it is generally a good thing.
Still, can we stop referring to it as "doubling standard deduction" and just say increasing the standard deduction or "doubling the SD while simultaneously removing the Personal Exemption"
For a single the SD + Personal Exemption (which really functioned like a secondary SD) for 2018 would be 10,400. The new tax plan increases this to either 12,000 or 12,200.
I know those here know this. I still think we should frame the potential benefits of this appropriately. An increase in the SD will have a modest impact on singles.
Just to add some numbers to your example, a single making 50K a year would get a tax cut of around $1270 under the Senate bill, same single making 100K a year sees a tax cut of around $2480.
I'm single earning about 60k and have been a standard deduction user. The tax bill will save me a grand total of $270, and once the sunset clauses kick in I'll be paying substantial more. I'd rather pay more so that people like my friend who currently makes heavy use of the medical deductions won't be penalized for genetic predispositions.
Can you show us how you got that? It doesn't look right. I don't think you allowed for the updated tax brackets.
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Whoops!
http://nymag.com/daily/intelligencer/2017/12/senate-gop-accidentally-killed-all-corporate-tax-deductions.html
A corporate AMT. Maybe the Senate accidentally DID close some loopholes.
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Whoops!
http://nymag.com/daily/intelligencer/2017/12/senate-gop-accidentally-killed-all-corporate-tax-deductions.html
A corporate AMT. Maybe the Senate accidentally DID close some loopholes.
Summary of that article: after permanently lowering the corporate tax rate to 20%, republicans accidentally included a corporate AMT, with a 20% floor. This means corporations can pay no more and also no less than 20% on their US earnings. All corporate loopholes and deductions instantly revoked. Guaranteed 20% corporate tax rate, and no opportunity for them to itemize.
They'll probably change it. The ACA had some glitches at first, too.
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Whoops!
http://nymag.com/daily/intelligencer/2017/12/senate-gop-accidentally-killed-all-corporate-tax-deductions.html
A corporate AMT. Maybe the Senate accidentally DID close some loopholes.
This would be amusing if it were not such an indicator of what a terrible process was used to craft and pass the bill. ugh.
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Anyone know if the provision mandating FIFO accounting for fund managers, including index funds, remained? That will increase taxable account capital gains distributions significantly if so.
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One example of benefit (sparked by a conversation with a colleague) - this plan would be of some benefit to a lot of singles who rent - think of our of college grads. They don't itemize usually and don't make tons. So doubling standard deduction is a boon.
I agree with this, and think it is generally a good thing.
Still, can we stop referring to it as "doubling standard deduction" and just say increasing the standard deduction or "doubling the SD while simultaneously removing the Personal Exemption"
For a single the SD + Personal Exemption (which really functioned like a secondary SD) for 2018 would be 10,400. The new tax plan increases this to either 12,000 or 12,200.
I know those here know this. I still think we should frame the potential benefits of this appropriately. An increase in the SD will have a modest impact on singles.
Just to add some numbers to your example, a single making 50K a year would get a tax cut of around $1270 under the Senate bill, same single making 100K a year sees a tax cut of around $2480.
I'm single earning about 60k and have been a standard deduction user. The tax bill will save me a grand total of $270, and once the sunset clauses kick in I'll be paying substantial more. I'd rather pay more so that people like my friend who currently makes heavy use of the medical deductions won't be penalized for genetic predispositions.
Can you show us how you got that? It doesn't look right. I don't think you allowed for the updated tax brackets.
You're right, the change in brackets pushes me up to $640 or $880 depending on if they go with the senate or house brackets.
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Whoops!
http://nymag.com/daily/intelligencer/2017/12/senate-gop-accidentally-killed-all-corporate-tax-deductions.html
A corporate AMT. Maybe the Senate accidentally DID close some loopholes.
This would be amusing if it were not such an indicator of what a terrible process was used to craft and pass the bill. ugh.
Looks like those clowns in Congress did it again. What a bunch of clowns.
-
Whoops!
http://nymag.com/daily/intelligencer/2017/12/senate-gop-accidentally-killed-all-corporate-tax-deductions.html
A corporate AMT. Maybe the Senate accidentally DID close some loopholes.
Summary of that article: after permanently lowering the corporate tax rate to 20%, republicans accidentally included a corporate AMT, with a 20% floor. This means corporations can pay no more and also no less than 20% on their US earnings. All corporate loopholes and deductions instantly revoked. Guaranteed 20% corporate tax rate, and no opportunity for them to itemize.
They'll probably change it. The ACA had some glitches at first, too.
Am I right in assuming this would actually lead to increased revenues, given that it would be much harder to play with numbers?
-
Whoops!
http://nymag.com/daily/intelligencer/2017/12/senate-gop-accidentally-killed-all-corporate-tax-deductions.html
A corporate AMT. Maybe the Senate accidentally DID close some loopholes.
Summary of that article: after permanently lowering the corporate tax rate to 20%, republicans accidentally included a corporate AMT, with a 20% floor. This means corporations can pay no more and also no less than 20% on their US earnings. All corporate loopholes and deductions instantly revoked. Guaranteed 20% corporate tax rate, and no opportunity for them to itemize.
They'll probably change it. The ACA had some glitches at first, too.
Am I right in assuming this would actually lead to increased revenues, given that it would be much harder to play with numbers?
No, overall corp taxes rates would go down.
This would discourage R&D, because companies couldn't write it off.
I don't think removing the AMT is an actual mistake. It was temporary fix to get it past budget reconciliation. If this gets removed expect individual tax payers to pick up the bill so everyone should hold off on their personal calculations. This bill is a hot mess.
-
Whoops!
http://nymag.com/daily/intelligencer/2017/12/senate-gop-accidentally-killed-all-corporate-tax-deductions.html
A corporate AMT. Maybe the Senate accidentally DID close some loopholes.
I think the AMT revival was just a last minute placeholder to get the thing through the Senate. Trump's sudden willingness to entertain a 22% corporate rate is likely the route in commitee for them to again remove AMT and also pay for those other last minute sweetners.
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+1...they must misunderstand their desire to conform to the one true narrative listed on the pages on the NY Times as the only true version of life. I have seen that somewhere else...under Stalin! 'Conform to what we tell you is good for you'...'yes, comrads!' Is the only acceptable answer. Yes, I saw and heard that in my formative years growing up under socialism....Sad! I am for freedom of though for everyone! Go, wise virgin!
A common alt-right troll tactic is to dismiss all criticism with "stop being thought police" "I thought this was a free country" false equivalence. No one is telling you or Wise what to think, you just have to be able to defend it or you'll continue to be ignored.
You seem to agree with my point and provide ample evidence for it. By dismissing my lived-in experience under a totalitarian system with thought control in place
which seems vaguely similar to what I observe in my own circumstances now, only strengthens my point.
Don't tell others what is good for them...the communist party is usually the one that tells you what is in your best interest. But again, how you would be familiar with that??
Wow, responding to being called out for false equivalence by doing exactly the same thing again is a bold move.
Let's try this again. No one is telling you what to think. Sol and I (and others) have no authority over you in any way whatsoever. Everyone is on equal footing here, and if you want people to pay attention to what you have to say then you (like everyone else) must be able to back it up. With reasoning and evidence, not easily disprovable magical thinking and propaganda.
Right, not on this board. But if you are so confident that we live at the present moment in a free-to-express your opinion society, I dare you to ware a red MAGA hat on the NYC subway or in a bar. No guns, but fist fights have been known to occur...Even if you don't fear for your safety, it will be an extremely uncomfortable experience. Maybe the same for someone wearing a Hillary button in deep red Montana or Idaho...
https://nypost.com/2017/03/19/i-made-150-just-by-wearing-a-trump-hat/
It is even easier to provoke people into hateful acts by being an out and proud gay person in Idaho or a Jew in certain parts of this country or a Muslim just about anywhere in the South or Midwest. Or, if you want to get your beating quick and hard, go to Ohio State and cheer for Michigan's football team.
Individual hooliganism is not the same as Stalinist Russia and you should not diminish the horror of that era by making this comparison. It is vile.
Off topic and I think the comments were made mostly as examples, but I've lived in Idaho for over 43 years, including all of the past 24 years. Although Idaho is a very conservative state, it is also very much a live and let live state. Those among us who supported Hillary(*), are gay, or Jewish or Muslim, or even Michigan supporters, are just people who we live and work with who have a different opinion.
The only thing that sometimes - and in actual fact rarely - rises to fistfights is between some Bronco and Vandal fans, and I would describe them as hooligans.
(*) Idaho actually went very hard for Senator Sanders in the Democratic primary last year. Lines around the block to vote for him, including my son. But there were also those who supported Secretary Clinton.
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Am I right in assuming this would actually lead to increased revenues, given that it would be much harder to play with numbers?
Economy wide, no. The current effective corporate tax rate is usually reported as higher than 20 percent, though it clearly depends on how you count it.
At a fixed 20%, some firms that currently pay zero (GE) would pay a lot more. Some firms that currently pay more than 20 (Wal-Mart) would pay less.
I think the AMT revival was just a last minute placeholder to get the thing through the Senate. Trump's sudden willingness to entertain a 22% corporate rate is likely the route in commitee for them to again remove AMT and also pay for those other last minute sweetners.
Bingo. It's probably just part off the political theater. It's more tricks designed to push through such an unpopular bill as quickly as possible.
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This would discourage R&D, because companies couldn't write it off.
To be honest I don't have a problem with this. Corporations currently make some really stupid decisions because of tax-deductible CapEx vs non-deductible OpEx considerations. Sometimes improving and maintaining the old system is better for everyone than reinventing the wheel. Level the tax playing field, corporations will still invest in R&D or they'll passed by their competitors.
I don't think removing the AMT is an actual mistake. It was temporary fix to get it past budget reconciliation. If this gets removed expect individual tax payers to pick up the bill so everyone should hold off on their personal calculations. This bill is a hot mess.
Yeah agreed. This is also the first thing I've seen that really convinces me that they're actually going to go through with the reconciliation process instead of just getting the House to pass it. So everyone get ready for another House / Senate vote in a couple weeks.
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To be honest I don't have a problem with this. Corporations currently make some really stupid decisions because of tax-deductible CapEx vs non-deductible OpEx considerations. Sometimes improving and maintaining the old system is better for everyone than reinventing the wheel. Level the tax playing field, corporations will still invest in R&D or they'll passed by their competitors.
On the other hand if this tax bill discourages R&D/investment and further encourages dividends and stock buy backs this bill is even worse for the average working person.
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+1...they must misunderstand their desire to conform to the one true narrative listed on the pages on the NY Times as the only true version of life. I have seen that somewhere else...under Stalin! 'Conform to what we tell you is good for you'...'yes, comrads!' Is the only acceptable answer. Yes, I saw and heard that in my formative years growing up under socialism....Sad! I am for freedom of though for everyone! Go, wise virgin!
A common alt-right troll tactic is to dismiss all criticism with "stop being thought police" "I thought this was a free country" false equivalence. No one is telling you or Wise what to think, you just have to be able to defend it or you'll continue to be ignored.
You seem to agree with my point and provide ample evidence for it. By dismissing my lived-in experience under a totalitarian system with thought control in place
which seems vaguely similar to what I observe in my own circumstances now, only strengthens my point.
Don't tell others what is good for them...the communist party is usually the one that tells you what is in your best interest. But again, how you would be familiar with that??
Wow, responding to being called out for false equivalence by doing exactly the same thing again is a bold move.
Let's try this again. No one is telling you what to think. Sol and I (and others) have no authority over you in any way whatsoever. Everyone is on equal footing here, and if you want people to pay attention to what you have to say then you (like everyone else) must be able to back it up. With reasoning and evidence, not easily disprovable magical thinking and propaganda.
Right, not on this board. But if you are so confident that we live at the present moment in a free-to-express your opinion society, I dare you to ware a red MAGA hat on the NYC subway or in a bar. No guns, but fist fights have been known to occur...Even if you don't fear for your safety, it will be an extremely uncomfortable experience. Maybe the same for someone wearing a Hillary button in deep red Montana or Idaho...
https://nypost.com/2017/03/19/i-made-150-just-by-wearing-a-trump-hat/
It is even easier to provoke people into hateful acts by being an out and proud gay person in Idaho or a Jew in certain parts of this country or a Muslim just about anywhere in the South or Midwest. Or, if you want to get your beating quick and hard, go to Ohio State and cheer for Michigan's football team.
Individual hooliganism is not the same as Stalinist Russia and you should not diminish the horror of that era by making this comparison. It is vile.
Off topic and I think the comments were made mostly as examples, but I've lived in Idaho for over 43 years, including all of the past 24 years. Although Idaho is a very conservative state, it is also very much a live and let live state. Those among us who supported Hillary(*), are gay, or Jewish or Muslim, or even Michigan supporters, are just people who we live and work with who have a different opinion.
The only thing that sometimes - and in actual fact rarely - rises to fistfights is between some Bronco and Vandal fans, and I would describe them as hooligans.
(*) Idaho actually went very hard for Senator Sanders in the Democratic primary last year. Lines around the block to vote for him, including my son. But there were also those who supported Secretary Clinton.
Thanks for the insight ;-)
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Well... everyone who makes an income gets taxed. Some people get reductions/exemptions from the tax based on certain variables, including the amount of income they make, but all labor/income is taxed (unless you are getting paid 'under the counter').
False. 45% of Americans pay $0 in income tax. If you pay $0 income tax, you made an income that was not taxed. Period.
I'm not accountant so maybe I'm missing something, but are you saying those 45% of Americans don't have to fill out a W2 form and aren't legally required to claim their income every year to be taxed? My understanding is they do. And of course a significant amount of those people pay a payroll tax (or self employment tax), which makes that 45% completely wrong.
Very few people who inherit estates have to pay estate tax. The only people that do are ones with estates valued more than $11m. So it's not a death tax, and the people who call it that are either confused or are being disingenuous.
If you want to call me disingenuous because I say everyone's income (being paid legally) is taxable although some people are exempt from having to pay tax on their income... I can live with that. We, too, can agree to disagree.
1. My apologies for misunderstanding you, I thought you were talking about INCOME tax, not tax in general, given the subject of this thread. Yes, everyone pays some sort of tax during their lifetimes.
2. Just because you file a W-2, and get a paycheck, and are SUBJECT to income tax, does not mean that you end up PAYING income tax. 45% of Americans do not pay income tax. That's the important point. Who is PAYING, not so much who is subject to it. You originally said "everyone who makes an income GETS taxed," which if we're talking about income tax, is false. Your revision using the word "taxable" isn't even technically correct if we're still talking about income tax, because non-taxable income (whether through deductions, exemptions, or otherwise) doesn't get taxed.
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+1...they must misunderstand their desire to conform to the one true narrative listed on the pages on the NY Times as the only true version of life. I have seen that somewhere else...under Stalin! 'Conform to what we tell you is good for you'...'yes, comrads!' Is the only acceptable answer. Yes, I saw and heard that in my formative years growing up under socialism....Sad! I am for freedom of though for everyone! Go, wise virgin!
A common alt-right troll tactic is to dismiss all criticism with "stop being thought police" "I thought this was a free country" false equivalence. No one is telling you or Wise what to think, you just have to be able to defend it or you'll continue to be ignored.
You seem to agree with my point and provide ample evidence for it. By dismissing my lived-in experience under a totalitarian system with thought control in place
which seems vaguely similar to what I observe in my own circumstances now, only strengthens my point.
Don't tell others what is good for them...the communist party is usually the one that tells you what is in your best interest. But again, how you would be familiar with that??
Wow, responding to being called out for false equivalence by doing exactly the same thing again is a bold move.
Let's try this again. No one is telling you what to think. Sol and I (and others) have no authority over you in any way whatsoever. Everyone is on equal footing here, and if you want people to pay attention to what you have to say then you (like everyone else) must be able to back it up. With reasoning and evidence, not easily disprovable magical thinking and propaganda.
Right, not on this board. But if you are so confident that we live at the present moment in a free-to-express your opinion society, I dare you to ware a red MAGA hat on the NYC subway or in a bar. No guns, but fist fights have been known to occur...Even if you don't fear for your safety, it will be an extremely uncomfortable experience. Maybe the same for someone wearing a Hillary button in deep red Montana or Idaho...
https://nypost.com/2017/03/19/i-made-150-just-by-wearing-a-trump-hat/
It is even easier to provoke people into hateful acts by being an out and proud gay person in Idaho or a Jew in certain parts of this country or a Muslim just about anywhere in the South or Midwest. Or, if you want to get your beating quick and hard, go to Ohio State and cheer for Michigan's football team.
Individual hooliganism is not the same as Stalinist Russia and you should not diminish the horror of that era by making this comparison. It is vile.
Off topic and I think the comments were made mostly as examples, but I've lived in Idaho for over 43 years, including all of the past 24 years. Although Idaho is a very conservative state, it is also very much a live and let live state. Those among us who supported Hillary(*), are gay, or Jewish or Muslim, or even Michigan supporters, are just people who we live and work with who have a different opinion.
The only thing that sometimes - and in actual fact rarely - rises to fistfights is between some Bronco and Vandal fans, and I would describe them as hooligans.
(*) Idaho actually went very hard for Senator Sanders in the Democratic primary last year. Lines around the block to vote for him, including my son. But there were also those who supported Secretary Clinton.
I thought a Buckeye would be the first at me for these examples, but they held their fire. (Perhaps they have seen the damage wrought by OSU fans along High Street and wisely chose the path of non-resistance.)
I'm glad to hear your description of Idaho as a tolerant place, especially since my cousin just moved to Boise from Denver. I am a bit worried now about the Vandals vs Broncos issue (which I was unaware of) since I believe that my cousin is a Broncos fan. Hopefully he can find a peaceful solution to this potential dispute with the natives. ;)
My point is that there are people itching to put their fist in something or someone everywhere in the world. Who they choose as their victim depends on who is the outsider in that community, whether that person is an outsider due to politics, religion, gender, or football partisanship isn't particularly important. I am guessing that Idaho is not immune from this universal element in human communities.
Violent people are problems for their local communities but they are not the equivalent of despotic governments that conduct large campaigns of terror and murder against their own people and they are not equivalent to governments denying citizens freedom of speech. That was my point. Apologies for any wounded feelings on the part of Idahoans.
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I'm glad to hear your description of Idaho as a tolerant place, especially since my cousin just moved to Boise from Denver. I am a bit worried now about the Vandals vs Broncos issue (which I was unaware of) since I believe that my cousin is a Broncos fan. Hopefully he can find a peaceful solution to this potential dispute with the natives. ;)
My point is that there are people itching to put their fist in something or someone everywhere in the world. Who they choose as their victim depends on who is the outsider in that community, whether that person is an outsider due to politics, religion, gender, or football partisanship isn't particularly important. I am guessing that Idaho is not immune from this universal element in human communities.
Violent people are problems for their local communities but they are not the equivalent of despotic governments that conduct large campaigns of terror and murder against their own people and they are not equivalent to governments denying citizens freedom of speech. That was my point. Apologies for any wounded feelings on the part of Idahoans.
99.9% of Bronco and Vandal fans get along just fine. It's easier now that they don't play each other (different conferences I think).
We're not immune from violence, but around here the violent folks tend to be gang members or meth addicts. Those kind of people tend to be violent anywhere I think.
And I understand your last point as well. And no hurt feelings; I'm pretty tolerant. ;-) Just wanted to clarify.
(We now return you to your regularly scheduled, ahem, discussion, of the tax bill.)
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Whoops!
http://nymag.com/daily/intelligencer/2017/12/senate-gop-accidentally-killed-all-corporate-tax-deductions.html
A corporate AMT. Maybe the Senate accidentally DID close some loopholes.
Summary of that article: after permanently lowering the corporate tax rate to 20%, republicans accidentally included a corporate AMT, with a 20% floor. This means corporations can pay no more and also no less than 20% on their US earnings. All corporate loopholes and deductions instantly revoked. Guaranteed 20% corporate tax rate, and no opportunity for them to itemize.
They'll probably change it. The ACA had some glitches at first, too.
Am I right in assuming this would actually lead to increased revenues, given that it would be much harder to play with numbers?
No, overall corp taxes rates would go down.
This would discourage R&D, because companies couldn't write it off.
What leads you to that conclusion?
AMT doesn't restrict or impact R&D spending's deductibility.
Any elimination of increased R&D credits via corporate AMT would have a modest negative effect, but I can tell you that we go about our normal business and only at the end of the year have a few long, painful meetings with the tax team to understand what was available from the R&D credit. (You could argue that our finance team has previously modeled the likely ranges and therefore set our budgets higher with the R&D credits taken into account than they would be if the R&D credit didn't exist, and I'm sure that's what actually happened, but day-to-day, I don't direct my teams to do X rather than Y because X has an R&D credit attached and Y doesn't.)
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I don't think removing the AMT is an actual mistake. It was temporary fix to get it past budget reconciliation. If this gets removed expect individual tax payers to pick up the bill so everyone should hold off on their personal calculations. This bill is a hot mess.
Yeah agreed. This is also the first thing I've seen that really convinces me that they're actually going to go through with the reconciliation process instead of just getting the House to pass it. So everyone get ready for another House / Senate vote in a couple weeks.
+1. I thought for sure the House would just vote to adopt the Senate version but it looks like this is something that they will want fixed.
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+2. I've had the same change in expectations. I'm actually glad, because that eleventh hour AMT switch was a killer (see earlier posts).
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Whoops!
http://nymag.com/daily/intelligencer/2017/12/senate-gop-accidentally-killed-all-corporate-tax-deductions.html
A corporate AMT. Maybe the Senate accidentally DID close some loopholes.
Summary of that article: after permanently lowering the corporate tax rate to 20%, republicans accidentally included a corporate AMT, with a 20% floor. This means corporations can pay no more and also no less than 20% on their US earnings. All corporate loopholes and deductions instantly revoked. Guaranteed 20% corporate tax rate, and no opportunity for them to itemize.
They'll probably change it. The ACA had some glitches at first, too.
Am I right in assuming this would actually lead to increased revenues, given that it would be much harder to play with numbers?
No, overall corp taxes rates would go down.
This would discourage R&D, because companies couldn't write it off.
What leads you to that conclusion?
AMT doesn't restrict or impact R&D spending's deductibility.
Any elimination of increased R&D credits via corporate AMT would have a modest negative effect, but I can tell you that we go about our normal business and only at the end of the year have a few long, painful meetings with the tax team to understand what was available from the R&D credit. (You could argue that our finance team has previously modeled the likely ranges and therefore set our budgets higher with the R&D credits taken into account than they would be if the R&D credit didn't exist, and I'm sure that's what actually happened, but day-to-day, I don't direct my teams to do X rather than Y because X has an R&D credit attached and Y doesn't.)
I can't speak to your company's specific scenario, however if something isn't as encouraged as it was before you're going to get less of it.
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One thing that makes me uncomfortable with long term economic projections is how easily they can be disproved by tweaking just one of the variables in the model. Especially when citing exact numbers rather than giving range of possible outcomes. Economists are wrong all the time, sometimes they are wrong really big.
http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html
One of those currently is with the deficit projections being thrown around is the 1.5 trillion in deficit. The CBP/JCT use static scoring for the next 10 years, which seems crazy to me. Using a dynamic scoring is more in line with reality (you have to account for varying growth and just uncertainty in business and individual behavior in the next 10 years). NY Times give a good example of how different models produce different deficit outcomes based on using different assumptions. Economics is not a hard science - economist have been wrong multiple times (refer to Krugman above).
https://www.nytimes.com/interactive/2017/11/28/us/politics/tax-bill-deficits.html
Quoted - "They (Republicans) have argued that economic growth spurred by the cuts would make up for the difference in tax revenue, eventually reducing the deficits. But there is no consensus among economists about the amount of growth that would occur, and few estimate that the bill would generate enough economic growth to offset the drop in tax revenue." This is what gets me to be skeptical of long term economic projections...Also, re-read Krugman above.
If you read the Tax Foundation report, on p15 they address this uncertainty of the future (it being the future!). Quote:
"Uncertainty in Modeling Estimates
There are three primary sources of uncertainty in modeling the provisions of the Senate’s version
of the Tax Cuts and Jobs Act: the significance of deficit effects, the timing of economic effects, and
expectations regarding the extension of temporary provisions.
Some economic models assume that there is a limited amount of saving available to the United States
to fund new investment opportunities when taxes on investment are reduced, and that when the
federal budget deficit increases, the amount of available saving for private investment is “crowdedout”
by government borrowing, which reduces the long-run size of the U.S. economy. While past
empirical work has found evidence of crowd-out, the estimated impact is usually small. Furthermore,
global savings remain high, which may help explain why interest rates remain low despite rising
budget deficits. We assume that a deficit increase will not meaningfully crowd out private investment
in the United States.5"
We are also forced to make certain assumptions about how quickly the economy would respond to
lower tax burdens on investment. There is an inherent level of uncertainty here that could impact the
timing of revenue generation within the budget window.
Finally, we assume that temporary tax changes will expire on schedule, and that business decisions
will be made in anticipation of this expiration. To the extent that investments are made in the
anticipation that temporary expensing provisions might be extended, economic effects could exceed
our projections.
Thoughts?
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Being from MN, I for one am a bit displeased with the complete loss of the SALT deduction.
The "property" tax deduction is a side-show, at least for MN. The income tax deduction loss probably means a net tax increase for a large chunk of MN residents(at least in the metro area)
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I can't speak to your company's specific scenario, however if something isn't as encouraged as it was before you're going to get less of it.
Of course! In this case, I don't see anything in the changes to suggest that R&D expenses are not deductible ("a write-off"). That was all I was claiming.
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Being from MN, I for one am a bit displeased with the complete loss of the SALT deduction.
The "property" tax deduction is a side-show, at least for MN. The income tax deduction loss probably means a net tax increase for a large chunk of MN residents(at least in the metro area)
New Jersey, checking in....less than 1% behind MN on income tax combined with the highest property taxes in the country.
I'm glad I don't own here.
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One of those currently is with the deficit projections being thrown around is the 1.5 trillion in deficit. The CBP/JCT use static scoring for the next 10 years, which seems crazy to me. Using a dynamic scoring is more in line with reality (you have to account for varying growth and just uncertainty in business and individual behavior in the next 10 years).
They did not just do a static analysis. The JCT also released a dynamic analysis that found that the plan would increase the deficit by about $1 Trillion for ten years:
https://www.jct.gov/publications.html?func=startdown&id=5045
The non-partisan Tax Policy Center estimates in their dynamic score that a stronger economy would offset about 1/6th of the $1.5 T deficit (leaving $1.25 T remaining):
http://www.taxpolicycenter.org/publications/macroeconomic-analysis-tax-cuts-and-jobs-act-passed-senate-finance-committee/full
And the conservative-leaning Tax Foundation found in their dynamic score of the House version that it would add $1.98 T (static) - $0.9 T (new revenue) = ~ $ 1 Trillion dollars in new deficit over ten years.
https://taxfoundation.org/2017-tax-cuts-jobs-act-analysis/
Saying "economics isn't a hard science" and "but they could be wrong" - while true - only goes so far. When all of the estimates from all of the most competent and knowledgeable people are in about the same place, that's probably a pretty good indication that the reality is somewhere around there. What's the alternative? To give up entirely on evidence-based decision making and just choose to believe whatever we want?
And part of the reason that scoring has been rough is because the bill has been changing constantly, on a daily or hourly basis. They passed it at 2AM with hand-written changes in the margins for crying out loud. How is anyone supposed to do an in-depth analysis of that?
One thing that makes me uncomfortable with long term economic projections is how easily they can be disproved by tweaking just one of the variables in the model.
There you go with a Scott Adams-esque incorrect usage of the word "disprove" again. "Tweaking" variables and showing that the models come to different conclusions doesn't "disprove" anything. Often we have very good ideas of what those variables should be, and often we know how the variables tend to related to each other so tweaking one isolation might not be valid. This is the same nonsense that Adams rants on about when he's "disproving" Climate Change.
Your 2009 article is talking about the 2008 housing collapse. Which sure, there were bad economic projections involved. There was also a systemic effort to mislead and defraud the public. Hopefully that's not a great comparison to make to the Republican tax bill.
To me the bottom line though is that "well economists can be wrong so we can just ignore them" cannot be the bottom-line conclusion we jump to. You disagree with their findings? Fine, publish a better paper explaining your methodology and why it's superior. But don't just jump straight into anti-intellectual know-nothingness to justify your party's actions.
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Being from MN, I for one am a bit displeased with the complete loss of the SALT deduction.
The "property" tax deduction is a side-show, at least for MN. The income tax deduction loss probably means a net tax increase for a large chunk of MN residents(at least in the metro area)
New Jersey, checking in....less than 1% behind MN on income tax combined with the highest property taxes in the country.
I'm glad I don't own here.
You're still paying the NJ property tax (as part of your rent).
In your case though, it will remain deductible on your landlord's schedule E, line 16.
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One of those currently is with the deficit projections being thrown around is the 1.5 trillion in deficit. The CBP/JCT use static scoring for the next 10 years, which seems crazy to me. Using a dynamic scoring is more in line with reality (you have to account for varying growth and just uncertainty in business and individual behavior in the next 10 years).
They did not just do a static analysis. The JCT also released a dynamic analysis that found that the plan would increase the deficit by about $1 Trillion for ten years:
https://www.jct.gov/publications.html?func=startdown&id=5045
The non-partisan Tax Policy Center estimates in their dynamic score that a stronger economy would offset about 1/6th of the $1.5 T deficit (leaving $1.25 T remaining):
http://www.taxpolicycenter.org/publications/macroeconomic-analysis-tax-cuts-and-jobs-act-passed-senate-finance-committee/full
And the conservative-leaning Tax Foundation found in their dynamic score of the House version that it would add $1.98 T (static) - $0.9 T (new revenue) = ~ $ 1 Trillion dollars in new deficit over ten years.
https://taxfoundation.org/2017-tax-cuts-jobs-act-analysis/
Saying "economics isn't a hard science" and "but they could be wrong" - while true - only goes so far. When all of the estimates from all of the most competent and knowledgeable people are in about the same place, that's probably a pretty good indication that the reality is somewhere around there. What's the alternative? To give up entirely on evidence-based decision making and just choose to believe whatever we want?
And part of the reason that scoring has been rough is because the bill has been changing constantly, on a daily or hourly basis. They passed it at 2AM with hand-written changes in the margins for crying out loud. How is anyone supposed to do an in-depth analysis of that?
One thing that makes me uncomfortable with long term economic projections is how easily they can be disproved by tweaking just one of the variables in the model.
There you go with a Scott Adams-esque incorrect usage of the word "disprove" again. "Tweaking" variables and showing that the models come to different conclusions doesn't "disprove" anything. Often we have very good ideas of what those variables should be, and often we know how the variables tend to related to each other so tweaking one isolation might not be valid. This is the same nonsense that Adams rants on about when he's "disproving" Climate Change.
Your 2009 article is talking about the 2008 housing collapse. Which sure, there were bad economic projections involved. There was also a systemic effort to mislead and defraud the public. Hopefully that's not a great comparison to make to the Republican tax bill.
To me the bottom line though is that "well economists can be wrong so we can just ignore them" cannot be the bottom-line conclusion we jump to. You disagree with their findings? Fine, publish a better paper explaining your methodology and why it's superior. But don't just jump straight into anti-intellectual know-nothingness to justify your party's actions.
In fact, Republicans went out of their way to discredit the Joint Committee on Taxation just because they didn't like the results of their analysis:
https://www.nytimes.com/2017/12/04/us/politics/republicans-joint-committee-on-taxation-estimate.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region®ion=top-news&WT.nav=top-news
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Being from MN, I for one am a bit displeased with the complete loss of the SALT deduction.
The "property" tax deduction is a side-show, at least for MN. The income tax deduction loss probably means a net tax increase for a large chunk of MN residents(at least in the metro area)
New Jersey, checking in....less than 1% behind MN on income tax combined with the highest property taxes in the country.
I'm glad I don't own here.
You're still paying the NJ property tax (as part of your rent).
In your case though, it will remain deductible on your landlord's schedule E, line 16.
Of course (and 18% of my rent is deductible from my state taxes as a property tax allowance). I can't deduct it from my federal taxes so the loss of the deduction doesn't matter to me.
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Of course (and 18% of my rent is deductible from my state taxes as a property tax allowance).
There's a similar provision in MA. I'm pretty sure it's designed to catch landlords who might otherwise "forget" that they had a rental property... ;)
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Being from MN, I for one am a bit displeased with the complete loss of the SALT deduction.
The "property" tax deduction is a side-show, at least for MN. The income tax deduction loss probably means a net tax increase for a large chunk of MN residents(at least in the metro area)
New Jersey, checking in....less than 1% behind MN on income tax combined with the highest property taxes in the country.
I'm glad I don't own here.
You're still paying the NJ property tax (as part of your rent).
In your case though, it will remain deductible on your landlord's schedule E, line 16.
Of course (and 18% of my rent is deductible from my state taxes as a property tax allowance). I can't deduct it from my federal taxes so the loss of the deduction doesn't matter to me.
Unless you work for an active pass through that has to cut expenses to pay excess federal tax.
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One report I read of last minute amendments said that there is an exemption from the endowment tax that is specific to one (well connected) college in Michigan.
Well, not exactly: http://thefederalist.com/2017/12/02/senate-democrats-blatantly-lied-hillsdale-college/.
Section 13701 of the Senate tax bill (at pages 288 to 292), imposes a 1.4-percent excise tax on the yearly earnings of large private college endowments. An amendment by Sen. Toomey and Sen. Ted Cruz of Texas applied the tax only to schools that have more than 500 students and an endowment worth at least $500,000 per student, and which take federal money. Those last four words are key. Despite having nearly 1,500 students, like the other half-dozen schools, Hillsdale does not take federal money.
Not that senate republicans don't also blatantly lie.... ;)
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One of those currently is with the deficit projections being thrown around is the 1.5 trillion in deficit. The CBP/JCT use static scoring for the next 10 years, which seems crazy to me. Using a dynamic scoring is more in line with reality (you have to account for varying growth and just uncertainty in business and individual behavior in the next 10 years).
They did not just do a static analysis. The JCT also released a dynamic analysis that found that the plan would increase the deficit by about $1 Trillion for ten years:
https://www.jct.gov/publications.html?func=startdown&id=5045
The non-partisan Tax Policy Center estimates in their dynamic score that a stronger economy would offset about 1/6th of the $1.5 T deficit (leaving $1.25 T remaining):
http://www.taxpolicycenter.org/publications/macroeconomic-analysis-tax-cuts-and-jobs-act-passed-senate-finance-committee/full
And the conservative-leaning Tax Foundation found in their dynamic score of the House version that it would add $1.98 T (static) - $0.9 T (new revenue) = ~ $ 1 Trillion dollars in new deficit over ten years.
https://taxfoundation.org/2017-tax-cuts-jobs-act-analysis/
Saying "economics isn't a hard science" and "but they could be wrong" - while true - only goes so far. When all of the estimates from all of the most competent and knowledgeable people are in about the same place, that's probably a pretty good indication that the reality is somewhere around there. What's the alternative? To give up entirely on evidence-based decision making and just choose to believe whatever we want?
And part of the reason that scoring has been rough is because the bill has been changing constantly, on a daily or hourly basis. They passed it at 2AM with hand-written changes in the margins for crying out loud. How is anyone supposed to do an in-depth analysis of that?
One thing that makes me uncomfortable with long term economic projections is how easily they can be disproved by tweaking just one of the variables in the model.
There you go with a Scott Adams-esque incorrect usage of the word "disprove" again. "Tweaking" variables and showing that the models come to different conclusions doesn't "disprove" anything. Often we have very good ideas of what those variables should be, and often we know how the variables tend to related to each other so tweaking one isolation might not be valid. This is the same nonsense that Adams rants on about when he's "disproving" Climate Change.
Your 2009 article is talking about the 2008 housing collapse. Which sure, there were bad economic projections involved. There was also a systemic effort to mislead and defraud the public. Hopefully that's not a great comparison to make to the Republican tax bill.
To me the bottom line though is that "well economists can be wrong so we can just ignore them" cannot be the bottom-line conclusion we jump to. You disagree with their findings? Fine, publish a better paper explaining your methodology and why it's superior. But don't just jump straight into anti-intellectual know-nothingness to justify your party's actions.
Sherr, why do you read so much Scott Adams? You dont have to ignore economist, just remember that they are not hard scientist. They don't deal with the laws of physics, and with repeatable phenomenon.
Have have you read anything by Nassim Taleb? I would recommend his books for a just a different point of view. He specifically addresses economics as a discipline that is guilty of much sin with examples which may satisfy you. But it just takes perusing the news circa Sept 2008, as Krugman points out, to see how wrong economic predictions could be. That is what I want to point out. Some skepticism about a profession which has been wrong on multiple occasion, is healthy.
My SO is a physical science researcher, that deals with models and academic papers on a daily basis on topics of the immutable laws of physics. Stuff you read about in the newspapers, like front page. He care naught for politics. He is constantly complaining of how papers get published in NATURE where data is used to fit a model, not the other way around, on a REGULAR basis. In the hard sciences...I have little hope for social sciences like economics.
If you know someone like that ask them about how models are build. It may be eye opening.
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http://billmoyers.com/story/republicans-tax-plan-looting-treasury/#.WiW1dR_NrcI.facebook
House Majority Leader Paul Ryan (R-WI) touted a letter signed by a number of economists who supposedly supported the House bill, but Lee Fang reported for The Intercept that it included signatures by people who don’t exist or who say they never signed anything of the sort, as well as “office assistants, ex-felons and a sprinkling of real economists.” Meanwhile, a survey of 38 academic economists conducted by the University of Chicago’s Initiative on Global Markets found that 37 of them expect the bill to blow up federal deficits, and the 38th “misread the question,” according to The Washington Post.
The GOP is so desperate to make their plan look plausible they're forging signatures of economists claiming to have supported their plan.
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Sherr, why do you read so much Scott Adams?
Mostly so I can recognize the bad reasoning and point it out when alt-righters parrot it back.
You dont have to ignore economist, just remember that they are not hard scientist. They don't deal with the laws of physics, and with repeatable phenomenon.
Have have you read anything by Nassim Taleb? I would recommend his books for a just a different point of view. He specifically addresses economics as a discipline that is guilty of much sin with examples which may satisfy you. But it just takes perusing the news circa Sept 2008, as Krugman points out, to see how wrong economic predictions could be. That is what I want to point out. Some skepticism about a profession which has been wrong on multiple occasion, is healthy.
My SO is a physical science researcher, that deals with models and academic papers on a daily basis on topics of the immutable laws of physics. Stuff you read about in the newspapers, like front page. He care naught for politics. He is constantly complaining of how papers get published in NATURE where data is used to fit a model, not the other way around, on a REGULAR basis. In the hard sciences...I have little hope for social sciences like economics.
If you know someone like that ask them about how models are build. It may be eye opening.
So then do you actually have a suggestion besides anti-intellectual know-nothing non-evidence-based whatever-I-want-to-be-true-is-true decision making? No? Okay, get back to us when you do.
Taking projections with a grain of salt is fine and reasonable. Rejecting them outright because you don't like the conclusion and "they might be wrong" is not.
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One of those currently is with the deficit projections being thrown around is the 1.5 trillion in deficit. The CBP/JCT use static scoring for the next 10 years, which seems crazy to me. Using a dynamic scoring is more in line with reality (you have to account for varying growth and just uncertainty in business and individual behavior in the next 10 years).
They did not just do a static analysis. The JCT also released a dynamic analysis that found that the plan would increase the deficit by about $1 Trillion for ten years:
https://www.jct.gov/publications.html?func=startdown&id=5045
The non-partisan Tax Policy Center estimates in their dynamic score that a stronger economy would offset about 1/6th of the $1.5 T deficit (leaving $1.25 T remaining):
http://www.taxpolicycenter.org/publications/macroeconomic-analysis-tax-cuts-and-jobs-act-passed-senate-finance-committee/full
And the conservative-leaning Tax Foundation found in their dynamic score of the House version that it would add $1.98 T (static) - $0.9 T (new revenue) = ~ $ 1 Trillion dollars in new deficit over ten years.
https://taxfoundation.org/2017-tax-cuts-jobs-act-analysis/
Saying "economics isn't a hard science" and "but they could be wrong" - while true - only goes so far. When all of the estimates from all of the most competent and knowledgeable people are in about the same place, that's probably a pretty good indication that the reality is somewhere around there. What's the alternative? To give up entirely on evidence-based decision making and just choose to believe whatever we want?
And part of the reason that scoring has been rough is because the bill has been changing constantly, on a daily or hourly basis. They passed it at 2AM with hand-written changes in the margins for crying out loud. How is anyone supposed to do an in-depth analysis of that?
One thing that makes me uncomfortable with long term economic projections is how easily they can be disproved by tweaking just one of the variables in the model.
There you go with a Scott Adams-esque incorrect usage of the word "disprove" again. "Tweaking" variables and showing that the models come to different conclusions doesn't "disprove" anything. Often we have very good ideas of what those variables should be, and often we know how the variables tend to related to each other so tweaking one isolation might not be valid. This is the same nonsense that Adams rants on about when he's "disproving" Climate Change.
Your 2009 article is talking about the 2008 housing collapse. Which sure, there were bad economic projections involved. There was also a systemic effort to mislead and defraud the public. Hopefully that's not a great comparison to make to the Republican tax bill.
To me the bottom line though is that "well economists can be wrong so we can just ignore them" cannot be the bottom-line conclusion we jump to. You disagree with their findings? Fine, publish a better paper explaining your methodology and why it's superior. But don't just jump straight into anti-intellectual know-nothingness to justify your party's actions.
Sherr, why do you read so much Scott Adams? You dont have to ignore economist, just remember that they are not hard scientist. They don't deal with the laws of physics, and with repeatable phenomenon.
Have have you read anything by Nassim Taleb? I would recommend his books for a just a different point of view. He specifically addresses economics as a discipline that is guilty of much sin with examples which may satisfy you. But it just takes perusing the news circa Sept 2008, as Krugman points out, to see how wrong economic predictions could be. That is what I want to point out. Some skepticism about a profession which has been wrong on multiple occasion, is healthy.
My SO is a physical science researcher, that deals with models and academic papers on a daily basis on topics of the immutable laws of physics. Stuff you read about in the newspapers, like front page. He care naught for politics. He is constantly complaining of how papers get published in NATURE where data is used to fit a model, not the other way around, on a REGULAR basis. In the hard sciences...I have little hope for social sciences like economics.
If you know someone like that ask them about how models are build. It may be eye opening.
Economics is definitely science, and just like physics with enough baseline assumptions, they can model some outcomes very accurately. However also just like physics modeling a large enough system becomes difficult simply because of computational limitations and possible holes in theories guiding the models.
The biggest hole in most economic models has been the old theory on rational actors. I doubt I am fully using the correct terminology of the field. But we had a long standing theory that individuals always act as a rational economist would expect them to act in their own best interest.
More modern economic theories however are starting to integrate the reality that people simply do not act in their best interest economically even most of the time.
When you use potential flaws in an economics model to point out why we shouldn't hold a tax plan to their findings you are making, I don't think that is a great argument to try to make. What needs to be asked is why our government is pushing a plan that has no demonstrable evidence of a positive outcome.
So far I have not heard a single study come out which supports most of the claims which the Republicans are making. If people really think government is flawed and should run more like a business I can tell you flat out not a single major corporation would ever approve a course of action that didn't have substantial evidence that it would achieve a desired outcome. This is why we have market research. Its never perfect but if you can't even achieve reasonable evidence that things will likely workout then you don't push a plan like this.
If I wanted to be cynical I would say they now there are a few likely outcomes from this plan. Such as the need to cut major medical programs as government revenue contracts. But they wont use those in their political narratives because they are unpopular with the public. Things that are popular like boosting average pay or increasing growth back to level of a bygone era are all much more pleasant but also are very thinly supported.
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Today the national debt is at a frightening level and will exponentially increase.
The math for paying it off does not work. Maybe 10 years and a trillion dollars or so ago we would've had a chance to do something meaningful about it, except, well, Iraq War and great recession. This debt will never be paid off and it will eventually have to be settled by devaluation of the currency or the sale of hard assets.
Or we can try to grow economically, and buy ourselves time, and possibly reorganize and reprioritize.
This Republican tax plan should be viewed as more than a tax plan, it's also a geopolitical power maneuver to keep us relevant and check the influence of competitors. Similar to "Star Wars."
This is complete nonsense. In order for "growing economically" to "buy us time" before the debt day-of-reckoning, the tax plan would have to reduce the deficit. Even given Republicans most optimistic (to put it charitably) assumptions about how much this will grow the economy, this plan increases the deficit in a time of relative prosperity. Never mind what it'll do in the next economic downturn. This can only possibly make the crisis bigger and sooner.
Sure the corporations may be sitting pretty thanks to their next-to-non-existent (since the bill leaves all their loopholes their tax rate will be in the teens or possibly single-digits) tax rate - and have plenty of money to relocate to wherever they want - but the country will be in ruins.
Have you considered the repatriation of overseas cash element in this bill? Do you think any of that cash would repatriate under the current tax system? It is being parked out of the country right now for a reason.
Also, I would invite you to consider that this bill is an instrument of foreign policy. There are coming international realignments of influence - best current example, Saudi Arabia. Thinking about this matter in simple US-centric or partisan ways is not optimal.
The most important element of all is the one most seem oblivious to: the animal spirits. People are really sick of sitting around obsessing about what the Federal Reserve is going to do. They want to spend.
There are some huge efficiencies still to be discovered, especially in the central two-thirds of the United States, and as we are a mature capitalist economy, the big money is to be made in efficiencies and consolidation, not from virgin natural resources any more.
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Just chiming in the economics models issue. There are certainly lots of problems with economic models (RangerOne points out a big one with the assumption that human beings will make rational choices, although behavioral economics is starting to address that one), or really ANY models trying to make predictions 10 years into the future.
However, it's not enough to say economic models aren't perfect. If you want people to discount the outcomes of economic forecasts in making decisions about whether a given piece of legislation is a good or bad idea, you have to propose some BETTER way of predicting the economic impact of that same piece of legislation.
Otherwise what you're saying is "The forecast says there is a 90% chance of 4-6 inches of rain tomorrow and I'm planning to spend the whole day outside, but I'm not going to bring a raincoat or umbrella because weather forecasts aren't an exact science."
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Summary so far:
No one knows what the heck is going on, especially the Senators who just voted, and no one can predict the long-term effects of this tax bill with any degree of certainty (other than it will worsen the deficit because 2 +2 = 4 still).
Correct?
Anyone know about changes in long-term gains? Sorry if someone answered, I couldn't tell from the bill. I'm sure it'll all be different in two days anyway...
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Summary so far:
No one knows what the heck is going on, especially the Senators who just voted
Well they kind of know. They know that Republicans want to add trillions to the national debt and raise taxes on the middle class in order to give tax breaks to millionaires and corporations. They're just a little fuzzy on the details of how to best do that.
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Summary so far:
No one knows what the heck is going on, especially the Senators who just voted
Well they kind of know. They know that Republicans want to add trillions to the national debt and raise taxes on the middle class in order to give tax breaks to millionaires and corporations. They're just a little fuzzy on the details of how to best do that.
Just because you keep saying this doesn't make it true. According to the Tax Policy Center (liberal think tank) every single income quintile will receive a tax break on average. (http://www.taxpolicycenter.org/publications/distributional-analysis-tax-cuts-and-jobs-act-passed-senate/full). The people that won't are rich people (though not stratospherically rich) in high tax states with huge mortgages.
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Now our idiot governor is threatening to sue the feds over legislation that will save most people money.
https://www.nytimes.com/2017/12/04/business/economy/tax-bill-new-york.html
I keep hearing these sob stories from people with insane property taxes but no one wants to answer WHY NY, CA, IL, etc have such high taxes. Time for local politicians to start doing their job and reel in costs.
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Summary so far:
No one knows what the heck is going on, especially the Senators who just voted
Well they kind of know. They know that Republicans want to add trillions to the national debt and raise taxes on the middle class in order to give tax breaks to millionaires and corporations. They're just a little fuzzy on the details of how to best do that.
Just because you keep saying this doesn't make it true. According to the Tax Policy Center (liberal think tank) every single income quintile will receive a tax break on average. (http://www.taxpolicycenter.org/publications/distributional-analysis-tax-cuts-and-jobs-act-passed-senate/full). The people that won't are rich people (though not stratospherically rich) in high tax states with huge mortgages.
Outside of the fact that we are talking about estimates and "truth" in the same sentence, I believe your own source proves Sol's point.
The ENTIRE sentence you paraphrased: "We find the bill would reduce taxes on average for all income groups in both 2019 and 2025 (emphasis mine).
Three sentences later: Compared to current law, 7 percent of taxpayers would pay more tax in 2019, 10 percent in 2025, and 48 percent in 2027 (again emphasis mine).
Is your claim that the 48% is rich with huge mortgages?
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Summary so far:
No one knows what the heck is going on, especially the Senators who just voted
Well they kind of know. They know that Republicans want to add trillions to the national debt and raise taxes on the middle class in order to give tax breaks to millionaires and corporations. They're just a little fuzzy on the details of how to best do that.
Just because you keep saying this doesn't make it true. According to the Tax Policy Center (liberal think tank) every single income quintile will receive a tax break on average. (http://www.taxpolicycenter.org/publications/distributional-analysis-tax-cuts-and-jobs-act-passed-senate/full). The people that won't are rich people (though not stratospherically rich) in high tax states with huge mortgages.
I'm sure you already know this, but the tax cuts on individuals are a temporary gimmick to help get the bill passed. In the long term, this bill is a tax increase. It has to be, to pay for the tax cuts for corporations.
Don't be fooled by temporary provisions that are set to expire. Look at the big picture to see the real intent.
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Summary so far:
No one knows what the heck is going on, especially the Senators who just voted
Well they kind of know. They know that Republicans want to add trillions to the national debt and raise taxes on the middle class in order to give tax breaks to millionaires and corporations. They're just a little fuzzy on the details of how to best do that.
Just because you keep saying this doesn't make it true. According to the Tax Policy Center (liberal think tank) every single income quintile will receive a tax break on average. (http://www.taxpolicycenter.org/publications/distributional-analysis-tax-cuts-and-jobs-act-passed-senate/full). The people that won't are rich people (though not stratospherically rich) in high tax states with huge mortgages.
I'm sure you already know this, but the tax cuts on individuals are a temporary gimmick to help get the bill passed. In the long term, this bill is a tax increase. It has to be, to pay for the tax cuts for corporations.
Don't be fooled by temporary provisions that are set to expire. Look at the big picture to see the real intent.
Ok -- so, we all agree that this bill cuts taxes for the middle class through 2027.
I guess you're worried that Democrats will be in power in 2027 and allow middle class tax cuts to expire? Not something I'm worried about personally, and history seems to be on my side (see the 2012 fiscal cliff deal.)
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Now our idiot governor is threatening to sue the feds over legislation that will save most people money.
https://www.nytimes.com/2017/12/04/business/economy/tax-bill-new-york.html
I keep hearing these sob stories from people with insane property taxes but no one wants to answer WHY NY, CA, IL, etc have such high taxes. Time for local politicians to start doing their job and reel in costs.
Right, the states with the residents that disproportionately pay to float the federal government and transfer money to low-tax states should get their acts together.
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I guess you're worried that Democrats will be in power in 2027 and allow middle class tax cuts to expire?
I find it amazing that you have already, pre-emptively, blamed democrats for potentially, in the future, maybe NOT changing a republican tax bill.
Let's review. The republican tax plan is designed to raise personal income taxes paid by most Americans. In order to trick poor people into voting for higher taxes on themselves, it offers them a temporary tax cut up front which will then phase out into a tax increase over time. This is the Republican plan, written without any Democrats and passed without any Democratic votes, and yet you're blaming Democrats for the way Republicans have written their law.
That's some hardcore tribalism right there.
The scenario you've described would not be "democrats letting middle tax cuts expire" it would be "the republican tax plan going exactly as republicans want it to go." Republicans want to raise taxes on all but the richest Americans, in order to help pay for tax cuts for the richest Americans. It's a fundamentally redistributive tax plan, from the poor to the rich, which also happens to add trillions more of Republican national debt.
Republicans had a genuine opportunity here to reform the tax code. They could have shown some of that fiscal responsibility they're always talking about. They could have actually cut taxes on the middle class. Instead they did neither, and squandered their opportunity.
Maybe in a few decades we'll get Democratic full control of the entire government again, and they can try to pass tax reform that actually accomplishes what everyone says they want, but seemingly refuses to do. God forbid the two parties actually work together on this one, despite their agreement on what the reform should look like.
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Right, the states with the residents that disproportionately pay to float the federal government and transfer money to low-tax states should get their acts together.
Here are the top 15 most dependent states per https://wallethub.com/edu/states-most-least-dependent-on-the-federal-government/2700/
1. KY
2. MS
3. NM
4. AL
5. WV
6. SC
7. MT
8. TN
9. ME
10. IN
11. AZ
12. LA
13. SD
14. MO
15. OR
From the last election, that's 2.75 blue states and 12.25 red states. Maine is responsible for the partials. It seems like an ironic correlation that the red states would be more likely to require federal assistance. FWIW the bottom 5 (all blue) of that dependency list are:
46. CA
47. IL
48. NJ
49. MN
50. DE
Time and time again I have to tip my hat to the Republican sales job that keeps them in office even though their constituents are more likely, on average, to need federal assistance of some form even though that is in opposition to some of the Party's core values.
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The people that won't are rich people (though not stratospherically rich) in high tax states with huge mortgages.
You're describing the class of people who actually spend tremendous amounts of money. You know, the ones who actually drive the economy. These are the people who by and large work hard for their money, and that money is being siphoned out their pockets to give to the ultra wealthy and corporations, who have no need for more money and certainly aren't going to spend it.
I am one of those people. And I've already cut my spending back significantly.
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Right, the states with the residents that disproportionately pay to float the federal government and transfer money to low-tax states should get their acts together.
Here are the top 15 most dependent states per https://wallethub.com/edu/states-most-least-dependent-on-the-federal-government/2700/
1. KY
2. MS
3. NM
4. AL
5. WV
6. SC
7. MT
8. TN
9. ME
10. IN
11. AZ
12. LA
13. SD
14. MO
15. OR
From the last election, that's 2.75 blue states and 12.25 red states. Maine is responsible for the partials. It seems like an ironic correlation that the red states would be more likely to require federal assistance. FWIW the bottom 5 (all blue) of that dependency list are:
46. CA
47. IL
48. NJ
49. MN
50. DE
Time and time again I have to tip my hat to the Republican sales job that keeps them in office even though their constituents are more likely, on average, to need federal assistance of some form even though that is in opposition to some of the Party's core values.
Fun fact: NYC residents get 55 cents back on every tax dollar sent to the Federal government--EVEN AFTER they deduct their high state and local taxes.
This bill will only exacerbate that.
Maybe, just maybe, our local taxes wouldn't have to be so high if we got more of that government cheese like the red states. Hmmm.
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https://www.cbsnews.com/news/u-s-corporations-earn-record-high-profits-pay-record-low-taxes/
U.S. corporations earn record high profits, pay record low taxes
U.S. businesses have amassed an overseas cash hoard of $2.4 trillion because they aren’t paying their fair share of taxes, according to two think tanks. But that view is at odds with how Republican Presidential nominee Donald Trump and fiscal conservatives see it. They say the U.S. corporate tax rate is too high.
Like most issues regarding taxation, this one has no shortage of opinions, especially because many U.S. companies don’t pay the 35 percent rate, thanks to loopholes and other tax breaks. A 2013 Government Accountability Office report estimated the levy that businesses actually paid -- also called the effective tax rate -- at 10.6 percent. At times, some Fortune 500 companies have wound up paying little at all in U.S. income taxes.
Further proof that trickle down is BS. Corporations already have plenty of cash to hire workers. So how is this tax cut, which is supposed to give corporations more cash, going to result in the hiring of more workers?
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If I weren't buying a home this would be large tax break, depending on the final version of course. Given that I am the Senate plan would be at about parity, but not itimizing. The current plan saves me slightly more in most cases.
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Right, the states with the residents that disproportionately pay to float the federal government and transfer money to low-tax states should get their acts together.
Time and time again I have to tip my hat to the Republican sales job that keeps them in office even though their constituents are more likely, on average, to need federal assistance of some form even though that is in opposition to some of the Party's core values.
The interstate transfers must be the “little people’s” interests that the liberal elites don’t understand.
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The most important element of all is the one most seem oblivious to: the animal spirits. People are really sick of sitting around obsessing about what the Federal Reserve is going to do. They want to spend.
Tell me more about these animal spirits...
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Now our idiot governor is threatening to sue the feds over legislation that will save most people money.
https://www.nytimes.com/2017/12/04/business/economy/tax-bill-new-york.html
I keep hearing these sob stories from people with insane property taxes but no one wants to answer WHY NY, CA, IL, etc have such high taxes. Time for local politicians to start doing their job and reel in costs.
Right, the states with the residents that disproportionately pay to float the federal government and transfer money to low-tax states should get their acts together.
Understood, but what does that have to do with a large state and local tax burden? Surely it doesn't give them the right to levy more taxes.
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Now our idiot governor is threatening to sue the feds over legislation that will save most people money.
https://www.nytimes.com/2017/12/04/business/economy/tax-bill-new-york.html
I keep hearing these sob stories from people with insane property taxes but no one wants to answer WHY NY, CA, IL, etc have such high taxes. Time for local politicians to start doing their job and reel in costs.
Right, the states with the residents that disproportionately pay to float the federal government and transfer money to low-tax states should get their acts together.
Understood, but what does that have to do with a large state and local tax burden? Surely it doesn't give them the right to levy more taxes.
It alleviates some of the effects of the higher cost of living in these areas that make these higher salaries, which get taxed at higher and higher rates, necessary.
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Now our idiot governor is threatening to sue the feds over legislation that will save most people money.
https://www.nytimes.com/2017/12/04/business/economy/tax-bill-new-york.html
I keep hearing these sob stories from people with insane property taxes but no one wants to answer WHY NY, CA, IL, etc have such high taxes. Time for local politicians to start doing their job and reel in costs.
Right, the states with the residents that disproportionately pay to float the federal government and transfer money to low-tax states should get their acts together.
Understood, but what does that have to do with a large state and local tax burden? Surely it doesn't give them the right to levy more taxes.
What does a state raising money internally to pay for its residents' needs have to do with its reliance on the federal government?
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Now our idiot governor is threatening to sue the feds over legislation that will save most people money.
https://www.nytimes.com/2017/12/04/business/economy/tax-bill-new-york.html
I keep hearing these sob stories from people with insane property taxes but no one wants to answer WHY NY, CA, IL, etc have such high taxes. Time for local politicians to start doing their job and reel in costs.
Right, the states with the residents that disproportionately pay to float the federal government and transfer money to low-tax states should get their acts together.
Understood, but what does that have to do with a large state and local tax burden? Surely it doesn't give them the right to levy more taxes.
What does a state raising money internally to pay for its residents' needs have to do with its reliance on the federal government?
All else being equal, a state that receives less federal funding must make up for that with higher local taxation in order to provide the same sorts of services that the states with more federal funding are able to provide.
-
Now our idiot governor is threatening to sue the feds over legislation that will save most people money.
https://www.nytimes.com/2017/12/04/business/economy/tax-bill-new-york.html
I keep hearing these sob stories from people with insane property taxes but no one wants to answer WHY NY, CA, IL, etc have such high taxes. Time for local politicians to start doing their job and reel in costs.
Right, the states with the residents that disproportionately pay to float the federal government and transfer money to low-tax states should get their acts together.
Understood, but what does that have to do with a large state and local tax burden? Surely it doesn't give them the right to levy more taxes.
What does a state raising money internally to pay for its residents' needs have to do with its reliance on the federal government?
All else being equal, a state that receives less federal funding must make up for that with higher local taxation in order to provide the same sorts of services that the states with more federal funding are able to provide.
Aye, but the ceteris is definitely not paribus with these tax plans.
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Being from MN, I for one am a bit displeased with the complete loss of the SALT deduction.
The "property" tax deduction is a side-show, at least for MN. The income tax deduction loss probably means a net tax increase for a large chunk of MN residents(at least in the metro area)
New Jersey, checking in....less than 1% behind MN on income tax combined with the highest property taxes in the country.
I'm glad I don't own here.
You're still paying the NJ property tax (as part of your rent).
In your case though, it will remain deductible on your landlord's schedule E, line 16.
Could someone buy a house under an LLC and rent it out to themselves (allowing the LLC to deduct the property tax)? Or would the rules regarding LLCs disallow that because it's obviously not a business expense?
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Now our idiot governor is threatening to sue the feds over legislation that will save most people money.
https://www.nytimes.com/2017/12/04/business/economy/tax-bill-new-york.html
I keep hearing these sob stories from people with insane property taxes but no one wants to answer WHY NY, CA, IL, etc have such high taxes. Time for local politicians to start doing their job and reel in costs.
Right, the states with the residents that disproportionately pay to float the federal government and transfer money to low-tax states should get their acts together.
Understood, but what does that have to do with a large state and local tax burden? Surely it doesn't give them the right to levy more taxes.
What does a state raising money internally to pay for its residents' needs have to do with its reliance on the federal government?
All else being equal, a state that receives less federal funding must make up for that with higher local taxation in order to provide the same sorts of services that the states with more federal funding are able to provide.
Maybe I was being to0 subtle in restating Debts_of_Despair's question. But maybe you're being even more subtle.
Some Republicans like to focus on part of the state-federal revenue and spending picture to claim that the SALT deductions are a subsidy to the high-tax states, rather than look at the entirety of the state-federal revenue and spending picture and admit that the system as a whole is a subsidy to those low-tax states that are generally hard-core red. That the SALT deductions have somewhat blunted the extent to which, e.g., CA subsidizes WV, doesn't change the fact that the subsidy still runs in that direction.
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The debt is going to increase anyway. You know that, right?
This Republican tax plan should be viewed as more than a tax plan, it's also a geopolitical power maneuver to keep us relevant and check the influence of competitors. Similar to "Star Wars."
So, the debt is going to increase anyway, so give the wealthiest more money? That makes no sense.
Neither does that last quoted statement. What about the tax plan is going to keep the United States relevant exactly?
Reduction in the corporate rate and repatriation of funds held out of the country.
As a thought experiment, imagine yourself as a competitor to the United States, as things are now, and alternatively as they would be under the new plan. Which do you like better?
I was traveling and did not have time to reply.
What!? What are you talking about? Repatriation of funds? I think I understand that you prescribe to the theory that corporations will somehow be investing, expanding and hiring with extra money they will receive from this tax bill. Nonsense. This doesn't happen. Our economy is fairly strong, we are employed as a country. In short, we don't need a stimulus now. We should be paying off debt instead of making it.
What's going to happen? The Fed is going to raise interest rates to stave off inflation. Corporations will be rich while we go into a downturn, but regular people the Republicans always say they care so much about will get screwed. They're going to gut Obamacare, social security, Medicaid and Medicare. Their wet dream will become reality.
EDIT: My post was in limbo.
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How about instead of giving more money to corporations and the ultra rich, and instead of "paying down debt", we make concrete investments in the future and shore up neglected infrastructure?
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How about instead of giving more money to corporations and the ultra rich, and instead of "paying down debt", we make concrete investments in the future and shore up neglected infrastructure?
I would like to put some to paying down debt and some to infrastructure. Wasn't infrastructure a campaign promise?
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How about instead of giving more money to corporations and the ultra rich, and instead of "paying down debt", we make concrete investments in the future and shore up neglected infrastructure?
We don't have money for that.
Seriously, I would have thought that with a real estate developer in the White House, this would at least be a consideration, and something that could plausibly get bi-partisan support (even if it's not either party's first priority).
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One example of benefit (sparked by a conversation with a colleague) - this plan would be of some benefit to a lot of singles who rent - think of our of college grads. They don't itemize usually and don't make tons. So doubling standard deduction is a boon.
But overall is a marginal benefit for most - 1-2K better off...its not all that great, but not terrible.
In my case with a family of four, I gain $12k for the standard deduction, but I lose 4 x $4,050 (2017)
or $16,200 for the personal exemptions.
In just a few years, I won't have the two kid deductions, Then I'd gain $12k and lose $8,080, coming out ahead, at least on those two changes.
A married couple over 65yrs old get a slightly larger Standard deduction of $14,600.
That couple gains $9,400 and loses $8,200, for a $1,200 reduction of AGI. Unless there is a senior exemption to the standard deduction change. I see where simplification is happening.
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The asinine thing about this whole tax bill is it is essentially a stimulus put on when the indices are at all time highs and full employment. Taxes and interest rates should be increased when times are good to save money for those times when the economy enters a recession. Reagan cut taxes in '81 to provide a stimulus to the economy. It worked wonderfully. Only problem is the federal government never removed the stimulus. If the country enters a recession, the government has no arrows in its quiver to stimulate the economy. The fed is still practicing QE albeit at a slower pace and the fed funds rate is at 1.25%. This means the next recession is going to last longer and increase the debt at a greater rate than the last if the two recessions were equal. We are getting to a point where minor recessions could be debilitating for a number of years. Not good for those looking to FIRE.
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How about instead of giving more money to corporations and the ultra rich, and instead of "paying down debt", we make concrete investments in the future and shore up neglected infrastructure?
"concrete investments" no pun intended, I'm sure.
We could actually do both, but you would need a government that would make that a priority.
It's ok, the infrastructure will catch up eventually
]https://www.mprnews.org/story/2017/12/05/small-towns-face-crisis-of-aging-water-sewer-pipes[url] (https://www.mprnews.org/story/2017/12/05/small-towns-face-crisis-of-aging-water-sewer-pipes[url)[/url]
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How about instead of giving more money to corporations and the ultra rich, and instead of "paying down debt", we make concrete investments in the future and shore up neglected infrastructure?
We don't have money for that.
Seriously, I would have thought that with a real estate developer in the White House, this would at least be a consideration, and something that could plausibly get bi-partisan support (even if it's not either party's first priority).
Trump doesn't know what he is doing and Republicans are 100% not on board with major infrastructure spending. However i wouldn't rule it out because Trump is very petty and he is clearly willing to fight his own party to please his base.
However if the media doesn't call him out on it, or he doesn't think it will gain him praise, it wont matter to him.
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One example of benefit (sparked by a conversation with a colleague) - this plan would be of some benefit to a lot of singles who rent - think of our of college grads. They don't itemize usually and don't make tons. So doubling standard deduction is a boon.
But overall is a marginal benefit for most - 1-2K better off...its not all that great, but not terrible.
In my case with a family of four, I gain $12k for the standard deduction, but I lose 4 x $4,050 (2017)
or $16,200 for the personal exemptions.
In just a few years, I won't have the two kid deductions, Then I'd gain $12k and lose $8,080, coming out ahead, at least on those two changes.
A married couple over 65yrs old get a slightly larger Standard deduction of $14,600.
That couple gains $9,400 and loses $8,200, for a $1,200 reduction of AGI. Unless there is a senior exemption to the standard deduction change. I see where simplification is happening.
One real major change also comes from the minor bump to the bracket cutoffs and the senate plan flat out cuts every tax tier by 2.5 or 3%. If the final bill keeps that it makes a big difference in the short term. Overall it could make it easier to stay out of the 25%/22% bracket with enough deductions.
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One real major change also comes from the minor bump to the bracket cutoffs and the senate plan flat out cuts every tax tier by 2.5 or 3%. If the final bill keeps that it makes a big difference in the short term. Overall it could make it easier to stay out of the 25%/22% bracket with enough deductions.
The bracket bumps are temporary. They adjusted the inflation adjustments to brackets so that they grow more slowly, so everyone's marginal rates will creep up over time.
And remember that ALL of the other personal tax reductions are temporary. The "doubled" standard deduction is temporary. The increased child tax credit is temporary. But the loss of personal deductions and exemptions is permanent. Your taxes will go up when the bill is fully phased in!
The temporary doubling of the standard deduction means anyone who takes the standard gets a tax cut in 2018. Most of them don't know the republicans want the doubled standard deduction to disappear in a few years.
For people who itemize the situation is more complicated, but most (~60%) will get a tax cut in 2018.
But that's because most people that itemize have children, and will get the new expanded child tax credit. Which is only partially refundable, and which will also expire once the bill is fully phased in. At least up front, though, having more kids means you'll get a bigger tax cut in 2018.
Here's a decent summary of the impacts on different kinds of tax filers: https://www.nytimes.com/interactive/2017/11/28/upshot/what-the-tax-bill-would-look-like-for-25000-middle-class-families.html
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Here's a decent summary of the impacts on different kinds of tax filers: https://www.nytimes.com/interactive/2017/11/28/upshot/what-the-tax-bill-would-look-like-for-25000-middle-class-families.html
Interesting analysis! But scrolling down to the bottom and looking at the effect on taxes in 2027, I don't understand why it shows such small numbers for the increase in taxes. The worse case is a family with $640 increase in taxes, whereas the worst case for 2018 is an increase of $3,780. If only the "good stuff" is expiring (doubled standard deduction, more generous child credit, lower tax rates) then why are taxes looking better for many folks in 2027 compared to 2018? What am I missing?
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The debt is going to increase anyway. You know that, right?
This Republican tax plan should be viewed as more than a tax plan, it's also a geopolitical power maneuver to keep us relevant and check the influence of competitors. Similar to "Star Wars."
So, the debt is going to increase anyway, so give the wealthiest more money? That makes no sense.
Neither does that last quoted statement. What about the tax plan is going to keep the United States relevant exactly?
Reduction in the corporate rate and repatriation of funds held out of the country.
As a thought experiment, imagine yourself as a competitor to the United States, as things are now, and alternatively as they would be under the new plan. Which do you like better?
I was traveling and did not have time to reply.
What!? What are you talking about? Repatriation of funds? I think I understand that you prescribe to the theory that corporations will somehow be investing, expanding and hiring with extra money they will receive from this tax bill. Nonsense. This doesn't happen. Our economy is fairly strong, we are employed as a country. In short, we don't need a stimulus now. We should be paying off debt instead of making it.
What's going to happen? The Fed is going to raise interest rates to stave off inflation. Corporations will be rich while we go into a downturn, but regular people the Republicans always say they care so much about will get screwed. They're going to gut Obamacare, social security, Medicaid and Medicare. Their wet dream will become reality.
EDIT: My post was in limbo.
I'm pretty sure you didn't actually do the thought experiment. Too bad, we could have discussed your insights.
The Fed will be stocked with doves and follow an accommodative policy, I think the signs are clear.
Unusual solutions to long-standing problems will be proposed, from unexpected sources.
Your disaster scenario seems like it came straight out of the media. Personally I avoid regular news and opinion media, I like business news better. I notice the businesspeople in interviews are animated, bullish, full of plans, and look like they are finally having a good time. None of them are frightened of the Fed.
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The most important element of all is the one most seem oblivious to: the animal spirits. People are really sick of sitting around obsessing about what the Federal Reserve is going to do. They want to spend.
Tell me more about these animal spirits...
https://en.wikipedia.org/wiki/Animal_spirits_(Keynes)
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I'm pretty sure you didn't actually do the thought experiment. Too bad, we could have discussed your insights.
The Fed will be stocked with doves and follow an accommodative policy, I think the signs are clear.
Unusual solutions to long-standing problems will be proposed, from unexpected sources.
Your disaster scenario seems like it came straight out of the media. Personally I avoid regular news and opinion media, I like business news better. I notice the businesspeople in interviews are animated, bullish, full of plans, and look like they are finally having a good time. None of them are frightened of the Fed.
Well, it's not that you don't trust media, it's that you only trust the media you've chosen to trust. What if an opinion is from an actual economist? Does that count?
Moving on: it's not my disaster scenario. It's basically most economists' scenario.
Is Forbes too media-y for you?
https://www.forbes.com/sites/johntharvey/2017/12/02/economists-say-the-trump-tax-plan-will-have-disastrous-consequences/#4319f3a44209 (https://www.forbes.com/sites/johntharvey/2017/12/02/economists-say-the-trump-tax-plan-will-have-disastrous-consequences/#4319f3a44209)
How about Business Insider?
http://www.businessinsider.com/trump-gop-tax-plan-tax-economist-says-senate-bill-crazy-stupid-2017-11 (http://www.businessinsider.com/trump-gop-tax-plan-tax-economist-says-senate-bill-crazy-stupid-2017-11)
Bloomberg?
https://www.bloomberg.com/news/articles/2017-09-28/most-economists-agree-trump-tax-plan-will-widen-budget-deficit (https://www.bloomberg.com/news/articles/2017-09-28/most-economists-agree-trump-tax-plan-will-widen-budget-deficit)
Unsure what the WSJ says, since I don't have a subscription and libraries are closed right now. I'd label that as a biased source however, considering the owner.
The reason they look so happy is because they're going to making money hand over fist off of this giveaway to them. It wont stimulate an economy that doesn't need stimulating. It wont show up other countries. It's going to make the people who own and run the companies rich. It does not trickle down. I'm sorry.
Edit to fix quote.
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The high level tax plan is doing exactly what the Republicans wanted.
1/big tax cut for their donors and the rich shareholding class
2/ penalise democratic strongholds (NY and Cali) that have high state and city taxes.
3/ensure nasty side effects on blue collar republicans and middle class don't get noticed until after 2018 and 2020 elections
4/ increase deficit but blame entitlements and democrats. Slash Medicaid and future SS to 'fix'
Looks like they will get away with it.
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One real major change also comes from the minor bump to the bracket cutoffs and the senate plan flat out cuts every tax tier by 2.5 or 3%. If the final bill keeps that it makes a big difference in the short term. Overall it could make it easier to stay out of the 25%/22% bracket with enough deductions.
The bracket bumps are temporary. They adjusted the inflation adjustments to brackets so that they grow more slowly, so everyone's marginal rates will creep up over time.
And remember that ALL of the other personal tax reductions are temporary. The "doubled" standard deduction is temporary. The increased child tax credit is temporary. But the loss of personal deductions and exemptions is permanent. Your taxes will go up when the bill is fully phased in!
The temporary doubling of the standard deduction means anyone who takes the standard gets a tax cut in 2018. Most of them don't know the republicans want the doubled standard deduction to disappear in a few years.
For people who itemize the situation is more complicated, but most (~60%) will get a tax cut in 2018.
But that's because most people that itemize have children, and will get the new expanded child tax credit. Which is only partially refundable, and which will also expire once the bill is fully phased in. At least up front, though, having more kids means you'll get a bigger tax cut in 2018.
Here's a decent summary of the impacts on different kinds of tax filers: https://www.nytimes.com/interactive/2017/11/28/upshot/what-the-tax-bill-would-look-like-for-25000-middle-class-families.html
I preface everything I say about this tax plan by saying cutting taxes on corps to stimulate and economy that has been over stimulated for a decade is stupid.
But the Republicans feel they have no choice because they know 2018 will likely see them lose their full control.
I still think the temporary aspects are a complete crock. They know from experience that no party is willing to let tax breaks for the middle class expire. So I find it unlikely they won't get extended like they were with the bush cuts.
This makes the move and even bigger load of bullshit. But I don't think raising taxes on the middle class directly is an option.
They as you note will do it the old fashion way with inflation and then cuts to public services. No one is able to stomach overt tax increases.
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Had an interesting conversation with my husband about the tax plan as part of the tax code's treatment of income from investment over income from labor.
On balance, we'll probably end up paying more in taxes when these changes are fully phased in--high SALT state and all that. But, it seems clear that companies are going to be absolutely flush with cash, and most of them are planning to use that money to either increase dividends or jack up their share prices through stock buybacks. Both of which will probably boost our portfolio considerably and, depending on timing and when the next inevitable recession finally comes, may even shave a few years off our FIRE date.
So, as investors, we're going to be rewarded by this. And, as a result, we're probably going to be removing ourselves from the labor market sooner rather than later.
Putting aside the question of "what if everyone became frugal" and all the valuable work many of us will be doing for our communities during FIRE, if the stated goal of the tax plan is to spur economic growth and vibrancy, incentivizing people to leave the labor force seems contrary to that. Both of us will probably retire AT LEAST 15 years before "standard" retirement age, meaning we're nixing a combined 30 years of economic output. This will be happening right about when an aging population will need ever greater support from the working population.
In reality, I suspect the number of people who can realistically FIRE is so small that it didn't even rise to the level of an afterthought in this process. But it begs the question of whether investment is too heavily incentivized and labor is too heavily disincentivized. Essentially, these policies are contributing to the creation of a permanent class of idle rich--and we're just riding along on the tiniest corner of their coattails.
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The sad thing is in theory the Republicans have it half right. You need a healthy investor class to start new businesses. But by and large we have an extremely healthy investor class and a below peak middle class. But they never moderate their approach based on reality. They always go over the top for heavy handed investor breaks with weak adjustments for working consumers.
The Dems want to solve everything with a new expensive program and rarely just worry about suring up programs like SS and cutting potentially failed programs.
I assume most of this is due to the normal problem of short term demands leading to short sighted action in politics and business. Big wins and action are sexy. Long term planning and refinement are not. But it should be our default mode 99% of the time.
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It's an interesting question, Aelias. Total labor force participation of 25-54 year olds peaked back around 2000 at around 85% and has been trending slowly downward ever since. If we still had 2000 era workforce participation that would translate to an extra 6 million 25-54 year olds working (call it something like an extra $200 billion in economic activity each year, which is nothing to sneeze at).
One argument is the one that you lay out that our tax code prioritizes capital at the expense of labor too much. Another is that it reflects a workforce that is increasingly sick, disabled, and dependent on alcohol and opiates (the hillbilly eulogy explanation). A third is that automation is replacing enough need for human labor that more people are having to give up on ever finding work. Or it could be any two of the three. Or all three. Or something else entirely.
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One argument is the one that you lay out that our tax code prioritizes capital at the expense of labor too much. Another is that it reflects a workforce that is increasingly sick, disabled, and dependent on alcohol and opiates (the hillbilly eulogy explanation). A third is that automation is replacing enough need for human labor that more people are having to give up on ever finding work. Or it could be any two of the three. Or all three. Or something else entirely.
I suspect it's probably mostly 2 and 3. Most people who could even hypothetically retire early don't because of consumption, risk aversion, or wanting more money. And, for the overwhelming majority of people, the disincentivization of work is a non-issue because they need to work to survive.
But the fact that these policies make investment so attractive and so lucrative is part of what makes FIRE a viable proposition. And, from a macroeconomic perspective, the people who are making enough to invest are probably not the people you want to incentivize to leave early, especially when many people will leave by necessity due to illness/disability/other issues.
To put it another way: the gov't inevitably incentivizes behavior by their tax policy. I'm not sure this is the kind of behavior they should be incentivizing.
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@maizeman @Aelias
USA GDP is $18.624 trillion, divided by 154.4 million US workers = $120,622/worker
While the added value of 6 million new workers would probably not be at that rate, I think you may be underestimating the boost to GDP if labor participation rates returned to the year 2000 levels
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You may very well be right PathtoFIRE. I was going off an average full time salary of ~$35,000/worker, but I think your approach of looking at GDP per worker instead of compensation per worker is probably closer to the truth. That'd put the economic impact of all those missing workers (and missing jobs for the missing workers to take) at north of $700B/year.
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http://thehill.com/news-by-subject/energy-environment/363496-coal-ceo-gop-tax-bill-wipes-us-out-destroys-thousands-of
The CEO of one of the nation’s largest coal companies ripped the Senate tax-reform bill, saying late changes to the bill would “wipe out” coal mining jobs.
Robert Murray, founder and CEO of Murray Energy, said Tuesday that the tax hike on coal mining firms that would result from the changes would cancel out progress that President Trump has made on reviving the coal industry, according to CNN.
“We won’t have enough cash flow to exist,” Murray told CNNMoney. “This wipes out everything that President Trump has done for coal.”
You sound surprised, Mr. Coal Man.
https://www.politico.com/story/2017/12/06/tax-plan-glitches-mistakes-republicans-208049
Republicans’ tax-rewrite plans are riddled with bugs, loopholes and other potential problems that could plague lawmakers long after their legislation is signed into law.
Some of the provisions could be easily gamed, tax lawyers say. Their plans to cut taxes on “pass-through” businesses in particular could open broad avenues for tax avoidance.
Others would have unintended results, like a last-minute decision by the Senate to keep the alternative minimum tax, which was designed to make sure wealthy people and corporations don't escape taxes altogether. For many businesses, that would nullify the value of a hugely popular break for research and development expenses.
https://www.vanityfair.com/newsletter/2017/12/trump-crony-admits-tax-plan-is-an-elaborate-middle-finger-to-liberals
TRUMP CRONY ADMITS REPUBLICAN TAX PLAN IS AN ELABORATE MIDDLE FINGER TO LIBERALS
“They go after state and local taxes, which weakens public employee unions. They go after university endowments, and universities have become play pens of the left. And getting rid of the mandate is to eventually dismantle Obamacare,” Moore said, explaining excitedly that scrapping the requirement that most people obtain coverage will hasten a “death spiral” in the Affordable Care Act’s marketplaces.
https://slate.com/business/2017/12/senate-republicans-may-have-made-a-usd260-billion-mistake-in-their-tax-bill.html
Senate Republicans Made a $289 Billion Mistake in the Handwritten Tax Bill They Passed at 2 a.m. Go Figure.
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One example of benefit (sparked by a conversation with a colleague) - this plan would be of some benefit to a lot of singles who rent - think of our of college grads. They don't itemize usually and don't make tons. So doubling standard deduction is a boon.
But overall is a marginal benefit for most - 1-2K better off...its not all that great, but not terrible.
In my case with a family of four, I gain $12k for the standard deduction, but I lose 4 x $4,050 (2017)
or $16,200 for the personal exemptions.
In just a few years, I won't have the two kid deductions, Then I'd gain $12k and lose $8,080, coming out ahead, at least on those two changes.
A married couple over 65yrs old get a slightly larger Standard deduction of $14,600.
That couple gains $9,400 and loses $8,200, for a $1,200 reduction of AGI. Unless there is a senior exemption to the standard deduction change. I see where simplification is happening.
Don't forget the flex family tax credit (worth $300 per adult), the expanded child credit ($1600) and the lower tax brackets.
Again, that great, but not terrible either.
As many have said, the point of this bill is mainly to lower the corporate tax rate and attempt to repatriate cash from overseas. But most will gain on the personal side also, about 2 iPhone X worth a year.
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You may very well be right PathtoFIRE. I was going off an average full time salary of ~$35,000/worker, but I think your approach of looking at GDP per worker instead of compensation per worker is probably closer to the truth. That'd put the economic impact of all those missing workers (and missing jobs for the missing workers to take) at north of $700B/year.
I doubt that the people who have exited the labor force are as productive as the average worker, so this might be an overestimate.
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You may very well be right PathtoFIRE. I was going off an average full time salary of ~$35,000/worker, but I think your approach of looking at GDP per worker instead of compensation per worker is probably closer to the truth. That'd put the economic impact of all those missing workers (and missing jobs for the missing workers to take) at north of $700B/year.
I doubt that the people who have exited the labor force are as productive as the average worker, so this might be an overestimate.
Exactly. No more than slicing a pizza into 6 extra slices would be as filling as the original 8 slices.
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I always cut my pizza into 6 slices. There is no way I could eat 8.
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You may very well be right PathtoFIRE. I was going off an average full time salary of ~$35,000/worker, but I think your approach of looking at GDP per worker instead of compensation per worker is probably closer to the truth. That'd put the economic impact of all those missing workers (and missing jobs for the missing workers to take) at north of $700B/year.
I doubt that the people who have exited the labor force are as productive as the average worker, so this might be an overestimate.
Exactly. No more than slicing a pizza into 6 extra slices would be as filling as the original 8 slices.
The people who have left the workforce may well be less productive than the average worker, but I don't think it is plausible to argue that total GDP is completely insensitive to the number of people working (which is what the analogy of slicing the same pizza into different numbers of slices implies). Taken to its logical extreme, that would imply that if someone (say a major orange political figure) managed to revoke the citizenship of every other american, deport us all, US GDP would remain exactly the same, and US per capita GDP would be more than $17 trillion.
We may well reach a point in our lifetimes where automation and machine learning make that hypothetical scenario more plausible, but today it's pretty clear that more people working equals more total economic activity (although reasonable people can certainly disagree about how much additional economic activity).
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Next season's sneak peek: https://www.washingtonpost.com/news/wonk/wp/2017/12/01/gop-eyes-post-tax-cut-changes-to-welfare-medicare-and-social-security/
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Next season's sneak peek: https://www.washingtonpost.com/news/wonk/wp/2017/12/01/gop-eyes-post-tax-cut-changes-to-welfare-medicare-and-social-security/
Of course - there's a deficit to make up for!!!!1111
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The most important element of all is the one most seem oblivious to: the animal spirits. People are really sick of sitting around obsessing about what the Federal Reserve is going to do. They want to spend.
Tell me more about these animal spirits...
https://en.wikipedia.org/wiki/Animal_spirits_(Keynes)
Priceless burn.
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The most important element of all is the one most seem oblivious to: the animal spirits. People are really sick of sitting around obsessing about what the Federal Reserve is going to do. They want to spend.
Tell me more about these animal spirits...
https://en.wikipedia.org/wiki/Animal_spirits_(Keynes)
Priceless burn.
Yes, posting a broken Wikipedia link as a response to a question is a truly powerful argument.
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Tell me more about these animal spirits...
https://en.wikipedia.org/wiki/Animal_spirits_(Keynes)
Priceless burn.
Yes, posting a broken Wikipedia link as a response to a question is a truly powerful argument.
Gonna hafta plead Poe's law (https://en.wikipedia.org/wiki/Poe%27s_law) to the last two comments.
Presumably y'all were astute enough to determine the Simple Machines software ignored the closing ")" in the URL and followed the "Did you mean:" wikipedia link to Animal spirits (Keynes) - Wikipedia (https://en.wikipedia.org/wiki/Animal_spirits_(Keynes)). Or https://en.wikipedia.org/wiki/Animal_spirits_(Keynes) (https://en.wikipedia.org/wiki/Animal_spirits_(Keynes)) directly.
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I think Keynes Animal Spirits would have been more interested in a real and sustained plan to boost to lower and middle class disposable income. Giving it to share buybacks and the 1% will just feed the investor class. U.S. corporations are already flush with cash and easy credit. What they really need are more customers.
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Tell me more about these animal spirits...
https://en.wikipedia.org/wiki/Animal_spirits_(Keynes)
Priceless burn.
Yes, posting a broken Wikipedia link as a response to a question is a truly powerful argument.
Gonna hafta plead Poe's law (https://en.wikipedia.org/wiki/Poe%27s_law) to the last two comments.
Presumably y'all were astute enough to determine the Simple Machines software ignored the closing ")" in the URL and followed the "Did you mean:" wikipedia link to Animal spirits (Keynes) - Wikipedia (https://en.wikipedia.org/wiki/Animal_spirits_(Keynes)). Or https://en.wikipedia.org/wiki/Animal_spirits_(Keynes) (https://en.wikipedia.org/wiki/Animal_spirits_(Keynes)) directly.
And Wise Virgin meant it the same way as P.G. Wodehouse.
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Tell me more about these animal spirits...
https://en.wikipedia.org/wiki/Animal_spirits_(Keynes)
Priceless burn.
Yes, posting a broken Wikipedia link as a response to a question is a truly powerful argument.
Gonna hafta plead Poe's law (https://en.wikipedia.org/wiki/Poe%27s_law) to the last two comments.
Presumably y'all were astute enough to determine the Simple Machines software ignored the closing ")" in the URL and followed the "Did you mean:" wikipedia link to Animal spirits (Keynes) - Wikipedia (https://en.wikipedia.org/wiki/Animal_spirits_(Keynes)). Or https://en.wikipedia.org/wiki/Animal_spirits_(Keynes) (https://en.wikipedia.org/wiki/Animal_spirits_(Keynes)) directly.
And Wise Virgin meant it the same way as P.G. Wodehouse.
This is pretty great - learned about P.G. Wodehouse and Poe's Law...never heard of either and I am glad someone pointed them out. Interesting stuff.
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Tell me more about these animal spirits...
https://en.wikipedia.org/wiki/Animal_spirits_(Keynes)
Priceless burn.
Yes, posting a broken Wikipedia link as a response to a question is a truly powerful argument.
Gonna hafta plead Poe's law (https://en.wikipedia.org/wiki/Poe%27s_law) to the last two comments.
Presumably y'all were astute enough to determine the Simple Machines software ignored the closing ")" in the URL and followed the "Did you mean:" wikipedia link to Animal spirits (Keynes) - Wikipedia (https://en.wikipedia.org/wiki/Animal_spirits_(Keynes)). Or https://en.wikipedia.org/wiki/Animal_spirits_(Keynes) (https://en.wikipedia.org/wiki/Animal_spirits_(Keynes)) directly.
Burn - as used in That 70's Show Just so funny!
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https://thinkprogress.org/paul-ryan-tax-cuts-medicare-medicaid-f87d810ad5b9/
Republicans in Congress are openly admitting they plan to use their tax reform bill to justify slashing funding for essential social programs like Social Security, Medicare, Medicaid, and food stamps.
“We’re going to have to get back next year at entitlement reform, which is how you tackle the debt and the deficit,” Ryan said, adding that health care entitlements like Medicare and Medicaid are “the big drivers of our debt.”
Rep. Rod Blum (R-IA) claimed that to achieve the growth the tax plan forecasts, “we have to have welfare reform.” Rep. Clay Higgins (R-LA) said, “If we pass tax reform, we have to have welfare reform.” Sen. Marco Rubio (R-FL) directly admitted that the plan all along has been “to do two things,” because “the driver of our debt is the structure of Social Security and Medicare for future beneficiaries.”
Ryan suggested that the programs are “paying people not to work.” Higgins referred to Americans who “suffer on welfare.” Blum went so far as to say, “Sometimes we need to force people to go to work.”
. Sen. Orrin Hatch (R-UT) claimed during debate on the tax bill last week that entitlements “help people who won’t help themselves, won’t lift a finger, and expect the federal government to do everything.” Sen. Chuck Grassley (R-IA) defended repealing the estate tax — a move that almost exclusively benefits the wealthy — by bemoaning “those that are just spending every darn penny they have, whether it’s on booze or women or movies.”
Nearly 90 percent of working-age parents who receive food stamps are back to work within a year. But two thirds of the people who receive those benefits are children, people who have disabilities, or people too old to return to work.
The tax cut, which overwhelmingly benefits the top 1% over the next 10 years, is needed in order to cut social programs that the poorest Americans need.
Your modern day GOP.
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https://thinkprogress.org/paul-ryan-tax-cuts-medicare-medicaid-f87d810ad5b9/
Republicans in Congress are openly admitting they plan to use their tax reform bill to justify slashing funding for essential social programs like Social Security, Medicare, Medicaid, and food stamps.
“We’re going to have to get back next year at entitlement reform, which is how you tackle the debt and the deficit,” Ryan said, adding that health care entitlements like Medicare and Medicaid are “the big drivers of our debt.”
Rep. Rod Blum (R-IA) claimed that to achieve the growth the tax plan forecasts, “we have to have welfare reform.” Rep. Clay Higgins (R-LA) said, “If we pass tax reform, we have to have welfare reform.” Sen. Marco Rubio (R-FL) directly admitted that the plan all along has been “to do two things,” because “the driver of our debt is the structure of Social Security and Medicare for future beneficiaries.”
Ryan suggested that the programs are “paying people not to work.” Higgins referred to Americans who “suffer on welfare.” Blum went so far as to say, “Sometimes we need to force people to go to work.”
. Sen. Orrin Hatch (R-UT) claimed during debate on the tax bill last week that entitlements “help people who won’t help themselves, won’t lift a finger, and expect the federal government to do everything.” Sen. Chuck Grassley (R-IA) defended repealing the estate tax — a move that almost exclusively benefits the wealthy — by bemoaning “those that are just spending every darn penny they have, whether it’s on booze or women or movies.”
Nearly 90 percent of working-age parents who receive food stamps are back to work within a year. But two thirds of the people who receive those benefits are children, people who have disabilities, or people too old to return to work.
The tax cut, which overwhelmingly benefits the top 1% over the next 10 years, is needed in order to cut social programs that the poorest Americans need.
Your modern day GOP.
What the fuck?
The GOP's wet dream is becoming a wet reality. Fuck over the voting base in order to benefit GOP donors - blame the hardships on them liberals!
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Rep. Rod Blum (R-IA) claimed that to achieve the growth the tax plan forecasts, “we have to have welfare reform.” Rep. Clay Higgins (R-LA) said, “If we pass tax reform, we have to have welfare reform.” Sen. Marco Rubio (R-FL) directly admitted that the plan all along has been “to do two things,” because “the driver of our debt is the structure of Social Security and Medicare for future beneficiaries.”
I'm never quite sure what anyone means by "welfare," but given that the two programs to which Sen. Rubio referred are also the subject of stand-alone taxes and premiums, I don't understand his comment at all. While I understand that future expenditures under those programs may be legitimate concerns, the programs have all been at a surplus for years (and Social Security and Medicare Part A are at those surpluses entirely from the stand-alone tax collections), and they're expected to continue to run at surplus for the next few years, at least. So how are they the driver of our existing debt?
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Welfare and entitlements mean "government programs I don't like".
Food stamps, TANF, and Section 8, are welfare.
Mortgage deductions, subsidized gasoline, and the Pentagon, are necessary spending.
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The GOP's wet dream is becoming a wet reality. Fuck over the voting base in order to benefit GOP donors - blame the hardships on them liberals!
Stolen jokes:
The Republican tax plan includes tax breaks for people who own private jets, and for golf course owners, and repeals the estate tax. It also raises health insurance premiums by an extra 10% per year and will cause approximately 13 million fewer Americans to have health insurance. So chin up, America! If you die from not being able to afford health care, at least you can leave up to eleven million dollars to your kids!
It also includes tax breaks for wineries and private school tuition. So if you happen to be using your private jet to fly from your golf course to your country estate winery while your kids are away at private school, this tax plan is going to be great for you!
"Imagine if a poor child only inherited eleven million dollars and had to pay taxes on it, why they could absolutely starve!"
As if this big middle finger to average Americans wasn't enough, they've also used their tax plan to strike a blow against reproductive rights. The republican tax plan would give a tax ID number to unborn fetuses so they can hold 529 accounts, moving them one step closer to personhood than their lack of a central nervous system would indicate.
62% of the benefits in this bill go to the top 1%, an unimaginable transfer of wealth from the poor to the rich. Republicans think this is appropriate because poor people are morally inferior and don't deserve tax breaks. Chuck Grassley specifically disparaged (http://www.cnn.com/2017/12/04/politics/chuck-grassley-estate-tax/index.html) Americans who don't own stock as morally inferior. (that last one isn't a joke, it's just really fucking infuriating)
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62% of the benefits in this bill go to the top 1%, an unimaginable transfer of wealth from the poor to the rich. Republicans think this is appropriate because poor people are morally inferior and don't deserve tax breaks. Chuck Grassley specifically disparaged (http://www.cnn.com/2017/12/04/politics/chuck-grassley-estate-tax/index.html) Americans who don't own stock as morally inferior. (that last one isn't a joke, it's just really fucking infuriating)
They really are gunning(pun intended) for a violent revolution of the masses(the poor). U.S. drone strikes on U.S. soil? Sign an executive order to protect "True Americans."
The future of America sure is Great!
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A post from Robert Reich yesterday:
Make no mistake. The oligarchs (Koch brothers, Mercers, Wilks, Waltons, Deasons, Schwabs, Neugebauers, Murdochs, Griffins, Ricketts, etc.) are now in charge of the U.S. government. The views of most Americans (75 percent of whom are against the tax cut, for example) no longer matter.
This was the oligarch’s deal with the devil (Trump) from the start: Get us a huge tax cut, use the resulting deficit to justify cutting Medicare and Social Security, and get rid of environmental and financial regulations. In return, we’ll finance you, we’ll back your allies in the GOP, and we’ll mount PR campaigns on your behalf that magnify your lies. Hell, we’ll even make you look like a populist.
Over half the money contributed in the 2016 came from just 158 families, along with the companies they own or control. More than 50 of these people are on the Forbes list of America’s richest billionaires. 64 of them made their fortunes in finance (hedge fund and private equity). 17 in energy, mostly oil and gas. 15 in real estate and construction (the Trumps, for example). 10 in technology.
These American oligarchs don’t have to worry about whether Social Security or Medicare will be there for them in their retirement because they’ve put away huge fortunes. They don’t worry about climate change because they don’t live in homes that might succumb to hurricanes or wildfires. They don't care about public schools because their families don't attend them. They don't care about public transportation because they don't use it. Truth to tell, they don't even care that much about America, because their personal and financial interests are global.
They are living in their own separate society, and they want people who will represent them, not the rest of us.
The Republican Party is their vehicle. Fox News is their voice. Trump is their champion.
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Next season's sneak peek: https://www.washingtonpost.com/news/wonk/wp/2017/12/01/gop-eyes-post-tax-cut-changes-to-welfare-medicare-and-social-security/
I wonder if this will distract congress away from messing with my Future Pension for 2018.
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62% of the benefits in this bill go to the top 1%, an unimaginable transfer of wealth from the poor to the rich.
You keep repeating the same tired arguments. In a tax bill, you can't look at the delta in isolation to determine if it's fair or not, you need to look at the final state.
E.g.: someone earning $20k/year pays $1k in taxes; someone earning $10M pays $3.5M. After the bill, they might pay $3.4M instead. Quit crying that the "delta" of the bill is unfair. You need to look at the big picture. Many people think that $3.4M is more than fair enough in this case. Taxing the rich more is not always the solution. What's the evidence we have that we're currently undertaxing the rich? Those questions are not that simple.
Republicans think this is appropriate because poor people are morally inferior and don't deserve tax breaks.
That's just your (angry) opinion. Why don't you assume good faith? Why couldn't the reason be that they really believe the whole economy works better that way?
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62% of the benefits in this bill go to the top 1%, an unimaginable transfer of wealth from the poor to the rich.
You keep repeating the same tired arguments. In a tax bill, you can't look at the delta in isolation to determine if it's fair or not, you need to look at the final state.
E.g.: someone earning $20k/year pays $1k in taxes; someone earning $10M pays $3.5M. After the bill, they might pay $3.4M instead. Quit crying that the "delta" of the bill is unfair. You need to look at the big picture. Many people think that $3.4M is more than fair enough in this case. Taxing the rich more is not always the solution. What's the evidence we have that we're currently undertaxing the rich? Those questions are not that simple.
Republicans think this is appropriate because poor people are morally inferior and don't deserve tax breaks.
That's just your (angry) opinion. Why don't you assume good faith? Why couldn't the reason be that they really believe the whole economy works better that way?
Agree with your first point, though I think the main counter-argument is that the rich disproportionately get long-term capital gain income that is taxed at a lower rate for unclear reasons. I don't understand why my marginal wage tax rate should be in the mid to upper 30% range while my long-term gain rate is half. Hence Warren Buffett's famous statement that his cumulative tax rate is less than his secretary's.
Second point - I can't ascribe motives to the Republicans other than I'm sure it's self-serving to some extent, given human nature. They may believe the economy works better that way, but most economists on the entire spectrum of thought agree that it won't (at least not enough to balance out the major debt increase). Good faith without being informed by experts isn't what we pay Congress for, they are supposed to make decisions based on all available information and expert opinion.
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62% of the benefits in this bill go to the top 1%, an unimaginable transfer of wealth from the poor to the rich.
You keep repeating the same tired arguments. In a tax bill, you can't look at the delta in isolation to determine if it's fair or not, you need to look at the final state.
E.g.: someone earning $20k/year pays $1k in taxes; someone earning $10M pays $3.5M. After the bill, they might pay $3.4M instead. Quit crying that the "delta" of the bill is unfair. You need to look at the big picture. Many people think that $3.4M is more than fair enough in this case. Taxing the rich more is not always the solution. What's the evidence we have that we're currently undertaxing the rich? Those questions are not that simple.
Republicans think this is appropriate because poor people are morally inferior and don't deserve tax breaks.
That's just your (angry) opinion. Why don't you assume good faith? Why couldn't the reason be that they really believe the whole economy works better that way?
Agree with your first point, though I think the main counter-argument is that the rich disproportionately get long-term capital gain income that is taxed at a lower rate for unclear reasons. I don't understand why my marginal wage tax rate should be in the mid to upper 30% range while my long-term gain rate is half. Hence Warren Buffett's famous statement that his cumulative tax rate is less than his secretary's.
Second point - I can't ascribe motives to the Republicans other than I'm sure it's self-serving to some extent, given human nature. They may believe the economy works better that way, but most economists on the entire spectrum of thought agree that it won't (at least not enough to balance out the major debt increase). Good faith without being informed by experts isn't what we pay Congress for, they are supposed to make decisions based on all available information and expert opinion.
I think the closed door process that purposefully avoided time for discussion of analysis by independent or even GOP sources us anathema to working in good faith. The bills were crammed through before people woukd really kniw what was in there.
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Republicans think this is appropriate because poor people are morally inferior and don't deserve tax breaks.
That's just your (angry) opinion. Why don't you assume good faith? Why couldn't the reason be that they really believe the whole economy works better that way?
DarkandStormy provided a few quotes earlier, including these:
Sen. Orrin Hatch (R-UT) claimed during debate on the tax bill last week that entitlements “help people who won’t help themselves, won’t lift a finger, and expect the federal government to do everything.”
Sen. Chuck Grassley (R-IA) defended repealing the estate tax — a move that almost exclusively benefits the wealthy — by bemoaning “those that are just spending every darn penny they have, whether it’s on booze or women or movies.”
While I think your first point was reasonable, if this is how two top Republican Senators are willing to go on record, I think Sol’s on to something, too.
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That's just your (angry) opinion. Why don't you assume good faith? Why couldn't the reason be that they really believe the whole economy works better that way?
Assume good faith? Fool me once...
I guess the reason could be that they believe the economy works better like this....but I'm not sure how many more Republican economic experiments the US can survive.
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It took one hell of a lot of poor and working class voters to create this political nightmare. The rich simply don't have the numbers themselves to get elected. With the pending election of Roy Moore to the Senate, I'm pretty much done. Fuck the poor and working middle class. They brought it on themselves.
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Fuck the poor and working middle class. They brought it on themselves.
I get it, but I'm not there yet.
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I think the main counter-argument is that the rich disproportionately get long-term capital gain income that is taxed at a lower rate for unclear reasons. I don't understand why my marginal wage tax rate should be in the mid to upper 30% range while my long-term gain rate is half.
I see two main reasons for long-term capital gains to be taxed at a lower marginal rate than short-term capital gains. (Then, I leave open the question of whether short-term capital gains should be taxed the same as labor or differently, but with total marginal rates on short term capital gains already over 50% for many investors, it's hard to argue that short-term capital gains should be taxed even more heavily.)
First, capital gains are a tax on nominal gains, not real gains. Over a short time frame, the effects of inflation (at least in the US) are low and so can reasonably be ignored. Over a long time frame, the effects of inflation are significant and the reduction in rate for long-term capital gains can be viewed as an imperfect nod to taxing that part that represents the real economic gain. (The housing total exclusion on some amount of gain on qualifying sales can be viewed as an economically sound exclusion for the same reason, IMO.)
The second relates to incenting behavior directly. Many businesses need long-term, committed capital to get off the ground, for inventory or other working capital needs, and/or for expansion. Businesses have uncertain returns for investors as well. Combining these factors, lowering the rates on LTCG serves as a financial incentive to invest for a longer horizon (and in these riskier ventures) than an investor might otherwise be inclined to do. Ceteris paribus, this has a positive effect on business formation, business expansion, and job creation.
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Fuck the poor and working middle class. They brought it on themselves.
I get it, but I'm not there yet.
I get it too. People I know, even people dependent on Obamacare, either voted for this shit or didn't bother to vote at all. I'm starting to lose a little sympathy.
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Fuck the poor and working middle class. They brought it on themselves.
I get it, but I'm not there yet.
I get it too. People I know, even people dependent on Obamacare, either voted for this shit or didn't bother to vote at all. I'm starting to lose a little sympathy.
I would like to get there, but can't.
Wife and I earn enough that we will likely benefit from this plan. But for me that is not enough reason to say "hey it's great!" It is definitely not great for my kids and those I care about that are less fortunate than me.
It is so frustrating to see many neighbors, friends, family support these idiots who constantly want to take money them and reduce many of the benefits they rely on....Then I hear about how "congress" wants to take away their Social Security. Who do they think "congress" is??? It's the dolts they voted for. I want to shake them and scream "pay attention people!"
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Fuck the poor and working middle class. They brought it on themselves.
I get it, but I'm not there yet.
I get it too. People I know, even people dependent on Obamacare, either voted for this shit or didn't bother to vote at all. I'm starting to lose a little sympathy.
I would like to get there, but can't.
Wife and I earn enough that we will likely benefit from this plan. But for me that is not enough reason to say "hey it's great!" It is definitely not great for my kids and those I care about that are less fortunate than me.
It is so frustrating to see many neighbors, friends, family support these idiots who constantly want to take money them and reduce many of the benefits they rely on....Then I hear about how "congress" wants to take away their Social Security. Who do they think "congress" is??? It's the dolts they voted for. I want to shake them and scream "pay attention people!"
I have no sympathy for people who don't vote. Especially the Bernie supporters who were 'perfectly comfortable' with their non-vote. I saw many pre-election interviews with these people and I couldn't believe it. I really hope they learned their lesson...but I fear not.
Frankly, you have to be a realist in this day and age...NOT an idealist.
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we could all save a ton on taxes if we own LLCs:
https://slate.com/business/2017/12/35-pages-of-loopholes-in-the-gop-tax-plan.html
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we could all save a ton on taxes if we own LLCs:
It's very easy to set up an LLC. I've got one.
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Law firm associates, LLC. Under the Senate bill, there is potentially a major problem as drafted: Employees may be able to benefit from the pass-through provision by forming a pass-through of which they are an owner. To achieve the tax savings, no longer be an employee (who cannot benefit from the provision); instead be an owner (who can benefit from the provision). For example, law firm associates (and other employees of the firm) should no longer be mere associates. They should instead be partners in Associates, LLC—a separate partnership paid to provide services to the original firm. Their “profit share”—in lieu of salary—from Associates, LLC would then be given the special low pass-through rate. There are restrictions on lawyers—since they provide a personal service, which is disfavored in the bill—from benefiting from the special pass-through rate, but those restrictions would not apply to these associates. So long as the associate (or really partner in Associates, LLC) makes less than $500,000 in taxable income (for a married couple) or $250,000 (for a single individual), they would be fully eligible. And that covers a lot of law firm associates, not to mention many other people who are now employees—but who may not be for long.
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From the link above, fyi.
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Does anyone know how the new AMT is supposed to work? It would seem to me that someone taking just the standard deduction could still pay AMT under the Senate bill - so effectively, the AMT simply takes away the benefit of the new lower tax brackets for people above the threshold?
I also went through an example last night that shows that I would pay the AMT under the Senate bill, even if I take the standard deduction. If your effective tax rate is less than 28%, and income is basically from W-2 income, there’s a zone where you seem to be subject to AMT without any itemized deductions. I don’t know whether that’s the “intent.” It seems like an oddity to apply an “alternative” system in that case. An obvious “fix” would be to exclude taxpayers who elect the standard deduction. I didn’t look closely, because it doesn’t apply to me, but it seems that income that qualifies for the pass-through treatment is not proposed to be added back for AMT purposes.
You folks may have missed my earlier post regarding AMT.
The AMT numbers don't make sense. They would still result in a joint filer at the top of the 24% bracket paying AMT, even if they're not claiming anything other than the standard deduction. The whole AMT concept is designed to limit deductions and force some level of tax payments. If somebody isn't deducting anything, I don't understand how they could still have to pay the AMT.
I tried to decipher the inflation adjustments, and it may be that the thresholds published in the bill (exemption and phaseout threshold), are in 2011 dollars, which will then be escalated to 2018 equivalents. That would "almost" eliminate the AMT for the situation I described above. I will be interested in hearing others' understanding of the revised AMT for individuals.
Edit: I just ran the comparison of the published AMT thresholds against the original Senate brackets. In this case, the AMT stays just below the 25% bracket top. Do you suppose that when they wedged the AMT revival in at the eleventh hour they forgot to take into account their earlier amendment to reduce the brackets. Nah, that would never happen in Washington.........would it?
fyi - I've started a dedicated thread on the revised individual AMT. The topic seems to be getting lost here in the "big thread."
https://forum.mrmoneymustache.com/taxes/individual-amt-in-the-final-senate-tax-bill/new/#new
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I've got to apologize for some of my comments. I'm pretty pissed about what going on in Alabama, poor and working people are on the verge of electing an accused pedophile to the Senate. Why the hell should we not just write them off?
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Oh don't worry the GOP will soon be going after their medicare, Social Security, food stamps and Medicaid.
That will surely alienate the Trump base right?.. right?
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Oh don't worry the GOP will soon be going after their medicare, Social Security, food stamps and Medicaid.
That will surely alienate the Trump base right?.. right?
Usually it takes damn near a full 8 years for disillusion to set in... Most people only have time to absorb how the media and politicians chose feed them. I admit none of us have time to deeply scrutinize every decision they make.
But I find that having a president like Trump has taught me that the perception filter have of public officials truly has no limit. You can have the most accomplished president ever on one hand and the worst on the other and in the public eye it wont really make a difference.
I find the idea of cutting medicare or social security, without making any changes to our payroll taxes which are supposed to pay for them completely absurd. I think independents will feel the same. Trumps base probably will turn a blind eye. Because they will continue to get other things they want. Like a president willing to shit on unpopular immigrant communities and occasionally adopt white nationalist talking points...
At the end of his term when they realize more manufacturing jobs aren't coming the indepents will swing to something else.
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I find the idea of cutting medicare or social security, without making any changes to our payroll taxes which are supposed to pay for them completely absurd. I think independents will feel the same. Trumps base probably will turn a blind eye. Because they will continue to get other things they want.
While I'm certainly not arguing for medicaid/care or social security cuts, it is worth noting that under currently law we're going to be spending more on those programs each year than the payroll taxes which are supposed to pay for them bring in each year.
Last year the social security payroll tax (plus income taxes charged on benefits) brought in $869 billion, but $910 billion was paid out. Which is a small gap, but one that keeps getting bigger every year.*
Last year medicare payroll tax (plus beneficiary premiums and medicare taxes on social security) brought in $280 $366 billion and $679 billion was paid out in medicare benefits.**
Which is a long winded way of saying that it seems reasonable to me that either payroll taxes could be raised without raising benefits, or that if benefits were reduced, it wouldn't necessarily be reasonable (or responsible) to also cut payroll taxes.
*Right now that gap is covered by interest on treasury bonds purchased by social security years ago when the program is running a surplus, but the gap is projected to exceed this interest income in 2021, and the bonds themselves are projected to all have been sold to cover annual payments by 2034.
**Now to be fair, medicare payroll taxes were only designed to cover medicare part A (hospitals but not doctor's visits), and they do a good job of covering the spending on that alone. Medicare parts B and D (doctor's visits and prescription drugs approximately) don't have any dedicated revenue stream and end up being paid out of the general fund (essentially income tax revenue) every year.
Source for all numbers: https://www.ssa.gov/oact/trsum/
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But will they dare touch the Mustachian sweet spot of benefits eligibility after only 40 credits?
We'll find out!
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But will they dare touch the Mustachian sweet spot of benefits eligibility after only 40 credits?
We'll find out!
We're also helped a lot by the fact that SS payouts are set up to be progressive (social security is a much better deal for low income earners than high income earners) but SS figures out who was low income based on average earnings over 35 years instead of earnings each year. So a mustachian who retires after making $100,000 for five years* gets the same very favorable treatment from social security as someone who worked for 35 years making only made $14,300/year.
Honestly I would be against of these being on the chopping block if congress does try to make significant reductions just because there aren't enough people like us to make the savings from changing those rules big. It seems much more likely any change would be a straight benefit cut for future retirees, increased taxability of social security payments, or a reduction in cost of living adjustments (for example switching to the chained CPI like Obama proposed years ago).
*Assuming they find a way to get up to 40 total credits at some point.
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62% of the benefits in this bill go to the top 1%, an unimaginable transfer of wealth from the poor to the rich.
You keep repeating the same tired arguments. In a tax bill, you can't look at the delta in isolation to determine if it's fair or not, you need to look at the final state.
E.g.: someone earning $20k/year pays $1k in taxes; someone earning $10M pays $3.5M. After the bill, they might pay $3.4M instead. Quit crying that the "delta" of the bill is unfair. You need to look at the big picture. Many people think that $3.4M is more than fair enough in this case. Taxing the rich more is not always the solution. What's the evidence we have that we're currently undertaxing the rich? Those questions are not that simple.
Republicans think this is appropriate because poor people are morally inferior and don't deserve tax breaks.
That's just your (angry) opinion. Why don't you assume good faith? Why couldn't the reason be that they really believe the whole economy works better that way?
Agree with your first point, though I think the main counter-argument is that the rich disproportionately get long-term capital gain income that is taxed at a lower rate for unclear reasons. I don't understand why my marginal wage tax rate should be in the mid to upper 30% range while my long-term gain rate is half. Hence Warren Buffett's famous statement that his cumulative tax rate is less than his secretary's.
Second point - I can't ascribe motives to the Republicans other than I'm sure it's self-serving to some extent, given human nature. They may believe the economy works better that way, but most economists on the entire spectrum of thought agree that it won't (at least not enough to balance out the major debt increase). Good faith without being informed by experts isn't what we pay Congress for, they are supposed to make decisions based on all available information and expert opinion.
I'm with gerardc, the top 10% pay as much as the other 90% of taxpayers. Of course, when taxes are cut there dollar amount will be larger!
EDIT: I'm sorry, I got that wrong, the top 10% pay 2.4 times as much in tax as the other 90%.
The top 25% pay 6.5 times more than the other 75%.
I want a lower rate on capital gains that's how many people aquire wealth, I don't want that taken away. Especially away from me!
I hope it passes, then we will have a data point about the effect of cutting taxes. Then we can argue again! :-)
Source, https://taxfoundation.org/summary-latest-federal-income-tax-data-2016-update/
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Wow! Lots to read here, man!
I preface everything I say about this tax plan by saying cutting taxes on corps to stimulate and economy that has been over stimulated for a decade is stupid.
But the Republicans feel they have no choice because they know 2018 will likely see them lose their full control.
Yeh - I couldn't quite figure out how our "honorable" politicians could quite take the actions they took. I guess they are setting a time bomb for the politicians that will follow them. And,....since they don't seem to be doing much to help the average working Joe, many of them will be voted out in 2018 and the bomb will go off when they have skeedaddled to the lobbying firm.
Grandma will really be mad if they cut her Social Security and Medicare,...... If they only cut for those 55 and younger, they should be able to get away with it. The rich folks will have their tax cuts and "reforms" will have taken place. What a wonderful world.
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I find the idea of cutting medicare or social security, without making any changes to our payroll taxes which are supposed to pay for them completely absurd. I think independents will feel the same. Trumps base probably will turn a blind eye. Because they will continue to get other things they want.
While I'm certainly not arguing for medicaid/care or social security cuts, it is worth noting that under currently law we're going to be spending more on those programs each year than the payroll taxes which are supposed to pay for them bring in each year.
Last year the social security payroll tax (plus income taxes charged on benefits) brought in $869 billion, but $910 billion was paid out. Which is a small gap, but one that keeps getting bigger every year.*
Last year medicare payroll tax (plus beneficiary premiums and medicare taxes on social security) brought in $280 $366 billion and $679 billion was paid out in medicare benefits.**
Which is a long winded way of saying that it seems reasonable to me that either payroll taxes could be raised without raising benefits, or that if benefits were reduced, it wouldn't necessarily be reasonable (or responsible) to also cut payroll taxes.
*Right now that gap is covered by interest on treasury bonds purchased by social security years ago when the program is running a surplus, but the gap is projected to exceed this interest income in 2021, and the bonds themselves are projected to all have been sold to cover annual payments by 2034.
**Now to be fair, medicare payroll taxes were only designed to cover medicare part A (hospitals but not doctor's visits), and they do a good job of covering the spending on that alone. Medicare parts B and D (doctor's visits and prescription drugs approximately) don't have any dedicated revenue stream and end up being paid out of the general fund (essentially income tax revenue) every year.
Source for all numbers: https://www.ssa.gov/oact/trsum/
Just wanted to add that the SSWB had a big increase last year: $118,500 to $127,200 (~7%), which is one way to raise revenue without actually changing the rate. I thought they were going to continue making large leaps but they recently announced that 2018 SSWB would only increase to $128,400.
Sent from my iPhone using Tapatalk
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62% of the benefits in this bill go to the top 1%, an unimaginable transfer of wealth from the poor to the rich.
You keep repeating the same tired arguments. In a tax bill, you can't look at the delta in isolation to determine if it's fair or not, you need to look at the final state.
E.g.: someone earning $20k/year pays $1k in taxes; someone earning $10M pays $3.5M. After the bill, they might pay $3.4M instead. Quit crying that the "delta" of the bill is unfair. You need to look at the big picture. Many people think that $3.4M is more than fair enough in this case. Taxing the rich more is not always the solution. What's the evidence we have that we're currently undertaxing the rich? Those questions are not that simple.
Republicans think this is appropriate because poor people are morally inferior and don't deserve tax breaks.
That's just your (angry) opinion. Why don't you assume good faith? Why couldn't the reason be that they really believe the whole economy works better that way?
Agree with your first point, though I think the main counter-argument is that the rich disproportionately get long-term capital gain income that is taxed at a lower rate for unclear reasons. I don't understand why my marginal wage tax rate should be in the mid to upper 30% range while my long-term gain rate is half. Hence Warren Buffett's famous statement that his cumulative tax rate is less than his secretary's.
Second point - I can't ascribe motives to the Republicans other than I'm sure it's self-serving to some extent, given human nature. They may believe the economy works better that way, but most economists on the entire spectrum of thought agree that it won't (at least not enough to balance out the major debt increase). Good faith without being informed by experts isn't what we pay Congress for, they are supposed to make decisions based on all available information and expert opinion.
I'm with gerardc, the top 10% pay as much as the other 90% of taxpayers. Of course, when taxes are cut there dollar amount will be larger!
EDIT: I'm sorry, I got that wrong, the top 10% pay 2.4 times as much in tax as the other 90%.
The top 25% pay 6.5 times more than the other 75%.
I want a lower rate on capital gains that's how many people aquire wealth, I don't want that taken away. Especially away from me!
I hope it passes, then we will have a data point about the effect of cutting taxes. Then we can argue again! :-)
Source, https://taxfoundation.org/summary-latest-federal-income-tax-data-2016-update/
Those who do nit know history are biund to reoeat it:
https://slate.com/business/2017/11/republicans-are-about-to-repeat-kansas-tax-cut-disaster.html
Anyine else want to chime in with examples of this experiment?
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Those who do nit know history are biund to reoeat it:
https://slate.com/business/2017/11/republicans-are-about-to-repeat-kansas-tax-cut-disaster.html
Anyine else want to chime in with examples of this experiment?
See: Oklahoma; Missouri
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accolay wrote:
See: Oklahoma; Missouri
Did it work there? Seems like the idea goes against common sense. If I was loaded and was given a big tax cut, I'd just pile it in an offshore account where it wouldn't be taxed. Or - They would invest it in an almost sure thing like Chinese manufacturing and satisfy world demand. Why invest it here? People are left poorer after paying the rich man's taxes. Ain't gonna be no demand for products cause people got no money. Investing that money in a US factory when there is no demand is kinda stupid ain't it?
On the other hand, if a tax cut is given to folks who need money, what are they going to do with it?
Well - They'll spend it. They will probably buy stuff they need. When manufacturers see demand for their products rising, they will run more shifts, open more facilities, buy more raw materials and basically expand the economy. They may spend some to help their kids through school or fix a leaky roof.
Yeh - It doesn't seem like this trickle down thing has really been thought through by the big dogs in charge. You know - Somebody ought to really tell them.
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accolay wrote:See: Oklahoma; Missouri
Did it work there?
Uh....no.
http://kgou.org/term/budget-shortfall-2017 (http://kgou.org/term/budget-shortfall-2017)
http://www.stltoday.com/news/local/govt-and-politics/missouri-faces-dire-budget-hole-may-need-million-in-cuts/article_a1c1542c-fc7f-535b-8f96-0608f165a939.html (http://www.stltoday.com/news/local/govt-and-politics/missouri-faces-dire-budget-hole-may-need-million-in-cuts/article_a1c1542c-fc7f-535b-8f96-0608f165a939.html)
On the other hand, if a tax cut is given to folks who need money, what are they going to do with it?
Probably just spend it on booze, women and movies like they always do.
https://www.washingtonpost.com/news/morning-mix/wp/2017/12/04/grassley-explains-why-people-dont-invest-booze-or-women-or-movies/?utm_term=.69aa30482873 (https://www.washingtonpost.com/news/morning-mix/wp/2017/12/04/grassley-explains-why-people-dont-invest-booze-or-women-or-movies/?utm_term=.69aa30482873)
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EDIT: I'm sorry, I got that wrong, the top 10% pay 2.4 times as much in tax as the other 90%.
...and the top 10% hold 76% of the wealth. More than 3 times as much as the other 90%
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MOAR DRAMA
http://www.cnn.com/2017/12/10/politics/susan-collins-tax-reform-vote/index.html
So much potential for a spectacular season finale. The ratings are going to be through the roof.
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The smart ultra rich ( Ray Dalio, Warren Buffet to name but a few) are keenly aware that unless income inequality is improved in this country you will eventually see a shrinking economy which does not bode well for those of us wishing to live off investments.
This tax plan increases income inequality by shuttling the savings disproportionately to the top.
That folks at the bottom are so easy to manipulate with notions of religion/guns/whatever the trend seems bound to continue.
For better and for worse, America is weird. I'll just keep on increasing my allocation of VEA as a hedge.
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The smart ultra rich ( Ray Dalio, Warren Buffet to name but a few) are keenly aware that unless income inequality is improved in this country you will eventually see a shrinking economy which does not bode well for those of us wishing to live off investments.
This tax plan increases income inequality by shuttling the savings disproportionately to the top.
That folks at the bottom are so easy to manipulate with notions of religion/guns/whatever the trend seems bound to continue.
For better and for worse, America is weird. I'll just keep on increasing my allocation of VEA as a hedge.
With the GOP assault on public education, from Betsy Devoss' Dept. of Education right down to the GOP tax plan -- removing the SALT deductions effectively means your local tax dollars that go to public schools are now going to be taxed federally -- the trend will not only continue, it will worsen. In case I haven't said it lately . . . oh nevermind.
[MOD NOTE: F-bombs, sure. F-U bombs toward other forum members are just going to escalate to the point where I have to lock the thread.]
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accolay wrote:See: Oklahoma; Missouri
Did it work there?
Uh....no.
http://kgou.org/term/budget-shortfall-2017 (http://kgou.org/term/budget-shortfall-2017)
http://www.stltoday.com/news/local/govt-and-politics/missouri-faces-dire-budget-hole-may-need-million-in-cuts/article_a1c1542c-fc7f-535b-8f96-0608f165a939.html (http://www.stltoday.com/news/local/govt-and-politics/missouri-faces-dire-budget-hole-may-need-million-in-cuts/article_a1c1542c-fc7f-535b-8f96-0608f165a939.html)
On the other hand, if a tax cut is given to folks who need money, what are they going to do with it?
Probably just spend it on booze, women and movies like they always do.
https://www.washingtonpost.com/news/morning-mix/wp/2017/12/04/grassley-explains-why-people-dont-invest-booze-or-women-or-movies/?utm_term=.69aa30482873 (https://www.washingtonpost.com/news/morning-mix/wp/2017/12/04/grassley-explains-why-people-dont-invest-booze-or-women-or-movies/?utm_term=.69aa30482873)
Honestly even if they spent all the money on booze, women and movies, the economy would be better off. Last I checked those are all businesses happy to have more customers. And if people are paying for it with tax breaks I guess they aren't lazy because they are working enough to pay taxes in the first place....
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accolay wrote:See: Oklahoma; Missouri
Did it work there? Seems like the idea goes against common sense. If I was loaded and was given a big tax cut, I'd just pile it in an offshore account where it wouldn't be taxed. Or - They would invest it in an almost sure thing like Chinese manufacturing and satisfy world demand. Why invest it here? People are left poorer after paying the rich man's taxes. Ain't gonna be no demand for products cause people got no money. Investing that money in a US factory when there is no demand is kinda stupid ain't it?
On the other hand, if a tax cut is given to folks who need money, what are they going to do with it?
Well - They'll spend it. They will probably buy stuff they need. When manufacturers see demand for their products rising, they will run more shifts, open more facilities, buy more raw materials and basically expand the economy. They may spend some to help their kids through school or fix a leaky roof.
Yeh - It doesn't seem like this trickle down thing has really been thought through by the big dogs in charge. You know - Somebody ought to really tell them.
I no longer live in Oklahoma but grew up there and all my family lives there. It's like Kansas, and yeah, it didn't work there either. The Laffer curve is laughable. Some ideas put on napkins should just stay on napkins.
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I find the idea of cutting social security without making any changes to our payroll taxes which are supposed to pay for them completely absurd.
While I'm certainly not arguing for social security cuts, it is worth noting that under currently law we're going to be spending more on those programs each year than the payroll taxes which are supposed to pay for them bring in each year.
Last year the social security payroll tax (plus income taxes charged on benefits) brought in $869 billion, but $910 billion was paid out. Which is a small gap, but one that keeps getting bigger every year.*
*Right now that gap is covered by interest on treasury bonds purchased by social security years ago when the program is running a surplus, but the gap is projected to exceed this interest income in 2021, and the bonds themselves are projected to all have been sold to cover annual payments by 2034.
Source for all numbers: https://www.ssa.gov/oact/trsum/
When S.S. was introduced, the benefit age was higher than expected life expectancy at birth. I'm not saying that should track perfectly moving forward but I'd be fine with having the FRA continue to increase incrementally to at least 70 years rather than the current 67 (grandfathering as appropriate). On the revenue side, I think it makes sense to index the payroll ceiling with inflation.
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I find the idea of cutting social security without making any changes to our payroll taxes which are supposed to pay for them completely absurd.
While I'm certainly not arguing for social security cuts, it is worth noting that under currently law we're going to be spending more on those programs each year than the payroll taxes which are supposed to pay for them bring in each year.
Last year the social security payroll tax (plus income taxes charged on benefits) brought in $869 billion, but $910 billion was paid out. Which is a small gap, but one that keeps getting bigger every year.*
*Right now that gap is covered by interest on treasury bonds purchased by social security years ago when the program is running a surplus, but the gap is projected to exceed this interest income in 2021, and the bonds themselves are projected to all have been sold to cover annual payments by 2034.
Source for all numbers: https://www.ssa.gov/oact/trsum/
When S.S. was introduced, the benefit age was higher than expected life expectancy at birth. I'm not saying that should track perfectly moving forward but I'd be fine with having the FRA continue to increase incrementally to at least 70 years rather than the current 67 (grandfathering as appropriate). On the revenue side, I think it makes sense to index the payroll ceiling with inflation.
Yes, it seems to me to be appropriate to start benefits at 65 and move FRA to 70.
But then, I also think retirement plans should be removed from employment. Let's all have a $20k IRA, with no 401k, 401a, 403b, 479, 666...
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I find the idea of cutting social security without making any changes to our payroll taxes which are supposed to pay for them completely absurd.
While I'm certainly not arguing for social security cuts, it is worth noting that under currently law we're going to be spending more on those programs each year than the payroll taxes which are supposed to pay for them bring in each year.
Last year the social security payroll tax (plus income taxes charged on benefits) brought in $869 billion, but $910 billion was paid out. Which is a small gap, but one that keeps getting bigger every year.*
*Right now that gap is covered by interest on treasury bonds purchased by social security years ago when the program is running a surplus, but the gap is projected to exceed this interest income in 2021, and the bonds themselves are projected to all have been sold to cover annual payments by 2034.
Source for all numbers: https://www.ssa.gov/oact/trsum/
When S.S. was introduced, the benefit age was higher than expected life expectancy at birth. I'm not saying that should track perfectly moving forward but I'd be fine with having the FRA continue to increase incrementally to at least 70 years rather than the current 67 (grandfathering as appropriate). On the revenue side, I think it makes sense to index the payroll ceiling with inflation.
they need to raise the SS cap each year so collections meet up with out lays. General inflation is not at all close to keeping up with health care inflation.
70 yrs for full retirement is ridiculous, but I suppose it's essentially the same as only paying out 75% of projected benefits which is what we're facing now. It does concern me thinking about all those elderly ppl out there who are working who should not be and whatever mistakes are occurring. Allowing these people to retire opens up more jobs for younger people.
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When S.S. was introduced, the benefit age was higher than expected life expectancy at birth. I'm not saying that should track perfectly moving forward but I'd be fine with having the FRA continue to increase incrementally to at least 70 years rather than the current 67 (grandfathering as appropriate). On the revenue side, I think it makes sense to index the payroll ceiling with inflation.
That's true, although you also have to remember a lot of the low life expectancy back then was caused by extremely high infant and childhood mortality relative to what we see today. If you die between the ages of 0 and 10 you have a big impact on overall life expectancy, but you're neither collecting social security nor paying into the social security fund in any meaningful fashion. The folks who did the most "good" for social security's balance sheets were the ones who lived into their late 50s early 60s, paying into the fund for decades before dropping dead. And life expectancy at 50 has changed significantly less than life expectancy at birth.
I completely agree with indexing the payroll ceiling to inflation (I didn't realize it wasn't already). Because so many people at the low end of the income spectrum appear to take social security the minute they become eligible at 62 while people with a lot of their own savings can put off taking the benefits until after FRA to maximize their payouts, raising the FRA acts is essentially a backdoor benefit cut that is focused more on low income/low net worth seniors than on the population as a whole. If a benefit cut ends up being necessary, maybe that's a politically more palatable approach than being upfront about reducing benefits, but if I had complete control over the program, somehow didn't answer to anyone who had to worry about getting reelected, but still needed to cut total spending, I'd prefer to cut benefits globally, which would have a more balanced effect on both high and low net worth individuals.
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When S.S. was introduced, the benefit age was higher than expected life expectancy at birth. I'm not saying that should track perfectly moving forward but I'd be fine with having the FRA continue to increase incrementally to at least 70 years rather than the current 67 (grandfathering as appropriate). On the revenue side, I think it makes sense to index the payroll ceiling with inflation.
You also have to consider what those extra years look like. Even for a healthy, active individual, expecting them to continue working may not be reasonable.
People used to die younger, but the trajectory was different (decline was less gradual).
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I completely agree with indexing the payroll ceiling to inflation (I didn't realize it wasn't already).
Not CPI inflation, but this limit changes each year with changes in the national average wage index. (https://www.ssa.gov/oact/cola/cbb.html)
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Never understood those that think the government should keep taking a larger percentage of an ever increase piece of the pie and that we should continue to give more benefits to more and more people.
Stop the Madness!
Many Mustachians are trying to figure out how to pay the least taxes, get the most benefits
and have no understanding there is a limit to how much more the government can spend than it takes in. It's just like a family, pretty soon the credit card payment is due and the money to pay it is spent on the rent.
Stop the Madness!
ARRGH!
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Never understood those that think the government should keep taking a larger percentage of an ever increase piece of the pie and that we should continue to give more benefits to more and more people.
Stop the Madness!
Many Mustachians are trying to figure out how to pay the least taxes, get the most benefits
and have no understanding there is a limit to how much more the government can spend than it takes in. It's just like a family, pretty soon the credit card payment is due and the money to pay it is spent on the rent.
Stop the Madness!
ARRGH!
It's really, really not. Finances on the level of the Federal government are completely different than a family or a company experiences, in particular because the Federal government by way of the Federal Reserve can and does manipulate the money supply. We're not on a metal standard and neither is any other currency in the world these days, which means there's no finite supply of money like what we experienced during and after the Great Depression. The Fed will keep inflation within their target range.
At this point Federal taxes are basically a way to influence people's choices. The level of the debt simply doesn't matter. It will never get paid back, and it doesn't really make sense to think of it in those terms. Every single economist, no matter their political leanings, will tell you that the debt ceiling is an anachronism that no longer makes sense (it made very little to start with) and should be abolished.
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Even for a healthy, active individual, expecting them to continue working may not be reasonable.
I expect them to plan a little bit during their earlier years. For those that are not healthy, either physically or financially, we have SSDI and SSI. Granted, laying the groundwork for personal finance needs to happen on an institutional level (i.e. a normal part of schooling) and is currently lacking. I think a large proportion of retirees are over-reliant on S.S. That is the reality but not the intent of the program. Let's keep S.S. solvent while simultaneously having responsible spending and investing become a norm rather than some niche thing you discover on your own.
Now, if the reason they need to work in their late 60s is due to astronomical healthcare costs for a family member or something along those lines, they do have my sympathy but healthcare is a different nut to crack. I purposely avoided healthcare in my prior post and only wanted to focus on S.S. Maybe you can't talk S.S. in a vacuum without considering healthcare, who knows.
The FRA rules are based on incremental birth years that end at 1960. Someone born in 1960 has the same rules as someone born in 2017 whereas someone born during the 1950s has 6 different FRAs. That seems odd to me that the increments stopped so suddenly and are treated the same for a 57 (soon to be 58) year period. I'm also open to keeping the minimum withdrawal age at 62 even if the FRA increases. I can't speak to the validity of the 6%/year penalty for a period greater than 5 years but someone smarter than me could keep the low end withdrawal age the same without emptying the S.S. coffers while also instituting a fair penalty.
I'm also okay with allowing the delay-in-collecting bonus to be lower. It's currently 8%/year while the penalty for withdrawing earlier is 6%/year. Why not make them both 6%/year? Again, this might have to be grandfathered to be fair to those who have been banking on policies for a long while.
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That's true, although you also have to remember a lot of the low life expectancy back then was caused by extremely high infant and childhood mortality relative to what we see today. If you die between the ages of 0 and 10 you have a big impact on overall life expectancy, but you're neither collecting social security nor paying into the social security fund in any meaningful fashion. The folks who did the most "good" for social security's balance sheets were the ones who lived into their late 50s early 60s, paying into the fund for decades before dropping dead. And life expectancy at 50 has changed significantly less than life expectancy at birth.
I completely agree with indexing the payroll ceiling to inflation (I didn't realize it wasn't already). Because so many people at the low end of the income spectrum appear to take social security the minute they become eligible at 62 while people with a lot of their own savings can put off taking the benefits until after FRA to maximize their payouts, raising the FRA acts is essentially a backdoor benefit cut that is focused more on low income/low net worth seniors than on the population as a whole. If a benefit cut ends up being necessary, maybe that's a politically more palatable approach than being upfront about reducing benefits, but if I had complete control over the program, somehow didn't answer to anyone who had to worry about getting reelected, but still needed to cut total spending, I'd prefer to cut benefits globally, which would have a more balanced effect on both high and low net worth individuals.
Sort of. Raising the FRA disproportionately hurts those who don't live as long. That's presumably going to be correlated to income/wealth, although I'm guessing the difference in life expectancy between different income/wealth levels of those who make it to their early 60's isn't as large if you look at overall life expectancy.
Arguably, raising the FRA is on net probably more helpful to the lower income, lower net worth. A lot of people are going to be living on not much more than SS. If you don't raise the FRA and instead just do a 25% cut to benefits, a lot of them are still going to quit working and take the money at 62. If you make them wait until 65 to take any benefits in order to avoid cuts, a lot of them will work until 65, and have a better quality of life as a result.
The ones that really can't make it to 65 are going to still have disability available (although it's going to be insolvent before regular SS, but presumably they;ll fix that). That's still going to leave a lot of hard cases with people who aren't disabled but just can't find employment and people who manage to work but whose bodies have trouble handling it.
Not sure how those trade-offs ultimately play out.
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What I don't understand are the heft tax breaks for the wealthy and corporations while, at the same time, reducing deductions for students
with student loan debt. Really??? That's your priority?
Very revealing.
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Never understood those that think the government should keep taking a larger percentage of an ever increase piece of the pie and that we should continue to give more benefits to more and more people.
Stop the Madness!
Many Mustachians are trying to figure out how to pay the least taxes, get the most benefits
and have no understanding there is a limit to how much more the government can spend than it takes in. It's just like a family, pretty soon the credit card payment is due and the money to pay it is spent on the rent.
Stop the Madness!
ARRGH!
It's really, really not. Finances on the level of the Federal government are completely different than a family or a company experiences, in particular because the Federal government by way of the Federal Reserve can and does manipulate the money supply.
Do you mean that the government can spend as much as it wants. Clearly you don't, so government spending is limited, just like a families spending has a limit before it causes problems.
We're not on a metal standard and neither is any other currency in the world these days, which means there's no finite supply of money like what we experienced during and after the Great Depression. The Fed will keep inflation within their target range.
You say "no Finite supply of money" I'm sure you don't mean there is an infinite supply of money before the excess causes problems!
At this point Federal taxes are basically a way to influence people's choices.
No, basically it is a source of income to run government programs.
The level of the debt simply doesn't matter.
I won't even explain why the level of debt matters, you know it does.
It will never get paid back, and it doesn't really make sense to think of it in those terms.
Thank God, we have agreement!
Every single economist, no matter their political leanings, will tell you that the debt ceiling is an anachronism that no longer makes sense (it made very little to start with) and should be abolished.
It makes no sense because when they (we) hit the ceiling they just raise it. If they said, we need to raise more money or cut spending because we hit the ceiling then we would be making progress.
If you compare Total Federal Debt to Total Federal Revenue, our nation is number 3, where number 1 is the worst debt of all nations.
https://www.forbes.com/sites/jeffreydorfman/2014/07/12/forget-debt-as-a-percent-of-gdp-its-really-much-worse/#5c971d2e53ba
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What I don't understand are the heft tax breaks for the wealthy and corporations while, at the same time, reducing deductions for students
with student loan debt. Really??? That's your priority?
Very revealing.
No sure what post you are responding to.
I'm not concerned if the wealthy don't get a tax reduction, but I do
want the corporations to get cuts.
Which deductions are being reduced for students?
Their debt is just that their debt, no relation to taxes at all.
If I buy a new car should we adjust taxes for that.
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I'm not concerned if the wealthy don't get a tax reduction, but I do want the corporations to get cuts.
Could you explain to me why tax cuts for corporations is a good idea again. No, really. Spell it out for me. Maybe I'm just completely missing something that's really obvious.
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Never understood those that think the government should keep taking a larger percentage of an ever increase piece of the pie and that we should continue to give more benefits to more and more people.
Stop the Madness!
Many Mustachians are trying to figure out how to pay the least taxes, get the most benefits
and have no understanding there is a limit to how much more the government can spend than it takes in. It's just like a family, pretty soon the credit card payment is due and the money to pay it is spent on the rent.
Stop the Madness!
ARRGH!
It's really, really not. Finances on the level of the Federal government are completely different than a family or a company experiences, in particular because the Federal government by way of the Federal Reserve can and does manipulate the money supply.
Do you mean that the government can spend as much as it wants. Clearly you don't, so government spending is limited, just like a families spending has a limit before it causes problems.
We're not on a metal standard and neither is any other currency in the world these days, which means there's no finite supply of money like what we experienced during and after the Great Depression. The Fed will keep inflation within their target range.
You say "no Finite supply of money" I'm sure you don't mean there is an infinite supply of money before the excess causes problems!
At this point Federal taxes are basically a way to influence people's choices.
No, basically it is a source of income to run government programs.
The level of the debt simply doesn't matter.
I won't even explain why the level of debt matters, you know it does.
It will never get paid back, and it doesn't really make sense to think of it in those terms.
Thank God, we have agreement!
Every single economist, no matter their political leanings, will tell you that the debt ceiling is an anachronism that no longer makes sense (it made very little to start with) and should be abolished.
It makes no sense because when they (we) hit the ceiling they just raise it. If they said, we need to raise more money or cut spending because we hit the ceiling then we would be making progress.
If you compare Total Federal Debt to Total Federal Revenue, our nation is number 3, where number 1 is the worst debt of all nations.
https://www.forbes.com/sites/jeffreydorfman/2014/07/12/forget-debt-as-a-percent-of-gdp-its-really-much-worse/#5c971d2e53ba
I mean exactly what I said. The Federal government can and will spend whatever Congress decides to spend. There is literally an infinite supply of money because the Fed can just create money. Remember Quantitative Easing? QEII? I don’t see this as either good or bad in and of itself. The thing that matters is the impact on the economy and the Fed seems to have done an ok job since the GFC.
The actual amount of taxes paid balanced against spending doesn’t matter and it hasn’t for many decades. Taxation policy effectively serves to level the playing field, or the opposite, depending on who is in charge. What we’re seeing now is people in Congress tipping the field toward the extremely affluent because they are explicitly bought and paid for by the extremely affluent. All of the rest of us are caught up in the Republican’s dual drives of serving their very small number of donors while appealing to their voter base with a very short term tax cut. Dealing a death blow to the social safety net is a bonus.
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What I don't understand are the heft tax breaks for the wealthy and corporations while, at the same time, reducing deductions for students
with student loan debt. Really??? That's your priority?
Very revealing.
No sure what post you are responding to.
I'm not concerned if the wealthy don't get a tax reduction, but I do
want the corporations to get cuts.
Which deductions are being reduced for students?
Their debt is just that their debt, no relation to taxes at all.
If I buy a new car should we adjust taxes for that.
The SL interest deduction.
Because fuck people with debt (except homeowners and corporations, they're cool)?
Trickle down never worked. It still doesn't work. It's a lie.
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Trickle down never worked. It still doesn't work. It's a lie.
Of course it's s lie. But it's a necessary lie.
The republican party has always been a coalition of two diametrically opposed camps. The first and more important one is supporting the interests rich people, but there aren't enough rich people to win a democratic election. So they compromised with the second camp, supporting archaic cultural issues like gays and guns and religion, in order to convince poor people to vote for them.
Rich people don't actually care about the culture war stuff, that's just the bait to convince the deep south to support the party. This is why so many republicans apparently vote against their own financial interests; they're not voting for tax breaks for billionaires they're voting for keeping women barefoot and pregnant, and the tax breaks for billionaires are just part of the package because that's the way the republican party is built.
Trump turned this game up to eleven. He ramped up the racist rhetoric to get votes and he embodies the anti-populist billionaires boys club that the party is actually for. The interesting part to me is what a complete 180 this is from the campaign trail, when he promised to help coal miners and the middle class. His tax plan has abandoned any pretense of this, and is instead straight up Paul Ryan wet dream giveaway to the ultra rich paid for by tax increases on the middle class.
Anyway, trickle down economics is the necessary thread that binds together these two sides of the republican party. It's the central lie off their coalition, the only way to rationalize why poor people should vote for things that billionaires want, like repealing the estate tax and lowering the corporate tax rate. There aren't any proud rednecks in trailer parks who care if the estate tax gets repealed, but if they hear "trickle down"enough times they'll vote for it anyway.
So I'm no longer surprised when republicans consistently revisit such a thoroughly discredited lie. They have to. Billionaires can't win elections on their own, because they're just aren't enough of them. They need the trickle down lie to maintain the viability of their entire party.
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^^ as succinct a synopsis of the GOP as I've ever seen.
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Talk about painting a fucking one-dimensional picture...
This is exactly why these conversations can never get anywhere. Because keyboard sociologists and psychologists such as Sol paint half the fucking country with a single one-dimensional brush, “They’re too fucking stupid to vote for their own interests because they are all misogynic homophobes who care more about culturally defeating the ‘others’”. Heaven forbid some of us actually agree that there should be a flat tax rate, or that the State’s social safety net should be a temporary Band-Aid to get someone back on their feet instead of a crutch that permanently disables them.
But its too fucking hard for people like Sol to imagine there are competent, rational people who vote libertarian or right-leaning for any other fucking reason than that they have been brainwashed and misled by billionaires into voting against their own interests. There is no possible way that someone could rationally think that a white person and a black person should be admitted to college based on merit and not on race, because to do so is apparently fucking racist?????..... Come again? It is not possible that anyone on the right that isn’t a billionaire thinks that corporate tax should be as low as feasible- since all of the money eventually falls into someone’s hands (and can be taxed at that time). Its not possible that anyone could think NAFTA is a fucking terrible deal simply because Mexico has almost nothing as a minimum wage and no environmental regulation that is enforced, and yet can bring products into the US duty free. “To be against NAFTA is racist because you hate brown-skinned people!!!!” No one could think Obamacare is bullshit because to do so means you hate poor people… Despite the fact that Obamacare increased the taxes on the lower middle class 50-fold (if you factor in insurance premiums as a ‘tax’ as it was defended in SCOTUS).
The political conversation in this country is not going to go anywhere until people stop painting with single-stroke brushes. Contrary to what many apparently think, not all Trump supports are Racist Misogynic Homophobic Idiot Assholes who only support lower corporate taxes because it comes with “Law against the other people”.
If I called the Democratic party out as a two party camp- one that wants to rule as an Plutocracy and the other that wants free shit despite the fact that it would make them a slave of the rich, I would probably get banned.
But apparently dude can tell half the forum Fuck You and not get banned so why not try it…
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Talk about painting a fucking one-dimensional picture...
This is exactly why these conversations can never get anywhere. Because keyboard sociologists and psychologists such as Sol paint half the fucking country with a single one-dimensional brush, “They’re too fucking stupid to vote for their own interests because they are all misogynic homophobes who care more about culturally defeating the ‘others’”. Heaven forbid some of us actually agree that there should be a flat tax rate, or that the State’s social safety net should be a temporary Band-Aid to get someone back on their feet instead of a crutch that permanently disables them.
But its too fucking hard for people like Sol to imagine there are competent, rational people who vote libertarian or right-leaning for any other fucking reason than that they have been brainwashed and misled by billionaires into voting against their own interests. There is no possible way that someone could rationally think that a white person and a black person should be admitted to college based on merit and not on race, because to do so is apparently fucking racist?????..... Come again? It is not possible that anyone on the right that isn’t a billionaire thinks that corporate tax should be as low as feasible- since all of the money eventually falls into someone’s hands (and can be taxed at that time). Its not possible that anyone could think NAFTA is a fucking terrible deal simply because Mexico has almost nothing as a minimum wage and no environmental regulation that is enforced, and yet can bring products into the US duty free. “To be against NAFTA is racist because you hate brown-skinned people!!!!” No one could think Obamacare is bullshit because to do so means you hate poor people… Despite the fact that Obamacare increased the taxes on the lower middle class 50-fold (if you factor in insurance premiums as a ‘tax’ as it was defended in SCOTUS).
The political conversation in this country is not going to go anywhere until people stop painting with single-stroke brushes. Contrary to what many apparently think, not all Trump supports are Racist Misogynic Homophobic Idiot Assholes who only support lower corporate taxes because it comes with “Law against the other people”.
If I called the Democratic party out as a two party camp- one that wants to rule as an Plutocracy and the other that wants free shit despite the fact that it would make them a slave of the rich, I would probably get banned.
But apparently dude can tell half the forum Fuck You and not get banned so why not try it…
It's a testament to the success of those billionaires' strategy that their lackeys so vociferously assert their own agency.
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If I called the Democratic party out as a two party camp- one that wants to rule as an Plutocracy and the other that wants free shit despite the fact that it would make them a slave of the rich, I would probably get banned.
But apparently dude can tell half the forum Fuck You and not get banned so why not try it…
I don't mind. :) But Sol discussed two groups that are actually part of the Republican coalition ("moral majority" + donor class, these groups are well recognized and widely commented on, even among non-partisan spectators). While I've no doubt that there are would-be plutocrats among the Democrats, this is hardly a large part of the coalition. Besides some companies who have taken relatively small loans for green energy stuff, I don't see where you get that. As far as folks who want more social services from the government, do you think the poor and middle class in Europe are more slaves to the rich than the poor and middle class here? I'd guess if you'd asked them, they feel the opposite. I don't really see it.
As I said, no harm done w.r.t. name calling, but do try to be more accurate in your representations! :)
If it helps, I don't think Sol was trying to say that every single Republican is a member of the two groups he discussed. Just a substantial fraction.
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If it helps, I don't think Sol was trying to say that every single Republican is a member of the two groups he discussed. Just a substantial fraction.
The two fractions that get the most attention from the party, coincidentally.
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Talk about painting a fucking one-dimensional picture...
This is exactly why these conversations can never get anywhere. Because keyboard sociologists and psychologists such as Sol paint half the fucking country with a single one-dimensional brush, “They’re too fucking stupid to vote for their own interests because they are all misogynic homophobes who care more about culturally defeating the ‘others’”. Heaven forbid some of us actually agree that there should be a flat tax rate, or that the State’s social safety net should be a temporary Band-Aid to get someone back on their feet instead of a crutch that permanently disables them.
But its too fucking hard for people like Sol to imagine there are competent, rational people who vote libertarian or right-leaning for any other fucking reason than that they have been brainwashed and misled by billionaires into voting against their own interests. There is no possible way that someone could rationally think that a white person and a black person should be admitted to college based on merit and not on race, because to do so is apparently fucking racist?????..... Come again? It is not possible that anyone on the right that isn’t a billionaire thinks that corporate tax should be as low as feasible- since all of the money eventually falls into someone’s hands (and can be taxed at that time). Its not possible that anyone could think NAFTA is a fucking terrible deal simply because Mexico has almost nothing as a minimum wage and no environmental regulation that is enforced, and yet can bring products into the US duty free. “To be against NAFTA is racist because you hate brown-skinned people!!!!” No one could think Obamacare is bullshit because to do so means you hate poor people… Despite the fact that Obamacare increased the taxes on the lower middle class 50-fold (if you factor in insurance premiums as a ‘tax’ as it was defended in SCOTUS).
The political conversation in this country is not going to go anywhere until people stop painting with single-stroke brushes. Contrary to what many apparently think, not all Trump supports are Racist Misogynic Homophobic Idiot Assholes who only support lower corporate taxes because it comes with “Law against the other people”.
If I called the Democratic party out as a two party camp- one that wants to rule as an Plutocracy and the other that wants free shit despite the fact that it would make them a slave of the rich, I would probably get banned.
But apparently dude can tell half the forum Fuck You and not get banned so why not try it…
It's a testament to the success of those billionaires' strategy that their lackeys so vociferously assert their own agency.
I do not appreciate being called anyone's "Lackey", and you completely disregarded my point above painting everyone with a one-dimensional brush.
Sorry I was frustrated.
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So much for this thread.
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It's a testament to the success of those billionaires' strategy that their lackeys so vociferously assert their own agency.
Fuck You.
A. Why do we need a tax cut for business and rich people when the economy is strong?
B. How do we respond when the economy tanks, as it inevitably will, with tax rates already at record lows?
C. Why is government spending the only side of the equation where it's worth causing pain?
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Rule #1 of internet forums: DBAD (don't be a dick).
Rule #2 of internet forums: Why do you get so pissed off by other people's opinions?
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To tie this all back to the original thread, there is one party that desperately needs an accused pedophile to win an election today to stave off ultimate defeat of their tax plan in the Senate.
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Talk about painting a fucking one-dimensional picture...
This is exactly why these conversations can never get anywhere. Because keyboard sociologists and psychologists such as Sol paint half the fucking country with a single one-dimensional brush, “They’re too fucking stupid to vote for their own interests because they are all misogynic homophobes who care more about culturally defeating the ‘others’”. Heaven forbid some of us actually agree that there should be a flat tax rate, or that the State’s social safety net should be a temporary Band-Aid to get someone back on their feet instead of a crutch that permanently disables them.
But its too fucking hard for people like Sol to imagine there are competent, rational people who vote libertarian or right-leaning for any other fucking reason than that they have been brainwashed and misled by billionaires into voting against their own interests. There is no possible way that someone could rationally think that a white person and a black person should be admitted to college based on merit and not on race, because to do so is apparently fucking racist?????..... Come again? It is not possible that anyone on the right that isn’t a billionaire thinks that corporate tax should be as low as feasible- since all of the money eventually falls into someone’s hands (and can be taxed at that time). Its not possible that anyone could think NAFTA is a fucking terrible deal simply because Mexico has almost nothing as a minimum wage and no environmental regulation that is enforced, and yet can bring products into the US duty free. “To be against NAFTA is racist because you hate brown-skinned people!!!!” No one could think Obamacare is bullshit because to do so means you hate poor people… Despite the fact that Obamacare increased the taxes on the lower middle class 50-fold (if you factor in insurance premiums as a ‘tax’ as it was defended in SCOTUS).
The political conversation in this country is not going to go anywhere until people stop painting with single-stroke brushes. Contrary to what many apparently think, not all Trump supports are Racist Misogynic Homophobic Idiot Assholes who only support lower corporate taxes because it comes with “Law against the other people”.
If I called the Democratic party out as a two party camp- one that wants to rule as an Plutocracy and the other that wants free shit despite the fact that it would make them a slave of the rich, I would probably get banned.
But apparently dude can tell half the forum Fuck You and not get banned so why not try it…
It's a testament to the success of those billionaires' strategy that their lackeys so vociferously assert their own agency.
Fuck You.
You are incredibly silly.
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I'm not concerned if the wealthy don't get a tax reduction, but I do want the corporations to get cuts.
Could you explain to me why tax cuts for corporations is a good idea again. No, really. Spell it out for me. Maybe I'm just completely missing something that's really obvious.
Lower corporate taxes will make us more competitive with other countries. Our corporations will sell more creating jobs.
Lower corporate taxes will lower the cost of goods which is equivalent to giving people a raise.
Lower corporate taxes will help keep inflation in check even as the economy booms.
Lower corporate taxes will boost business investment, creating a larger tax base in the future.
Lower corporate taxes will reduce shifting of profits overseas.
Lower corporate taxes will decrease the tax avoidance that companies use thru legal loopholes
Lower corporate taxes will decrease time and money spent avoiding taxes.
Lower corporate taxes will help small companies compete with big companies that hire teams of lawyers to exploit loopholes to reduce their tax bill, small companies can't afford the lawyers needed.
Lower corporate taxes will increase employee wages.
Lower corporate taxes will increase stockholder dividends
Lower corporate taxes will increase foreign investment in the US
Am I positive all these will happen? There will be several that happen, some will take time to develop,
and many will add their small part to the economic competitiveness and economic growth we want.
Thanks for asking.
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@TexasRunner I have sympathies for some of the views you expressed.
Obamacare is a tax.
The safety net shouldn't create a dependency.
Taxes should be low (but a flat tax is a terrible idea).
Environmental regulations are important.
UBI is a pipe dream.
I have some doubts about affirmative action.
Voter ID laws aren't a ditch worth dying in, a view for which I've been called a racist both online and offline.
But none of this excuses the absolute garbage that the GOP of the last decade wraps what remains of their conservative views in order to get the votes of the batshit insane. Sol's view is pretty fucking on point there. The GOP as it currently stands is the party of idiots, and those who think the ends justifies the means, even if it means waging war on common sense.
Knock off the religious bullshit, stop giving a platform to conspiracy theorists of all stripes, get your house in order, and you may have a shot at luring back rational people. Until then, enjoy the company you have.
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There is no possible way that someone could rationally think that a white person and a black person should be admitted to college based on merit and not on race, because to do so is apparently fucking racist?????..... Come again?
This is a tricky topic.
At one point I would have wholeheartedly agreed with you. Admissions to college, police forces, fire departments, and hiring should be totally based on merit.
There's kinda a catch 22 that institutionalize racism has built up over the years regarding certain minorities though. Inequality regarding incarceration rates, education, geographic location, available schooling, and wealth mean that fewer black kids will perform as well as white kids. This all means that fewer black kids will have good role models and families supportive/able to fund higher education, which spirals over and over again. The idea behind inequality in acceptance practices is to slowly try to fix the inequality that currently exists.
Currently, I'm kinda torn on the issue. I see the inherent unfairness in affirmative action. You're choosing people who are less qualified because of skin colour. But I also see the inherent unfairness in the current system . . . where there are greater obstacles for people of a particular skin colour to overcome and it's not a level playing field.
When we're discussing racism, there are certainly some folks who fight affirmative action because they don't like minorities. I wouldn't tar everyone on the 'no affirmative action' side as racist though, and Sol didn't in his post.
It is not possible that anyone on the right that isn’t a billionaire thinks that corporate tax should be as low as feasible- since all of the money eventually falls into someone’s hands (and can be taxed at that time).
This I do flat out disagree with. Large corporations are very good at moving money around to avoid taxation. The money will eventually fall into someone's hands, but those hands aren't necessarily ever going to be taxed by your countries tax system.
Its not possible that anyone could think NAFTA is a fucking terrible deal simply because Mexico has almost nothing as a minimum wage and no environmental regulation that is enforced, and yet can bring products into the US duty free. “To be against NAFTA is racist because you hate brown-skinned people!!!!”
Again, at one point I was totally on your side regarding NAFTA. Tariffs sound like a great idea to protect a countries businesses. There is the argument that we don't want to be protecting the type of low wage, low education assembly jobs that are lost due to NAFTA though . . . and that a country benefits more from the lower prices of goods created elsewhere than the higher prices/slight increase in unskilled jobs that ending it would bring. Both arguments have valid points.
Does anyone say that disliking NAFTA is racist though? I've honestly never heard that before. Sol certainly didn't say it.
No one could think Obamacare is bullshit because to do so means you hate poor people… Despite the fact that Obamacare increased the taxes on the lower middle class 50-fold (if you factor in insurance premiums as a ‘tax’ as it was defended in SCOTUS).
Costs were increased on the middle class (and upper class) via Obamacare . . . and they were increased in order to pay for poor people having health care. You might not hate poor people . . . but it sounds like you're willing to let them go uninsured to save a few bucks from people who need the money less. Is that correct, or a misreading of your position?
Contrary to what many apparently think, not all Trump supports are Racist Misogynic Homophobic Idiot Assholes who only support lower corporate taxes because it comes with “Law against the other people”.
Not all Trump supporters fall into this category. What's disturbing though, is that the ones who obviously do appear to be happily tolerated by the ones who don't. Look at the full Trump/republican support of a candidate like Roy Moore . . . a racist, misogynistic, homophobic, pedophile. Stop supporting these people, and I suspect that many of the claims of racism, homophobia, misogyny, etc. will stop coming up. But you can't have a president who says that marching neo-nazis are good people and then pretend to be confused by cries of racism.
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It's a testament to the success of those billionaires' strategy that their lackeys so vociferously assert their own agency.
Fuck You.
You are incredibly silly.
In (right) before the lock...
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Voter ID laws aren't a ditch worth dying in, a view for which I've been called a racist both online and offline.
I'm going to have to respectfully disagree, considering the number of people who have fought, died, been injured, imprisoned, etc. over their suffrage rights.
Now, if you want to make it easier for everyone to get a free ID, then we can talk.
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Talk about painting a fucking one-dimensional picture...
Technically, I think it was a two dimensional picture. Two camps, with competing interests, bound together to form a somewhat paradoxical ruling party. But a party that holds all of the power in this country right now, so at least it's effective.
keyboard sociologists and psychologists such as Sol
As a general rule, on this forum we try to constrain ourselves to attacking arguments instead of attacking people. There's no need to be petty or personally insulting. You may notice I will not call you any names in this post, and I would ask that you do the same in the future. Also, consider editing your previous post before you get moderated for violating the forum rules.
“They’re too fucking stupid to vote for their own interests because they are all misogynic homophobes who care more about culturally defeating the ‘others’”.
I said nothing of the sort, but I recognize your faux outrage over what you heard, instead of what was said. This is a common tactic on right wing talk radio, too, where discussions of registering mentally ill people who try to buy semi auto rifles with bump stocks immediately turned into "libtards are gunna take our guns!" No, that's not the topic at hand, and your immediate overreaction into extreme interpretations does not help advance the discussion we need to have. You're just stifling honest debate with such ridiculousness.
But its too fucking hard for people like Sol to imagine there are competent, rational people who vote libertarian or right-leaning for any other fucking reason than that they have been brainwashed and misled by billionaires into voting against their own interests.
Did you even read what I wrote?
I said nothing about "every voter" and I said nothing about you. I described the party's coalition of disparate interests.
It was a post about the lie behind trickle down economics, and why I think the party has so fully embraced that lie despite so many decades of evidence that it is indefensible.
corporate tax should be as low as feasible- since all of the money eventually falls into someone’s hands
This is the lie of trickle down economics. Thank you for proving my point, I guess?
If the republicans actually wanted to help the middle class, they could have given the middle class a tax cut. They chose not to. It's not like it's a hard bill to write. Reagan and Bush BOTH passed tax cuts that actually lowered taxes on the middle class, so I'm pretty sure they know how to do it. This time they choose to write a bill that instead raises taxes on the middle class, to partially offset the debt created by their giant, permanent, tax cut for corporations and the wealthy. Sure, they phased in the tax increases on the middle class slowly, to soften the blow, but they still raise taxes on the middle class.
You don't need to believe in the trickle down fairy tale. If you want to help the middle class, then actually help the middle class. Don't help billionaires and claim it will then secondarily maybe help the middle class, even though that has never worked before. It's silly.
The political conversation in this country is not going to go anywhere until people stop painting with single-stroke brushes.
Do you think your post is helping? I see an awful lot of name calling, gross exaggeration, strawman arguments, and belittling of opposing viewpoints and the people who hold them. I don't think you're exactly elevating the discourse.
If I called the Democratic party out
I would encourage you to offer your personal views on the democratic party, at length, maybe in a thread devoted to that topic. I would discourage you from continuing to make antagonistic personal attacks on fellow forum members, by name.
I agree that the democratic party has it's own coalition and internal conflicts, but this isn't a thread about them, or about parties in general, or about the social divide in our country. It's a thread about the republican tax plan, the economic lie it is based on, and how clearly it betrays the ideals the president campaigned on. Democrats have no role in it. Trump sold us down the river.
But apparently dude can tell half the forum Fuck You and not get banned so why not try it…
I didn't even swear!
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It's a testament to the success of those billionaires' strategy that their lackeys so vociferously assert their own agency.
Fuck You.
You are incredibly silly.
In (right) before the lock...
Yes, let's please try and keep this mostly civil.
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It's a testament to the success of those billionaires' strategy that their lackeys so vociferously assert their own agency.
Fuck You.
You are incredibly silly.
In (right) before the lock...
Yes, let's please try and keep this mostly civil.
Sorry.
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Lower corporate taxes will make us more competitive with other countries. Our corporations will sell more creating jobs.
Hard to chat when we have this disconnect. I disagree with your point. I think executives and shareholders (yay 401k, IRA, taxable accounts) will be better off but can't see how it will create any meaningful number of jobs besides a handful in R&D and that's a maybe.
In terms of corporate profits, what country is outpacing us currently?
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But apparently dude can tell half the forum Fuck You and not get banned so why not try it…
I didn't even swear!
I was specifically referencing dude. Sorry that wasn't clear. Should have linked the post.
The smart ultra rich ( Ray Dalio, Warren Buffet to name but a few) are keenly aware that unless income inequality is improved in this country you will eventually see a shrinking economy which does not bode well for those of us wishing to live off investments.
This tax plan increases income inequality by shuttling the savings disproportionately to the top.
That folks at the bottom are so easy to manipulate with notions of religion/guns/whatever the trend seems bound to continue.
For better and for worse, America is weird. I'll just keep on increasing my allocation of VEA as a hedge.
With the GOP assault on public education, from Betsy Devoss' Dept. of Education right down to the GOP tax plan -- removing the SALT deductions effectively means your local tax dollars that go to public schools are now going to be taxed federally -- the trend will not only continue, it will worsen. In case I haven't said it lately . . . oh nevermind.
[MOD NOTE: F-bombs, sure. F-U bombs toward other forum members are just going to escalate to the point where I have to lock the thread.]
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No one could think Obamacare is bullshit because to do so means you hate poor people… Despite the fact that Obamacare increased the taxes on the lower middle class 50-fold (if you factor in insurance premiums as a ‘tax’ as it was defended in SCOTUS).
Costs were increased on the middle class (and upper class) via Obamacare . . . and they were increased in order to pay for poor people having health care. You might not hate poor people . . . but it sounds like you're willing to let them go uninsured to save a few bucks from people who need the money less. Is that correct, or a misreading of your position?
My position onObamacare is largely summed up based on the Family Glitch and Obama's blatant refusal to fix it.
And yes, It has been stated that I hate poor people for hating Obamacare, I would have to find the post.
1. Gutting of ACA and how it effects your FIRE plans...
I fall into the "Family Glitch" that Obama blatantly refused to fix even though he had the ability, so F#%$ ACA and Obamacare. My premiums rose 382% across three years and I wasn't eligble for subsidies. Burn ACA to the ground and lets build something completely from scratch (I know thats a pipe dream). (FYI, My family and I are currently Cash Payments for medical without insurance. I paid over 60,000$ in the last 5 years in insurance premiums but only used 28,000$ worth of benefits, including a (1) car wreck, (2) MRI of DW's lower back when we might have found a tumor, (3) couple of stomach X-rays (because kids, thats why), and (4) a broken collarbone. Had I made cash payments, I would have been at least 25,000$ ahead.)
If you don't know about the family glitch, it really is something that you should understand if you support ACA: https://www.centerforhealthjournalism.org/2016/04/27/family-trapped-aca-glaring-family-glitch-life-gets-harder (https://www.centerforhealthjournalism.org/2016/04/27/family-trapped-aca-glaring-family-glitch-life-gets-harder)
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I'm not concerned if the wealthy don't get a tax reduction, but I do want the corporations to get cuts.
Could you explain to me why tax cuts for corporations is a good idea again. No, really. Spell it out for me. Maybe I'm just completely missing something that's really obvious.
Lower corporate taxes will make us more competitive with other countries. Our corporations will sell more creating jobs.
Why are we competing in a rush to the bottom with other countries? There's a reason VTSAX is a 'global' index and there is a reason why the world's most educated people fight to come to the US for jobs. Also, the effective corporate tax rate is already in line with other developed countries.
Lower corporate taxes will lower the cost of goods which is equivalent to giving people a raise.
Good prices are driven by supply and demand, so yes a cheaper supply may drop certain prices, but only in competitive and price-elastic markets. That means cheaper luxury goods for people who have disposable income but likely not cheaper essentials for those living closer to the edge.
Lower corporate taxes will help keep inflation in check even as the economy booms.
Except this will also balloon the deficit which could possibly lead to greater inflation.
Lower corporate taxes will boost business investment, creating a larger tax base in the future.
It's been said many times before. Corporations are already sitting on record amounts of cash. This is just bogus.
Lower corporate taxes will reduce shifting of profits overseas.
True, but the reason profits are being held overseas right now is that 1) corporations are already sitting on record amounts of cash already, and 2) this allows them to simply sit on the foreign profits patiently waiting for a repatriation event companies know the Republicans will eventually grant them. If they needed it they could always bring it back at current rates, which again shows that they don't need it at the moment.
Lower corporate taxes will decrease the tax avoidance that companies use thru legal loopholes
So just close the loopholes instead?
Lower corporate taxes will decrease time and money spent avoiding taxes.
Why would this be true? Effort to minimize taxes is independent of the tax rate when you're taking about tax filings at the corporate level.
Lower corporate taxes will help small companies compete with big companies that hire teams of lawyers to exploit loopholes to reduce their tax bill, small companies can't afford the lawyers needed.
No, closing loopholes will.
Lower corporate taxes will increase employee wages.
No, corporations are sitting on record amounts of cash. They could afford to give out higher salaries right now, yet they don't. Unskilled labor is over-supplied and is wage-inelastic.
Lower corporate taxes will increase stockholder dividends
Oh yes, yes they will.
Lower corporate taxes will increase foreign investment in the US
Possibly. Are our corporations hurting for foreign investments enough to justify such a squeeze on the middle class? Seems like they're sitting on record amounts of cash, not investing it.
Am I positive all these will happen? There will be several that happen, some will take time to develop,
and many will add their small part to the economic competitiveness and economic growth we want.
Thanks for asking.
I just don't see how the supposed benefits outweigh the squeeze this puts on the lower and middle classes, not to mention the impending hit to the deficit/debt.
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No one could think Obamacare is bullshit because to do so means you hate poor people… Despite the fact that Obamacare increased the taxes on the lower middle class 50-fold (if you factor in insurance premiums as a ‘tax’ as it was defended in SCOTUS).
Costs were increased on the middle class (and upper class) via Obamacare . . . and they were increased in order to pay for poor people having health care. You might not hate poor people . . . but it sounds like you're willing to let them go uninsured to save a few bucks from people who need the money less. Is that correct, or a misreading of your position?
My position onObamacare is largely summed up based on the Family Glitch and Obama's blatant refusal to fix it.
And yes, It has been stated that I hate poor people for hating Obamacare, I would have to find the post.
1. Gutting of ACA and how it effects your FIRE plans...
I fall into the "Family Glitch" that Obama blatantly refused to fix even though he had the ability, so F#%$ ACA and Obamacare. My premiums rose 382% across three years and I wasn't eligble for subsidies. Burn ACA to the ground and lets build something completely from scratch (I know thats a pipe dream). (FYI, My family and I are currently Cash Payments for medical without insurance. I paid over 60,000$ in the last 5 years in insurance premiums but only used 28,000$ worth of benefits, including a (1) car wreck, (2) MRI of DW's lower back when we might have found a tumor, (3) couple of stomach X-rays (because kids, thats why), and (4) a broken collarbone. Had I made cash payments, I would have been at least 25,000$ ahead.)
If you don't know about the family glitch, it really is something that you should understand if you support ACA: https://www.centerforhealthjournalism.org/2016/04/27/family-trapped-aca-glaring-family-glitch-life-gets-harder (https://www.centerforhealthjournalism.org/2016/04/27/family-trapped-aca-glaring-family-glitch-life-gets-harder)
I meant to return to this and forgot, thanks for bring it back up.
You lay the blame squarely on Obama, but I'm not clear on whether the fix was attainable through agency rule-making or if it required legislative action. Do you have a source that clarifies this?
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As someone who identifies as center-left and votes Dem 99% of the time only because the GOP has gone bug-shagging INSANE since GH Bush, I also want to state that THIS Dem voter does not actually subscribe to the over-simplification of "GOP voters are too stupid to understand they are voting against their own self-interest".
Voters of all stripes define self-interest differently, and financial self-interest is only one element among many. Voter self-interest includes tribal affiliation, family and social-circle harmony/approval, religious/other 'moral' convictions, civil liberties of value (which differ from person to person), short-term financial interest (tax cuts, competition from immigrants for jobs, protectionist policies that protect their job or industry, funding of entitlement or safety net programs that reduces their paycheck), long-term financial interest (deficit spending, funding of safety net and entitlements they are likely to need in the future, negative effects of protectionism on long term GDP growth and jobs, etc.), and any particular pet issues that they feel strongly about.
Any particular voter might prioritize ANY of these issues, and it would be in some way in their 'self-interest'. And most voters have some conflicts taking votes in their own self interest.
So it's totally reasonable to expect that some middle and lower income voters, who will most certainly need to rely on SS and Medicare at some point in the future, to nevertheless vote consistently for a party that wants to dismantle them as long as that party keeps fighting for 'bringing back jobs' (short term financial interest) or supporting gun rights, or restricting abortion, etc. All that indicates is that those voters value gun rights or stopping abortion MORE at any given voting moment than their long-term financial concerns.
Likewise, as an upper-middle class voter, it is consistent for me to vote for a party that (historically and rhetorically) believes in raising my taxes to fund the social safety net and health care for all. I value those things MORE than my personal household's short-term financial gain, so I vote consistently against my short-term financial 'interest'.
Disclaimer 1: I think Sol's 100% accurate about how the GOP holds together its two largest constituencies. Those constituencies do not necessarily encompass all GOP voters.
Disclaimer 2: I am leaving out the inevitable low-information or just plain stupid voters who really do not know their party's position on issues (which I remember reading somewhere is actually a fairly high percentage of people).
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No one could think Obamacare is bullshit because to do so means you hate poor people… Despite the fact that Obamacare increased the taxes on the lower middle class 50-fold (if you factor in insurance premiums as a ‘tax’ as it was defended in SCOTUS).
This is blatantly wrong. The Supreme Court upheld the "fine for not having insurance" as a legal tax, not insurance premiums themselves. The fine is 2.5% of your household income, so no that's not going to come anywhere near "increasing taxes on the lower middle class 50-fold". If you're really dedicated to not having insurance, fine don't have it and pay the 2.5% fine.
1. Gutting of ACA and how it effects your FIRE plans...
I fall into the "Family Glitch" that Obama blatantly refused to fix even though he had the ability, so F#%$ ACA and Obamacare. My premiums rose 382% across three years and I wasn't eligble for subsidies. Burn ACA to the ground and lets build something completely from scratch (I know thats a pipe dream). (FYI, My family and I are currently Cash Payments for medical without insurance. I paid over 60,000$ in the last 5 years in insurance premiums but only used 28,000$ worth of benefits, including a (1) car wreck, (2) MRI of DW's lower back when we might have found a tumor, (3) couple of stomach X-rays (because kids, thats why), and (4) a broken collarbone. Had I made cash payments, I would have been at least 25,000$ ahead.)
If you don't know about the family glitch, it really is something that you should understand if you support ACA: https://www.centerforhealthjournalism.org/2016/04/27/family-trapped-aca-glaring-family-glitch-life-gets-harder (https://www.centerforhealthjournalism.org/2016/04/27/family-trapped-aca-glaring-family-glitch-life-gets-harder)
I did read your article but nothing in there explains your "Obama did nothing to fix it even though he had the ability" position. The 19 states that did not expand Medicaid referenced in the article are all Republican states (including mine). The House has been held by the Republicans since 2011, and the Senate since 2015. The Republican obstructionism of anything related to Obamacare (or anything Obama tried to do at all, really) has been so well documented and is so obvious I don't feel I really have to spell it out.
It seems completely obvious to me that it was the Republican Party that has refused to do anything to fix the problems with Obamacare and done everything they could to cause people pain to get them riled up over it, not Obama. Obama and Democrats in general were begging the Republicans to work with them during the drafting process, and they have always said they were willing to work with the Republicans on fixes to make things better. The Republicans have simply been more interested in obstructing, sabotaging, propagandising, and pushing for an eventual complete repeal.
I'm sure your anger is valid, but I think it is misplaced.
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1. Lower corporate taxes will make us more competitive with other countries. Our corporations will sell more creating jobs.
2. Lower corporate taxes will lower the cost of goods which is equivalent to giving people a raise.
3. Lower corporate taxes will help keep inflation in check even as the economy booms.
4. Lower corporate taxes will boost business investment, creating a larger tax base in the future.
5. Lower corporate taxes will reduce shifting of profits overseas.
6. Lower corporate taxes will decrease the tax avoidance that companies use thru legal loopholes
7. Lower corporate taxes will decrease time and money spent avoiding taxes.
8. Lower corporate taxes will help small companies compete with big companies that hire teams of lawyers to exploit loopholes to reduce their tax bill, small companies can't afford the lawyers needed.
9. Lower corporate taxes will increase employee wages.
10. Lower corporate taxes will increase stockholder dividends
11. Lower corporate taxes will increase foreign investment in the US
Am I positive all these will happen? There will be several that happen, some will take time to develop,
and many will add their small part to the economic competitiveness and economic growth we want.
Thanks for asking.
Numbering mine for clarity of discussion.
1. How much more room is there to grow? Employment rate is low. Economy is good.
2. I don't think the cost of goods will really come down. I think corporations are going to bank it or give to shareholders.
3. Again, I don't know how much better our economy can get, the ends not justifying the means. And that was with a 35% tax rate.
4. I don't know, but doubtful. How many more corporations will actually be created? Maybe more individuals will get into forming their own corporations? I'm not really sure how that would work, but if there's a will, there's a way.
5. Loopholes
6. We are closing some loopholes.... only to create others.
7. Stop avoiding taxes for whom? There will always be complaining about taxes. When we get to 20%, then that will be too high. Then the argument will be that we're not competitive enough with other countries, so we'd better lower it to 10%.
8. What's a small company vs. a large company? You're either a small business (< 200 employees, <25.5 mil in revenue) or you're not. I have a hard time feeling sorry for a business that makes that much money that is unable to hire a good tax accountant and lawyer. Like..boo hoo, we can't afford to hire staff to hide all of our profits?
9. Trickle down theory at its finest. I would be interested to see if the likes of Walmart and Amazon start to pay their employees a living wage with benefits. But not counting on it.
10. This is a point I can agree with. I see shareholders gaining more money.
11. Oh yeah. Wealthy foreign investors get a better deal than the US middle class.
To summarize: I don't quite follow the logic that if the tax rate is 35% and economy is good, then a tax rate of 20% will make it a lot better. This especially when knowing that companies right now NEVER pay a 35% corporate tax rate, most likely less than 20%, some pay nothing, and a few actually get a tax credit.
12. (this is mine) Lower corporate taxes will increase our national debt.
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There is no possible way that someone could rationally think that a white person and a black person should be admitted to college based on merit and not on race, because to do so is apparently fucking racist?????..... Come again?
This is a tricky topic.
At one point I would have wholeheartedly agreed with you. Admissions to college, police forces, fire departments, and hiring should be totally based on merit.
There's kinda a catch 22 that institutionalize racism has built up over the years regarding certain minorities though. Inequality regarding incarceration rates, education, geographic location, available schooling, and wealth mean that fewer black kids will perform as well as white kids. This all means that fewer black kids will have good role models and families supportive/able to fund higher education, which spirals over and over again. The idea behind inequality in acceptance practices is to slowly try to fix the inequality that currently exists.
Currently, I'm kinda torn on the issue. I see the inherent unfairness in affirmative action. You're choosing people who are less qualified because of skin colour. But I also see the inherent unfairness in the current system . . . where there are greater obstacles for people of a particular skin colour to overcome and it's not a level playing field.
When we're discussing racism, there are certainly some folks who fight affirmative action because they don't like minorities. I wouldn't tar everyone on the 'no affirmative action' side as racist though, and Sol didn't in his post.
I agree that Sol didn't directly state it, but his 'Two Camps' mentality clearly paints a picture that the lower portion is motivated/persuaded by 'cultural issues' and I was choosing to highlight several of those issues and why they are not, in fact, proof of his two camp statement... Namely that people can be opposed to many of the cultural things on totally non-racist / bigoted / whatever grounds.
Example of the mentality I was addressing:
Its mind boggling why any thinking individual would vote for this shitbag....this coming from someone who has voted GOP.
Hey....Im still waiting to meet a trump voter who's not racist.
Didn't vote for him but woo boy...reading these responses. People are bending over backwards to try to justify the *****-grabber in Chief. And apparently buried their heads in the sand on the Muslim tweets last week, white supremacist crap WRT Charlottesville, etc.
If you vote for a racist candidate running a racist campaign based on racist policies, I have little sympathy for your claims that you're being unfairly tarred as racist.
If I were going to "be fair" to them, I'd say something like, "Well, they're just falling for racist dog whistles. They don't know they're being racist because it's not explicit."
...but there's no way around the fact that every single Trump voter saw a campaign that was racist, Islamophobic, anti-disability, and misogynistic, and still voted for him. That's a tacit endorsement of those beliefs.
You hopefully get the point...
It is not possible that anyone on the right that isn’t a billionaire thinks that corporate tax should be as low as feasible- since all of the money eventually falls into someone’s hands (and can be taxed at that time).
This I do flat out disagree with. Large corporations are very good at moving money around to avoid taxation. The money will eventually fall into someone's hands, but those hands aren't necessarily ever going to be taxed by your countries tax system.
I'm very interested in your opinion on this. How exactly would a corporation move money out of the coffers into the hands of the individual without it being taxed?... Offshore accounts? Discreet benefits? Some ridiculously high Per Diem?
It seems to me that if (1) we could get the H&R Block lobbyists to stop crusading against the IRS pre-filling the data, we could free up a lot of audits and blanket statement all individuals above XXX threshhold will get audited?
Thanks
Its not possible that anyone could think NAFTA is a fucking terrible deal simply because Mexico has almost nothing as a minimum wage and no environmental regulation that is enforced, and yet can bring products into the US duty free. “To be against NAFTA is racist because you hate brown-skinned people!!!!”
Again, at one point I was totally on your side regarding NAFTA. Tariffs sound like a great idea to protect a countries businesses. There is the argument that we don't want to be protecting the type of low wage, low education assembly jobs that are lost due to NAFTA though . . . and that a country benefits more from the lower prices of goods created elsewhere than the higher prices/slight increase in unskilled jobs that ending it would bring. Both arguments have valid points.
Does anyone say that disliking NAFTA is racist though? I've honestly never heard that before. Sol certainly didn't say it.
Why, exactly, would we "don't want to be protecting the type of low wage, low education assembly jobs that are lost due to NAFTA"? Do you have something against manual labor or assembly line workers?
Had those jobs stayed here the last 15-30 years, we could now be reaping the benefits of more automation and advanced machinery within our own country. The average jobs would have flowed towards more skilled work fluidly and naturally instead of being ripped out of the country. Those jobs were sacrificed on the alter of corporate profits, despite the odd turning-of-tables as of late. Now many are claiming the upper-middle is being gutted for the corporations and its a problem?...
No one could think Obamacare is bullshit because to do so means you hate poor people… Despite the fact that Obamacare increased the taxes on the lower middle class 50-fold (if you factor in insurance premiums as a ‘tax’ as it was defended in SCOTUS).
Costs were increased on the middle class (and upper class) via Obamacare . . . and they were increased in order to pay for poor people having health care. You might not hate poor people . . . but it sounds like you're willing to let them go uninsured to save a few bucks from people who need the money less. Is that correct, or a misreading of your position?
I addressed this in this post, just keeping it here to remain consistent.
My position on Obamacare is largely summed up based on the Family Glitch and Obama's blatant refusal to fix it.
And yes, It has been stated that I hate poor people for hating Obamacare, I would have to find the post.
1. Gutting of ACA and how it effects your FIRE plans...
I fall into the "Family Glitch" that Obama blatantly refused to fix even though he had the ability, so F#%$ ACA and Obamacare. My premiums rose 382% across three years and I wasn't eligble for subsidies. Burn ACA to the ground and lets build something completely from scratch (I know thats a pipe dream). (FYI, My family and I are currently Cash Payments for medical without insurance. I paid over 60,000$ in the last 5 years in insurance premiums but only used 28,000$ worth of benefits, including a (1) car wreck, (2) MRI of DW's lower back when we might have found a tumor, (3) couple of stomach X-rays (because kids, thats why), and (4) a broken collarbone. Had I made cash payments, I would have been at least 25,000$ ahead.)
If you don't know about the family glitch, it really is something that you should understand if you support ACA: https://www.centerforhealthjournalism.org/2016/04/27/family-trapped-aca-glaring-family-glitch-life-gets-harder (https://www.centerforhealthjournalism.org/2016/04/27/family-trapped-aca-glaring-family-glitch-life-gets-harder)
Contrary to what many apparently think, not all Trump supports are Racist Misogynic Homophobic Idiot Assholes who only support lower corporate taxes because it comes with “Law against the other people”.
Not all Trump supporters fall into this category. What's disturbing though, is that the ones who obviously do appear to be happily tolerated by the ones who don't. Look at the full Trump/republican support of a candidate like Roy Moore . . . a racist, misogynistic, homophobic, pedophile. Stop supporting these people, and I suspect that many of the claims of racism, homophobia, misogyny, etc. will stop coming up. But you can't have a president who says that marching neo-nazis are good people and then pretend to be confused by cries of racism.
Now following his election so not sure what I can add. The issue is, those cards have been pulled so many times that they have lost their redeeming value... Every candidate has been called those things, generally without strong evidence, which has made the accusation a moot point....
Not saying you are wrong, just highlighting an issue.
(Editing to fix brackets.... my bad)
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My position onObamacare is largely summed up based on the Family Glitch and Obama's blatant refusal to fix it.
And yes, It has been stated that I hate poor people for hating Obamacare, I would have to find the post.
1. Gutting of ACA and how it effects your FIRE plans...
I fall into the "Family Glitch" that Obama blatantly refused to fix even though he had the ability, so F#%$ ACA and Obamacare. My premiums rose 382% across three years and I wasn't eligble for subsidies. Burn ACA to the ground and lets build something completely from scratch (I know thats a pipe dream). (FYI, My family and I are currently Cash Payments for medical without insurance. I paid over 60,000$ in the last 5 years in insurance premiums but only used 28,000$ worth of benefits, including a (1) car wreck, (2) MRI of DW's lower back when we might have found a tumor, (3) couple of stomach X-rays (because kids, thats why), and (4) a broken collarbone. Had I made cash payments, I would have been at least 25,000$ ahead.)
If you don't know about the family glitch, it really is something that you should understand if you support ACA: https://www.centerforhealthjournalism.org/2016/04/27/family-trapped-aca-glaring-family-glitch-life-gets-harder (https://www.centerforhealthjournalism.org/2016/04/27/family-trapped-aca-glaring-family-glitch-life-gets-harder)
Man do I feel you on the family glitch. I probably would have been able to get insurance for my family a few years earlier if not for that problem. But I'm not sure why you think Obama could have fixed it, I thought it would have required a legislative fix. Can you elaborate?
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I meant to return to this and forgot, thanks for bring it back up.
You lay the blame squarely on Obama, but I'm not clear on whether the fix was attainable through agency rule-making or if it required legislative action. Do you have a source that clarifies this?
Yes. The President has full situational authority over the IRS when nessecary, and the glitch was created (and intentionally not closed) by an IRS ruling: https://www.gpo.gov/fdsys/pkg/FR-2013-02-01/pdf/2013-02136.pdf (https://www.gpo.gov/fdsys/pkg/FR-2013-02-01/pdf/2013-02136.pdf) (second page, middle column § 1.36B–2 Eligibility for premium tax credit)
As such, it was possible for intervention to occur, and as the chief executive of the IRS is a presidential nomination, there is precedence for at least some collaboration. Regarding whether he knew or not initially, it became a VERY big deal after implementation and could have been corrected.
Health Affairs explains that this was not an accident or oversight – it was carefully considered and the final regulation was delayed while the Government Accountability Office and the IRS analyzed the impact of the decision. There were concerns that employers would increase the contributions required to enroll family members, which would push more people off employer plans and into the exchanges, driving up the total cost of subsidies. Ultimately, those concerns prevailed and the “family glitch” was born.
Source: https://www.healthinsurance.org/obamacare/no-family-left-behind-by-obamacare/
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There is no possible way that someone could rationally think that a white person and a black person should be admitted to college based on merit and not on race, because to do so is apparently fucking racist?????..... Come again?
This is a tricky topic.
At one point I would have wholeheartedly agreed with you. Admissions to college, police forces, fire departments, and hiring should be totally based on merit.
There's kinda a catch 22 that institutionalize racism has built up over the years regarding certain minorities though. Inequality regarding incarceration rates, education, geographic location, available schooling, and wealth mean that fewer black kids will perform as well as white kids. This all means that fewer black kids will have good role models and families supportive/able to fund higher education, which spirals over and over again. The idea behind inequality in acceptance practices is to slowly try to fix the inequality that currently exists.
Currently, I'm kinda torn on the issue. I see the inherent unfairness in affirmative action. You're choosing people who are less qualified because of skin colour. But I also see the inherent unfairness in the current system . . . where there are greater obstacles for people of a particular skin colour to overcome and it's not a level playing field.
When we're discussing racism, there are certainly some folks who fight affirmative action because they don't like minorities. I wouldn't tar everyone on the 'no affirmative action' side as racist though, and Sol didn't in his post.
I agree that Sol didn't directly state it, but his 'Two Camps' mentality clearly paints a picture that the lower portion is motivated/persuaded by 'cultural issues' and I was choosing to highlight several of those issues and why they are not, in fact, proof of his two camp statement... Namely that people can be opposed to many of the cultural things on totally non-racist / bigoted / whatever grounds.
Example of the mentality I was addressing:
Its mind boggling why any thinking individual would vote for this shitbag....this coming from someone who has voted GOP.
Hey....Im still waiting to meet a trump voter who's not racist.
Didn't vote for him but woo boy...reading these responses. People are bending over backwards to try to justify the *****-grabber in Chief. And apparently buried their heads in the sand on the Muslim tweets last week, white supremacist crap WRT Charlottesville, etc.
If you vote for a racist candidate running a racist campaign based on racist policies, I have little sympathy for your claims that you're being unfairly tarred as racist.
If I were going to "be fair" to them, I'd say something like, "Well, they're just falling for racist dog whistles. They don't know they're being racist because it's not explicit."
...but there's no way around the fact that every single Trump voter saw a campaign that was racist, Islamophobic, anti-disability, and misogynistic, and still voted for him. That's a tacit endorsement of those beliefs.
You hopefully get the point...
What words would you user to describe someone who supports a racist or misogynist for public office? Donald Trump has a long history of both racist and misogynist words and actions.
It is not possible that anyone on the right that isn’t a billionaire thinks that corporate tax should be as low as feasible- since all of the money eventually falls into someone’s hands (and can be taxed at that time).
This I do flat out disagree with. Large corporations are very good at moving money around to avoid taxation. The money will eventually fall into someone's hands, but those hands aren't necessarily ever going to be taxed by your countries tax system.
I'm very interested in your opinion on this. How exactly would a corporation move money out of the coffers into the hands of the individual without it being taxed?... Offshore accounts? Discreet benefits? Some ridiculously high Per Diem?
It seems to me that if (1) we could get the H&R Block lobbyists to stop crusading against the IRS pre-filling the data, we could free up a lot of audits and blanket statement all individuals above XXX threshhold will get audited?
Thanks
Yes. Offshore accounts, discreet benefits are both ways that this can happen. Or they can pay a few of their wealthiest employees in stock options to avoid taxes. They can choose to spend the money paying employees in other countries, where it will never be taxed by the US. There's also the problem that corporations don't necessarily spend the money that they do have. They often will just sit on giant cash reserves for strategic purposes.
Its not possible that anyone could think NAFTA is a fucking terrible deal simply because Mexico has almost nothing as a minimum wage and no environmental regulation that is enforced, and yet can bring products into the US duty free. “To be against NAFTA is racist because you hate brown-skinned people!!!!”
Again, at one point I was totally on your side regarding NAFTA. Tariffs sound like a great idea to protect a countries businesses. There is the argument that we don't want to be protecting the type of low wage, low education assembly jobs that are lost due to NAFTA though . . . and that a country benefits more from the lower prices of goods created elsewhere than the higher prices/slight increase in unskilled jobs that ending it would bring. Both arguments have valid points.
Does anyone say that disliking NAFTA is racist though? I've honestly never heard that before. Sol certainly didn't say it.
Why, exactly, would we "don't want to be protecting the type of low wage, low education assembly jobs that are lost due to NAFTA"? Do you have something against manual labor or assembly line workers?
Had those jobs stayed here the last 15-30 years, we could now be reaping the benefits of more automation and advanced machinery within our own country. The average jobs would have flowed towards more skilled work fluidly and naturally instead of being ripped out of the country. Those jobs were sacrificed on the alter of corporate profits, despite the odd turning-of-tables as of late. Now many are claiming the upper-middle is being gutted for the corporations and its a problem?...
I don't have anything against assembly line workers. I do have a thing against assembly line work. Assembly line work is teetering on the edge of extinction. As you mentioned, it is about to be completely wiped out by the next generation of automation. The benefits that people are reaping of more automation is the benefit of not needing to pay expensive humans to do things any more.
Those jobs that went away 15 - 30 years ago? That was a conscious choice to be proactive about things, and to start the slow/painful transition to the work needed by the modern economy. What you're proposing would end up hurting a lot more people in the long run.
No one could think Obamacare is bullshit because to do so means you hate poor people… Despite the fact that Obamacare increased the taxes on the lower middle class 50-fold (if you factor in insurance premiums as a ‘tax’ as it was defended in SCOTUS).
Costs were increased on the middle class (and upper class) via Obamacare . . . and they were increased in order to pay for poor people having health care. You might not hate poor people . . . but it sounds like you're willing to let them go uninsured to save a few bucks from people who need the money less. Is that correct, or a misreading of your position?
I addressed this in this post, just keeping it here to remain consistent.
My position on Obamacare is largely summed up based on the Family Glitch and Obama's blatant refusal to fix it.
And yes, It has been stated that I hate poor people for hating Obamacare, I would have to find the post.
1. Gutting of ACA and how it effects your FIRE plans...
I fall into the "Family Glitch" that Obama blatantly refused to fix even though he had the ability, so F#%$ ACA and Obamacare. My premiums rose 382% across three years and I wasn't eligble for subsidies. Burn ACA to the ground and lets build something completely from scratch (I know thats a pipe dream). (FYI, My family and I are currently Cash Payments for medical without insurance. I paid over 60,000$ in the last 5 years in insurance premiums but only used 28,000$ worth of benefits, including a (1) car wreck, (2) MRI of DW's lower back when we might have found a tumor, (3) couple of stomach X-rays (because kids, thats why), and (4) a broken collarbone. Had I made cash payments, I would have been at least 25,000$ ahead.)
If you don't know about the family glitch, it really is something that you should understand if you support ACA: https://www.centerforhealthjournalism.org/2016/04/27/family-trapped-aca-glaring-family-glitch-life-gets-harder (https://www.centerforhealthjournalism.org/2016/04/27/family-trapped-aca-glaring-family-glitch-life-gets-harder)
Why do you believe that the responsibility for the issues you've outlined above rest squarely on Obama's shoulders?
Contrary to what many apparently think, not all Trump supports are Racist Misogynic Homophobic Idiot Assholes who only support lower corporate taxes because it comes with “Law against the other people”.
Not all Trump supporters fall into this category. What's disturbing though, is that the ones who obviously do appear to be happily tolerated by the ones who don't. Look at the full Trump/republican support of a candidate like Roy Moore . . . a racist, misogynistic, homophobic, pedophile. Stop supporting these people, and I suspect that many of the claims of racism, homophobia, misogyny, etc. will stop coming up. But you can't have a president who says that marching neo-nazis are good people and then pretend to be confused by cries of racism.
Now following his election so not sure what I can add. The issue is, those cards have been pulled so many times that they have lost their redeeming value... Every candidate has been called those things, generally without strong evidence, which has made the accusation a moot point....
Not saying you are wrong, just highlighting an issue.
There's pretty strong evidence against Roy Moore on all counts. This is a very good example of Republican voters in a Republican state choosing to support someone who is all of the things that you're telling us most Republicans are not. How does that statement go? If you lie down with dogs, you're bound to get fleas? If you tolerate all of this stuff in your elected officials, you're probably going to get called racist, misogynistic, and homophobic.
To take a slightly different approach . . . how do you feel about the Catholic church and the rampant pedophilia/sexual abuse that it actively hid / tacitly supported over the years? Even though not all Catholics are pedophiles, and it was never a majority of priests . . . how did the support that the church gave it's priests who were pedophiles make you feel about the organization as a whole?
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Stock options are taxed as regular income.
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Stock options are taxed as regular income.
it never ceases to amaze me the number of people that genuinely think there are easy and costless ways to just not pay taxes, as long as you are rich enough or are a big enough corporation.
Certainly there are some ridiculous tax treatments, but it's not as easy as "just pay with stock options".
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I'm not concerned if the wealthy don't get a tax reduction, but I do want the corporations to get cuts.
Could you explain to me why tax cuts for corporations is a good idea again. No, really. Spell it out for me. Maybe I'm just completely missing something that's really obvious.
Lower corporate taxes will make us more competitive with other countries. Our corporations will sell more creating jobs.
Why are we competing in a rush to the bottom with other countries? There's a reason VTSAX is a 'global' index and there is a reason why the world's most educated people fight to come to the US for jobs. Also, the effective corporate tax rate is already in line with other developed countries.
Lower corporate taxes will lower the cost of goods which is equivalent to giving people a raise.
Good prices are driven by supply and demand, so yes a cheaper supply may drop certain prices, but only in competitive and price-elastic markets. That means cheaper luxury goods for people who have disposable income but likely not cheaper essentials for those living closer to the edge.
Lower corporate taxes will help keep inflation in check even as the economy booms.
Except this will also balloon the deficit which could possibly lead to greater inflation.
Lower corporate taxes will boost business investment, creating a larger tax base in the future.
It's been said many times before. Corporations are already sitting on record amounts of cash. This is just bogus.
Lower corporate taxes will reduce shifting of profits overseas.
True, but the reason profits are being held overseas right now is that 1) corporations are already sitting on record amounts of cash already, and 2) this allows them to simply sit on the foreign profits patiently waiting for a repatriation event companies know the Republicans will eventually grant them. If they needed it they could always bring it back at current rates, which again shows that they don't need it at the moment.
Lower corporate taxes will decrease the tax avoidance that companies use thru legal loopholes
So just close the loopholes instead?
Lower corporate taxes will decrease time and money spent avoiding taxes.
Why would this be true? Effort to minimize taxes is independent of the tax rate when you're taking about tax filings at the corporate level.
Lower corporate taxes will help small companies compete with big companies that hire teams of lawyers to exploit loopholes to reduce their tax bill, small companies can't afford the lawyers needed.
No, closing loopholes will.
Lower corporate taxes will increase employee wages.
No, corporations are sitting on record amounts of cash. They could afford to give out higher salaries right now, yet they don't. Unskilled labor is over-supplied and is wage-inelastic.
Lower corporate taxes will increase stockholder dividends
Oh yes, yes they will.
Lower corporate taxes will increase foreign investment in the US
Possibly. Are our corporations hurting for foreign investments enough to justify such a squeeze on the middle class? Seems like they're sitting on record amounts of cash, not investing it.
Am I positive all these will happen? There will be several that happen, some will take time to develop,
and many will add their small part to the economic competitiveness and economic growth we want.
Thanks for asking.
I just don't see how the supposed benefits outweigh the squeeze this puts on the lower and middle classes, not to mention the impending hit to the deficit/debt.
You are confused on how corporations decide to invest money. How much money they have is obviously important, but not the driving factor. If a firm has an investment that it expects to return 25%, if they have no money, they'll try to go borrow money and still make the investment. If firm has $100B in cash, they're not going to invest $100k on something that isn't expected to meet their minimum target return. Right now, some firms have a lot of money. They don't have anything they want to invest in. Sending the money to the shareholders would result in a haircut for most of the shareholders. So the option value of sitting on the money is the best use for it. If you cut the corporate tax rate in half, that's going to make a lot of previously questionable investments suddenly look good. Doesn't matter that they already had the money available before the tax cut. What matters is that the pre-tax return they need to meet for an investment to be attractive just got a lot lower.
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Now following his election so not sure what I can add. The issue is, those cards have been pulled so many times that they have lost their redeeming value... Every candidate has been called those things, generally without strong evidence, which has made the accusation a moot point....
Not saying you are wrong, just highlighting an issue.
The accusations of making passes at young girls not being bad enough I don't think are the issue. No matter the accusation you can always find a large portion of either base that can be convinced that maybe its just a smear. It seems like the swing voters who actually don't just vote for their team are simply forced to decide between policies they hate and a person who seems to be a know pervert of the worst kind...
Its easy to take the moral high ground except when it involves voting for someone who doesn't share your political views. I personally think Roy More's politics have a great deal of other flaws even from a conservative benchmark. But we are in an age of numerous single issue voters.
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Stock options are taxed as regular income.
My mistake. I was confusing different taxation for gains from stocks with being granted stock options.
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AP declares Jones the winner
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AP declares Jones the winner
Blink. Blink. Pinch.
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I haven't felt this good in a long time. There is hope.
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Wait, you mean republicans in Alabama didn't elect a pedophile to congress?
This is the low bar that counts as victory, in these times.
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Wait, you mean republicans in Alabama didn't elect a pedophile to congress?
This is the low bar that counts as victory, in these times.
Moore carried 91% of the vote among registered Republicans. Maybe some decent ones stayed home.
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Moore only lost because black people voted. 96% of blacks voted against him; 68% of whites voted for him. Thank you black people. https://www.washingtonpost.com/graphics/2017/politics/alabama-exit-polls/?utm_term=.334dbeed66c8
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I meant to return to this and forgot, thanks for bring it back up.
You lay the blame squarely on Obama, but I'm not clear on whether the fix was attainable through agency rule-making or if it required legislative action. Do you have a source that clarifies this?
Yes. The President has full situational authority over the IRS when nessecary, and the glitch was created (and intentionally not closed) by an IRS ruling: https://www.gpo.gov/fdsys/pkg/FR-2013-02-01/pdf/2013-02136.pdf (https://www.gpo.gov/fdsys/pkg/FR-2013-02-01/pdf/2013-02136.pdf) (second page, middle column § 1.36B–2 Eligibility for premium tax credit)
As such, it was possible for intervention to occur, and as the chief executive of the IRS is a presidential nomination, there is precedence for at least some collaboration. Regarding whether he knew or not initially, it became a VERY big deal after implementation and could have been corrected.
Health Affairs explains that this was not an accident or oversight – it was carefully considered and the final regulation was delayed while the Government Accountability Office and the IRS analyzed the impact of the decision. There were concerns that employers would increase the contributions required to enroll family members, which would push more people off employer plans and into the exchanges, driving up the total cost of subsidies. Ultimately, those concerns prevailed and the “family glitch” was born.
Source: https://www.healthinsurance.org/obamacare/no-family-left-behind-by-obamacare/
That sucks really hard, and absolutely should've been solved.
It's also one of the (many) frustrating aspects of our employer-focused health insurance system. We give employers/business way too much clout in making healthcare decisions for people. Winning the employer lottery could mean the difference between timely access to high quality care and waiting too long because it's expensive.
Follow up question for you personally: is this the main reason for your stance on ACA, or are you opposed to the law more generally as well?
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Moore only lost because black people voted. 96% of blacks voted against him; 68% of whites voted for him. Thank you black people. https://www.washingtonpost.com/graphics/2017/politics/alabama-exit-polls/?utm_term=.334dbeed66c8
More specifically, black women. Overwhelmingly so. Not hard to see why when you consider Moore's words and actions.
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I meant to return to this and forgot, thanks for bring it back up.
You lay the blame squarely on Obama, but I'm not clear on whether the fix was attainable through agency rule-making or if it required legislative action. Do you have a source that clarifies this?
Yes. The President has full situational authority over the IRS when nessecary, and the glitch was created (and intentionally not closed) by an IRS ruling: https://www.gpo.gov/fdsys/pkg/FR-2013-02-01/pdf/2013-02136.pdf (https://www.gpo.gov/fdsys/pkg/FR-2013-02-01/pdf/2013-02136.pdf) (second page, middle column § 1.36B–2 Eligibility for premium tax credit)
As such, it was possible for intervention to occur, and as the chief executive of the IRS is a presidential nomination, there is precedence for at least some collaboration. Regarding whether he knew or not initially, it became a VERY big deal after implementation and could have been corrected.
Health Affairs explains that this was not an accident or oversight – it was carefully considered and the final regulation was delayed while the Government Accountability Office and the IRS analyzed the impact of the decision. There were concerns that employers would increase the contributions required to enroll family members, which would push more people off employer plans and into the exchanges, driving up the total cost of subsidies. Ultimately, those concerns prevailed and the “family glitch” was born.
Source: https://www.healthinsurance.org/obamacare/no-family-left-behind-by-obamacare/
That sucks really hard, and absolutely should've been solved.
It's also one of the (many) frustrating aspects of our employer-focused health insurance system. We give employers/business way too much clout in making healthcare decisions for people. Winning the employer lottery could mean the difference between timely access to high quality care and waiting too long because it's expensive.
Follow up question for you personally: is this the main reason for your stance on ACA, or are you opposed to the law more generally as well?
Its one of the primary factors.
Another is the individual mandate.
https://www.theatlantic.com/politics/archive/2012/06/how-obama-broke-his-promise-on-individual-mandates/259183/ (https://www.theatlantic.com/politics/archive/2012/06/how-obama-broke-his-promise-on-individual-mandates/259183/)
http://www.politifact.com/truth-o-meter/statements/2009/jul/20/barack-obama/obama-flip-flops-requiring-people-buy-health-care/ (http://www.politifact.com/truth-o-meter/statements/2009/jul/20/barack-obama/obama-flip-flops-requiring-people-buy-health-care/)
https://www.youtube.com/watch?v=EoSnqofelsQ (https://www.youtube.com/watch?v=EoSnqofelsQ)
“If a mandate was a solution, we could try that to solve homelessness by mandating everybody buy a house. The reason they don’t have a house is that they don’t have the money.”
-Barack Obama 2008
Finally, the primary issue I have with ACA is that it did nothing to actually reduce inflated healthcare costs, and didn't just stick my generation with the bill for the boomers, but stuck us with a bill that was drastically inflated!
Also, If you are going to mandate that everyone have health insurance... Wouldn't that make health insurance a utility? Shouldn't we be setting profit caps and transparent financing requirements on an industry that will become a 'forced product'?
It had several problems and, in my opinion, was a method of putting our (then) current system on steroids instead of actually creating a system that works- IE pulling employers out of the equation, setting requirements for open billing, requiring insurance companies to actually pay a significant portion of what they are billed (or all of it), etc. Not taking a shitty patchwork system and applying it 'universally'.
Thoughts?
I know this is a bit of a tangent, start a new thread or find a mothballed one and we can jump over there to discuss if anyone likes.
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Also, If you are going to mandate that everyone have health insurance... Wouldn't that make health insurance a utility? Shouldn't we be setting profit caps and transparent financing requirements on an industry that will become a 'forced product'?
They did set profit caps as part of the ACA. 80% of premium dollars must go to actual medical expenses, only the remaining 20% is allowable for marketing, administration and profit.
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Back on topic, it appears that the Republicans have reached an internal deal on reconciliation and will be moving to a vote.
https://www.nytimes.com/2017/12/13/us/politics/tax-bill-republicans-deal.html
It will be interesting to see how the details and horse trading that went on.
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No one could think Obamacare is bullshit because to do so means you hate poor people… Despite the fact that Obamacare increased the taxes on the lower middle class 50-fold (if you factor in insurance premiums as a ‘tax’ as it was defended in SCOTUS).
Costs were increased on the middle class (and upper class) via Obamacare . . . and they were increased in order to pay for poor people having health care. You might not hate poor people . . . but it sounds like you're willing to let them go uninsured to save a few bucks from people who need the money less. Is that correct, or a misreading of your position?
My position onObamacare is largely summed up based on the Family Glitch and Obama's blatant refusal to fix it.
And yes, It has been stated that I hate poor people for hating Obamacare, I would have to find the post.
1. Gutting of ACA and how it effects your FIRE plans...
I fall into the "Family Glitch" that Obama blatantly refused to fix even though he had the ability, so F#%$ ACA and Obamacare. My premiums rose 382% across three years and I wasn't eligble for subsidies. Burn ACA to the ground and lets build something completely from scratch (I know thats a pipe dream). (FYI, My family and I are currently Cash Payments for medical without insurance. I paid over 60,000$ in the last 5 years in insurance premiums but only used 28,000$ worth of benefits, including a (1) car wreck, (2) MRI of DW's lower back when we might have found a tumor, (3) couple of stomach X-rays (because kids, thats why), and (4) a broken collarbone. Had I made cash payments, I would have been at least 25,000$ ahead.)
If you don't know about the family glitch, it really is something that you should understand if you support ACA: https://www.centerforhealthjournalism.org/2016/04/27/family-trapped-aca-glaring-family-glitch-life-gets-harder (https://www.centerforhealthjournalism.org/2016/04/27/family-trapped-aca-glaring-family-glitch-life-gets-harder)
Exactly how was President Obama suppose to change this law when it is Congress that writes the laws? Did I somehow miss that the GOP controlled congress sent President Obama a bill that fixed the family glitch and he refused to sign it? Because he is required to follow and enforce the laws passed by Congress so no, your IRS statement is false.
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...
See this post.
I meant to return to this and forgot, thanks for bring it back up.
You lay the blame squarely on Obama, but I'm not clear on whether the fix was attainable through agency rule-making or if it required legislative action. Do you have a source that clarifies this?
Yes. The President has full situational authority over the IRS when nessecary, and the glitch was created (and intentionally not closed) by an IRS ruling: https://www.gpo.gov/fdsys/pkg/FR-2013-02-01/pdf/2013-02136.pdf (https://www.gpo.gov/fdsys/pkg/FR-2013-02-01/pdf/2013-02136.pdf) (second page, middle column § 1.36B–2 Eligibility for premium tax credit)
As such, it was possible for intervention to occur, and as the chief executive of the IRS is a presidential nomination, there is precedence for at least some collaboration. Regarding whether he knew or not initially, it became a VERY big deal after implementation and could have been corrected.
Health Affairs explains that this was not an accident or oversight – it was carefully considered and the final regulation was delayed while the Government Accountability Office and the IRS analyzed the impact of the decision. There were concerns that employers would increase the contributions required to enroll family members, which would push more people off employer plans and into the exchanges, driving up the total cost of subsidies. Ultimately, those concerns prevailed and the “family glitch” was born.
Source: https://www.healthinsurance.org/obamacare/no-family-left-behind-by-obamacare/
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Supposedly they are revealing the conference version today.
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Moore only lost because black people voted. 96% of blacks voted against him; 68% of whites voted for him. Thank you black people. https://www.washingtonpost.com/graphics/2017/politics/alabama-exit-polls/?utm_term=.334dbeed66c8
I'm guessing it was probably higher amongst gay people given that he wanted to throw us all in prison. You're welcome...
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Supposedly they are revealing the conference version today.
They said they would reveal it to GOP reps; no news on when they might reveal it to the voting public.
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Anything revealed to Representatives is as good as public. Congress leaks.
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Wait, you mean republicans in Alabama didn't elect a pedophile to congress?
This is the low bar that counts as victory, in these times.
Moore carried 91% of the vote among registered Republicans. Maybe some decent ones stayed home.
Not all democrats are using the ACA, I guess a few decent ones don't want to have most of there healthcare bill paid out of the pocket of hardworking taxpayers.
At least some will work for what they want. ;-/
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Can someone help me understand the 100%+ marginal rate on high-earning service passthroughs?
If you can see the WSJ, here:
https://www.wsj.com/articles/the-taxman-cometh-senate-bills-marginal-rates-could-top-100-for-some-1512942118
Like where does this kick in for a single person?
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Moore only lost because black people voted. 96% of blacks voted against him; 68% of whites voted for him. Thank you black people. https://www.washingtonpost.com/graphics/2017/politics/alabama-exit-polls/?utm_term=.334dbeed66c8
I'm guessing it was probably higher amongst gay people given that he wanted to throw us all in prison. You're welcome...
Belated thanks from me.
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Can someone help me understand the 100%+ marginal rate on high-earning service passthroughs?
If you can see the WSJ, here:
https://www.wsj.com/articles/the-taxman-cometh-senate-bills-marginal-rates-could-top-100-for-some-1512942118
Like where does this kick in for a single person?
With them reconvening to make changes and us not knowing those details yet I think it'd be worked out, but not sure.
FWIW that seemed to only be the case for high SALT locations as well from what I could read.
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Can someone help me understand the 100%+ marginal rate on high-earning service passthroughs?
If you can see the WSJ, here:
https://www.wsj.com/articles/the-taxman-cometh-senate-bills-marginal-rates-could-top-100-for-some-1512942118
Like where does this kick in for a single person?
Looks like $250K of specified-service pass-through business income for an individual.
The issue is the way the phase-out works. Senate plan is acheiving the "lower taxes on small businesses" goal by allowing a 20% (17.4%? I've seen a bunch of different numbers for this) deduction on your pass-through's income. For the "specified services" businesses, this deduction phases out over only a 50K range. So say your business income is $250K - you're getting a $50,000 deduction, and you're in the 24% bracket. I don't have the full text to work from, but the basic idea is this: your next dollar, the phaseout starts - you're paying tax not only on that $1, but on another $1.00 ($50K / $50K) where the deduction is phasing out. so you earned 1 more dollar, but you're paying tax on 24% of $2 = $0.48. 48% marginal rate is quite high Plus state, FICA, etc. You get a very high total tax rate on that $1.
The numbers get really galling for MFJ, where the phase out comes in at $500K and goes over $100K. I get 70% marginal federal income taxes alone by the method described above. Apparently the formula for the phase-out is somewhat convoluted, so the exact numbers aren't quite what I've shown here, but the idea is in this certain income range, the federal income tax is computed on a much larger number than you might think. Combined with state, local, and FICA and what-not, the marginal rate can be more than 100%, which is a problem - making $600K should net you more than $550K, but it won't necessarily.
Also note - this is not unique to the new tax plan. With current law, you can get shockingly high marginal tax rates even at quite low incomes. An example is the saver's credit - if you earn $1 more than the top of the 50% bracket for that particular credit, you're paying a whole lot more tax than if you're under the limit.
That being said, who knows what, if anything, they're actually going to pass. This is a well publicized issue, so maybe it will have been fixed.
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@TexasRunner I have sympathies for some of the views you expressed.
Obamacare is a tax.
The safety net shouldn't create a dependency.
Taxes should be low (but a flat tax is a terrible idea).
Environmental regulations are important.
UBI is a pipe dream.
I have some doubts about affirmative action.
Voter ID laws aren't a ditch worth dying in, a view for which I've been called a racist both online and offline.
But none of this excuses the absolute garbage that the GOP of the last decade wraps what remains of their conservative views in order to get the votes of the batshit insane. Sol's view is pretty fucking on point there. The GOP as it currently stands is the party of idiots, and those who think the ends justifies the means, even if it means waging war on common sense.
Knock off the religious bullshit, stop giving a platform to conspiracy theorists of all stripes, get your house in order, and you may have a shot at luring back rational people. Until then, enjoy the company you have.
I think if government was working well all government funded programs would do that following:
1. Have clear measurable results they end to achieve
2. Establish a time limit for the program over which goals or milestones should be met.
That way failed programs just expire and don't create a drag even when they never delivered on there intended goals.
I am all for government programs if they can prove they meet expectations and provide their intend effect. I think most people would like to see a few presidents stop adding new stuff and start doing a fair evaluation and cleanup of existing programs.
The Republican approach tends to be a jack hammer to anything that isn't defense or that their corporate buddies have been bitching about. As opposed to doing a fair evaluation of each programs usefulness versus cost.
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Is there a thread to discuss how mustachians should adjust their plans on the tax plan that will pass? I would like to focus on how to optimize my finances on the actual plan that is going to pass rather than discuss the politics behind it. I think this thread has turned into more of a political discussion and it's hard to find the optimizing techniques. I think it started out that way, but now it is not providing this information.
I'm not complaining, just trying to find the relevant information. Thanks.
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Is there a thread to discuss how mustachians should adjust their plans on the tax plan that will pass? I would like to focus on how to optimize my finances on the actual plan that is going to pass rather than discuss the politics behind it. I think this thread has turned into more of a political discussion and it's hard to find the optimizing techniques. I think it started out that way, but now it is not providing this information.
I'm not complaining, just trying to find the relevant information. Thanks.
We haven't even seen the new plan yet, unless something happens while I was sewing just now.
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Is there a thread to discuss how mustachians should adjust their plans on the tax plan that will pass? I would like to focus on how to optimize my finances on the actual plan that is going to pass rather than discuss the politics behind it. I think this thread has turned into more of a political discussion and it's hard to find the optimizing techniques. I think it started out that way, but now it is not providing this information.
I'm not complaining, just trying to find the relevant information. Thanks.
We haven't even seen the new plan yet, unless something happens while I was sewing just now.
True. I thought I read that the House and Senate reconciled their differences, but nothing has been signed yet. OK, I guess I will wait for it to pass to try and figure out what to do.
I already started my DAF (thanks to this thread) to maximize itemized deductions this year. I guess for next year (newly FIREd), I'd like to know the new tax brackets and if the 0% capital gains tax remains in the lowest tax bracket.
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Is there a thread to discuss how mustachians should adjust their plans on the tax plan that will pass? I would like to focus on how to optimize my finances on the actual plan that is going to pass rather than discuss the politics behind it. I think this thread has turned into more of a political discussion and it's hard to find the optimizing techniques. I think it started out that way, but now it is not providing this information.
I'm not complaining, just trying to find the relevant information. Thanks.
We haven't even seen the new plan yet, unless something happens while I was sewing just now.
True. I thought I read that the House and Senate reconciled their differences, but nothing has been signed yet. OK, I guess I will wait for it to pass to try and figure out what to do.
I already started my DAF (thanks to this thread) to maximize itemized deductions this year. I guess for next year (newly FIREd), I'd like to know the new tax brackets and if the 0% capital gains tax remains in the lowest tax bracket.
There is some justification for the Bogleheads' policy not to spend (waste?) time speculating about possible legislation: Political comments and proposed tax plan remain off-topic - Bogleheads.org (https://www.bogleheads.org/forum/viewtopic.php?f=3&t=203640)
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...
See this post.
I meant to return to this and forgot, thanks for bring it back up.
You lay the blame squarely on Obama, but I'm not clear on whether the fix was attainable through agency rule-making or if it required legislative action. Do you have a source that clarifies this?
Yes. The President has full situational authority over the IRS when nessecary, and the glitch was created (and intentionally not closed) by an IRS ruling: https://www.gpo.gov/fdsys/pkg/FR-2013-02-01/pdf/2013-02136.pdf (https://www.gpo.gov/fdsys/pkg/FR-2013-02-01/pdf/2013-02136.pdf) (second page, middle column § 1.36B–2 Eligibility for premium tax credit)
As such, it was possible for intervention to occur, and as the chief executive of the IRS is a presidential nomination, there is precedence for at least some collaboration. Regarding whether he knew or not initially, it became a VERY big deal after implementation and could have been corrected.
Health Affairs explains that this was not an accident or oversight – it was carefully considered and the final regulation was delayed while the Government Accountability Office and the IRS analyzed the impact of the decision. There were concerns that employers would increase the contributions required to enroll family members, which would push more people off employer plans and into the exchanges, driving up the total cost of subsidies. Ultimately, those concerns prevailed and the “family glitch” was born.
Source: https://www.healthinsurance.org/obamacare/no-family-left-behind-by-obamacare/
I read that post, nothing in it at ALL says that the president may change laws to do what he wants instead of enforcing the laws written by Congress. Even your own link disagrees with you. Senator Frankin did propose a fix according to that link, the GOP controlled congress refused to pass it.
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How is adding 1 Trillion to the national debt over the next 10 years a good thing?
How is widening the income inequality a good thing?
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How is widening the income inequality a good thing?
It's good for you if you're one of the ultra-wealthy donors who funds the republican party.
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How is adding 1 Trillion to the national debt over the next 10 years a good thing?
It's better than the 11 Trillion added over the past 10 years (https://www.thebalance.com/national-debt-by-year-compared-to-gdp-and-major-events-3306287)?
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How is adding 1 Trillion to the national debt over the next 10 years a good thing?
It's better than the 11 Trillion added over the past 10 years (https://www.thebalance.com/national-debt-by-year-compared-to-gdp-and-major-events-3306287)?
C'mon MDM, that's not a fair comparison. The last decade was exceptionally bad times that required massive spending bills. This isn't the case anymore.
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2017 Military spending in billions:
1 United States 597.5
2 China 145.8
3 Saudi Arabia 81.9
4 Russia 65.6
5 United Kingdom 56.2
Seems like a nice place to trim some fat in the budget.
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How is adding 1 Trillion to the national debt over the next 10 years a good thing?
It's better than the 11 Trillion added over the past 10 years (https://www.thebalance.com/national-debt-by-year-compared-to-gdp-and-major-events-3306287)?
C'mon MDM, that's not a fair comparison. The last decade was exceptionally bad times that required massive spending bills. This isn't the case anymore.
Just observing that $0.1T/yr, in and of itself, is a better rate than $1.1T/yr.
It's also clear that, to both congressional Democrats and Republicans, the horror of the national debt is inversely proportional to the number of seats each party holds.
There is much about many proposed/rumored parts of the bill I dislike. But I'm not losing any sleep over this magnitude of debt growth rate. And "increase the corporate rate tax a little (from 20%) in order to restore some egregious changes (e.g., losing the medical deduction)" seems a good idea. Wouldn't surprise me if that was the plan all along: propose something beyond the Pale, then "reluctantly" agree to something "more reasonable."
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How is adding 1 Trillion to the national debt over the next 10 years a good thing?
It's better than the 11 Trillion added over the past 10 years (https://www.thebalance.com/national-debt-by-year-compared-to-gdp-and-major-events-3306287)?
Just observing that $0.1T/yr, in and of itself, is a better rate than $1.1T/yr.
MDM, I think there is some confusion. They aren't adding a total of 1.4 trillion over the next 10 years. They are adding 1.4 Trillion MORE on top of the roughly 10 trillion that was already projected for the next 10 years. This is also during a growing economy. If we see another recession, or start another war, then add a few more trillion on top of that. They are making a bad situation even worse.
I'm all for simplifying the tax code. However, this doesn't simplify, it just makes the deficit worse.
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How is adding 1 Trillion to the national debt over the next 10 years a good thing?
It's better than the 11 Trillion added over the past 10 years (https://www.thebalance.com/national-debt-by-year-compared-to-gdp-and-major-events-3306287)?
C'mon MDM, that's not a fair comparison. The last decade was exceptionally bad times that required massive spending bills. This isn't the case anymore.
Just observing that $0.1T/yr, in and of itself, is a better rate than $1.1T/yr.
You seem to be missing that one is added to the other, not substituting.
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2017 Military spending in billions:
1 United States 597.5
2 China 145.8
3 Saudi Arabia 81.9
4 Russia 65.6
5 United Kingdom 56.2
Seems like a nice place to trim some fat in the budget.
Ironically, the one place where both Democrats and Republicans seem to agree on spending more is for defense.
-
2017 Military spending in billions:
1 United States 597.5
2 China 145.8
3 Saudi Arabia 81.9
4 Russia 65.6
5 United Kingdom 56.2
Seems like a nice place to trim some fat in the budget.
Ironically, the one place where both Democrats and Republicans seem to agree on spending more is for defense.
Heh? Obama wanted to cut the military substantially. That was the democrats' side of sequestration.
-
2017 Military spending in billions:
1 United States 597.5
2 China 145.8
3 Saudi Arabia 81.9
4 Russia 65.6
5 United Kingdom 56.2
Seems like a nice place to trim some fat in the budget.
Ironically, the one place where both Democrats and Republicans seem to agree on spending more is for defense.
Heh? Obama wanted to cut the military substantially. That was the democrats' side of sequestration.
Not really. The sequestration only forces us to overspend on domestic programs at the same rate we overspend on defense. Dems would gladly kill sequestration if there was an agreement that future spending growth would be equally split between domestic and defense. "We'll spend ten billion more on bombs if you agree to let us spend ten billion more on healthcare." GOP response: "no way you evil crooks; we'll arm to kill people, but you're not going to help sick people if we can help it"
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2017 Military spending in billions:
1 United States 597.5
2 China 145.8
3 Saudi Arabia 81.9
4 Russia 65.6
5 United Kingdom 56.2
Seems like a nice place to trim some fat in the budget.
Ironically, the one place where both Democrats and Republicans seem to agree on spending more is for defense.
I think many Democrats accept they can’t get elected if they’re soft on terrorism, or globalists, or whatever label successfully scares the electorate.
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MDM, I think there is some confusion. They aren't adding a total of 1.4 trillion over the next 10 years. They are adding 1.4 Trillion MORE on top of the roughly 10 trillion that was already projected for the next 10 years.
You seem to be missing that one is added to the other, not substituting.
Yes, this is extra but it's "only" 10% extra.
Why get upset about the extra 10% if not upset about the base increase? Of course, if you are saying "a pox on both their houses" then I agree 100%.
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MDM, I think there is some confusion. They aren't adding a total of 1.4 trillion over the next 10 years. They are adding 1.4 Trillion MORE on top of the roughly 10 trillion that was already projected for the next 10 years.
You seem to be missing that one is added to the other, not substituting.
Yes, this is extra but it's "only" 10% extra.
Why get upset about the extra 10% if not upset about the base increase? Of course, if you are saying "a pox on both their houses" then I agree 100%.
Because, as others have mentioned, it's not going to valuable programs but rather the ultra wealthy.
It's like you go to a restaurant and get a $10 meal. Taxes are 10%. Sure, fine. But this restaurant is also adding a 1% fee that they donate to Warren Buffet. No thanks.
I've also seen this number variously reported as adding $1 trillion to the deficit and to the debt. Big difference there, and I suspect lazy reporting, but I wonder what the CBC report actually says. Anyone read it?
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MDM, I think there is some confusion. They aren't adding a total of 1.4 trillion over the next 10 years. They are adding 1.4 Trillion MORE on top of the roughly 10 trillion that was already projected for the next 10 years.
You seem to be missing that one is added to the other, not substituting.
Yes, this is extra but it's "only" 10% extra.
Why get upset about the extra 10% if not upset about the base increase? Of course, if you are saying "a pox on both their houses" then I agree 100%.
Because, as others have mentioned, it's not going to valuable programs but rather the ultra wealthy.
It's like you go to a restaurant and get a $10 meal. Taxes are 10%. Sure, fine. But this restaurant is also adding a 1% fee that they donate to Warren Buffet. No thanks.
No problem with picking on specific trade-offs that have or haven't been made. E.g., I'll believe either party is at least partway serious when said party eliminates the carried interest loophole. May or may not be a relatively big issue dollar-wise (a billion here, a billion there, etc.) but until it's gone I'll continue to believe both parties kowtow to the ultra-wealthy. I suppose we could argue whether Democrats stop at the top .02% while Republicans favor the .001% but why bother?
Wealth inequality aside, my point on the debt is that Republicans scream about how terrible it is - until they are in power - and Democrats behave likewise. And in that context, it's not worth angst about a 10% change in something unless one is also willing to deal with the base 90% problem.
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I've also seen this number variously reported as adding $1 trillion to the deficit and to the debt. Big difference there, and I suspect lazy reporting, but I wonder what the CBC report actually says. Anyone read it?
It's debt over the course of 10 years. So average increase to the annual deficit over that time period would be a tenth of that, but average is also incredibly misleading because of the timed phase-ins and phase-outs. I haven't seen any estimates on what it would do to the deficit after that 10-year period.
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...
See this post.
I meant to return to this and forgot, thanks for bring it back up.
You lay the blame squarely on Obama, but I'm not clear on whether the fix was attainable through agency rule-making or if it required legislative action. Do you have a source that clarifies this?
Yes. The President has full situational authority over the IRS when nessecary, and the glitch was created (and intentionally not closed) by an IRS ruling: https://www.gpo.gov/fdsys/pkg/FR-2013-02-01/pdf/2013-02136.pdf (https://www.gpo.gov/fdsys/pkg/FR-2013-02-01/pdf/2013-02136.pdf) (second page, middle column § 1.36B–2 Eligibility for premium tax credit)
As such, it was possible for intervention to occur, and as the chief executive of the IRS is a presidential nomination, there is precedence for at least some collaboration. Regarding whether he knew or not initially, it became a VERY big deal after implementation and could have been corrected.
Health Affairs explains that this was not an accident or oversight – it was carefully considered and the final regulation was delayed while the Government Accountability Office and the IRS analyzed the impact of the decision. There were concerns that employers would increase the contributions required to enroll family members, which would push more people off employer plans and into the exchanges, driving up the total cost of subsidies. Ultimately, those concerns prevailed and the “family glitch” was born.
Source: https://www.healthinsurance.org/obamacare/no-family-left-behind-by-obamacare/
I read that post, nothing in it at ALL says that the president may change laws to do what he wants instead of enforcing the laws written by Congress. Even your own link disagrees with you. Senator Frankin did propose a fix according to that link, the GOP controlled congress refused to pass it.
My interpretation was that it was an IRS ruling that created the problem in the first place, thus within the purview of the executive branch to fix. Obviously, a legislative fix was always an option as well, but not necessarily the only option.
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Finally, the primary issue I have with ACA is that it did nothing to actually reduce inflated healthcare costs, and didn't just stick my generation with the bill for the boomers, but stuck us with a bill that was drastically inflated!
Also, If you are going to mandate that everyone have health insurance... Wouldn't that make health insurance a utility? Shouldn't we be setting profit caps and transparent financing requirements on an industry that will become a 'forced product'?
It had several problems and, in my opinion, was a method of putting our (then) current system on steroids instead of actually creating a system that works- IE pulling employers out of the equation, setting requirements for open billing, requiring insurance companies to actually pay a significant portion of what they are billed (or all of it), etc. Not taking a shitty patchwork system and applying it 'universally'.
Thoughts?
I know this is a bit of a tangent, start a new thread or find a mothballed one and we can jump over there to discuss if anyone likes.
I think those are all valid criticisms that I more or less agree with, but I don't necessarily come to the same conclusion that the law is worse than what we had before. Yes, failing to address the supply side was a big problem with ACA.
I also think there are a handful of employers that are bad actors, and cause avoidable problems within an already deeply flawed system. Insurance companies are also the devil, and will do anything they can to get out of paying claims, regardless of whether or not they're legit, and regardless of whether or not it makes sense from a long-term perspective.
These are all things that make me want to strangle somebody.
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How is adding 1 Trillion to the national debt over the next 10 years a good thing?
It's better than the 11 Trillion added over the past 10 years (https://www.thebalance.com/national-debt-by-year-compared-to-gdp-and-major-events-3306287)?
C'mon MDM, that's not a fair comparison. The last decade was exceptionally bad times that required massive spending bills. This isn't the case anymore.
It was Bush's fault!
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...
See this post.
I meant to return to this and forgot, thanks for bring it back up.
You lay the blame squarely on Obama, but I'm not clear on whether the fix was attainable through agency rule-making or if it required legislative action. Do you have a source that clarifies this?
Yes. The President has full situational authority over the IRS when nessecary, and the glitch was created (and intentionally not closed) by an IRS ruling: https://www.gpo.gov/fdsys/pkg/FR-2013-02-01/pdf/2013-02136.pdf (https://www.gpo.gov/fdsys/pkg/FR-2013-02-01/pdf/2013-02136.pdf) (second page, middle column § 1.36B–2 Eligibility for premium tax credit)
As such, it was possible for intervention to occur, and as the chief executive of the IRS is a presidential nomination, there is precedence for at least some collaboration. Regarding whether he knew or not initially, it became a VERY big deal after implementation and could have been corrected.
Health Affairs explains that this was not an accident or oversight – it was carefully considered and the final regulation was delayed while the Government Accountability Office and the IRS analyzed the impact of the decision. There were concerns that employers would increase the contributions required to enroll family members, which would push more people off employer plans and into the exchanges, driving up the total cost of subsidies. Ultimately, those concerns prevailed and the “family glitch” was born.
Source: https://www.healthinsurance.org/obamacare/no-family-left-behind-by-obamacare/
I read that post, nothing in it at ALL says that the president may change laws to do what he wants instead of enforcing the laws written by Congress. Even your own link disagrees with you. Senator Frankin did propose a fix according to that link, the GOP controlled congress refused to pass it.
My interpretation was that it was an IRS ruling that created the problem in the first place, thus within the purview of the executive branch to fix. Obviously, a legislative fix was always an option as well, but not necessarily the only option.
No, the ruling was that this was clearly the intention of the law and therefore it was to be followed as it was the law. There was no confusion in how it was written. There was no other option other than a legislative fix. If there was, don't you think the GOP would have used that against Obama?
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My interpretation was that it was an IRS ruling that created the problem in the first place, thus within the purview of the executive branch to fix. Obviously, a legislative fix was always an option as well, but not necessarily the only option.
No, the ruling was that this was clearly the intention of the law and therefore it was to be followed as it was the law. There was no confusion in how it was written. There was no other option other than a legislative fix. If there was, don't you think the GOP would have used that against Obama?
50/50 split the difference. The IRS ruling was that fixing the gap through IRS regulatory decision making, while possible, would have huge unintended financial implications to the federal budget and the stability of the program. They decided to not act unilaterally and let congress fix it, which of course the Republican-controlled congress refused to do.
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The GOP is the living definition of hypocrisy.
https://twitter.com/twitter/statuses/940978958824329222
^Video of Republicans prematurely freaking out over possible Obamacare being passed before Scott Brown got seated. Height of hypocrisy?
https://twitter.com/twitter/statuses/941084731864645634
^Republicans refusing to answer questions on the bill.
https://twitter.com/twitter/statuses/941051377417060352
^Another video from Capitol Hill.
John McCain in 2010 after Scott Brown won the special election for Ted Kennedy's MA Senate seat:
(https://pbs.twimg.com/media/DQ7yoaJX0AEyiq7.jpg)
Susan Collins is locking her doors to avoid meeting with constituents on the tax bill.
https://shareblue.com/sen-collins-locks-office-doors-refuses-to-answer-to-constituents-on-secret-gop-tax-scam/
Collins said, "The results of this election also reflect the fact that so many people are appalled at the process by which the [ACA] was negotiated behind closed doors, rammed through the Senate with limited debate and amendments, and riddled with special deals to garner votes"
Susan Collins might be the biggest hypocrite of them all.
The GOP complained about transparency with Obamacare, said the Senate should wait until Scott Brown was seated following a special election in order to "listen to the Massachusetts voters," and delayed seating a Supreme Court nominee for a year in order to get the results of an election some 8 months away.
They know want to ram a tax bill through before Doug Jones can be seated (the exact opposite of what they wanted when Scott Brown won his special election), ignoring the voters of Alabama.
The GOP does not care about Americans or voters. They want to pad the already cushy pockets of their billionaire donors.
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On a lighter note, its seems the GOP has followed through on their suggestion to congressional leaders in states like California that they would take away some of the SALT sting.
House Ways and Means Chairman Kevin Brady, who’s overseeing the House-Senate conference committee of tax negotiators, said Thursday that taxpayers will be able to deduct state income taxes or state sales taxes in addition to property levies -- up to a $10,000 cap.
Most news source report that the $10k cap will now include State Income tax in addition property tax. That to me at least balances out the loss of the deduction to be even handed against states which have high income tax versus states that have high property tax. Though I assume $10k is still fairly paltry in many expensive areas. This change alone will definitely give me a slight net advantage by itemizing. Which is always nice because it opens the door to deduct ancillary things like my wifes business expenses when she goes back to work.
Also the new mortgage deduction cap seems to be settling on $750k. Which should again even out the high cost of living states where jumbo loans are more common.
Overall in California it seems impossible to say how this will impact home prices. On my end purchasing a $500k starter home this month this tax bill will save me almost an extra $250 a month versus the previous tax code with the same scenario. So I am hard pressed to believe this will hurt lower and mid tier home markets for people with kids. Since we will have more cash.
At the high end, people buying million dollar homes, cuts to the brackets and possibly AMT will be of more benefit than the mortgage deduction cuts.
Personally I would suspect most sane people don't buy a home just for a fat tax break. As long as they can afford the same home for their primary residence while netting more cash, prices should stay high. Also with this new scenario peoples ability to pay rent should go up, possibly driving up rental prices since the gap between a renting family and homeowners will narrow.
Ignoring the some of the other debatably good or bad tax changes I am for tax code change that discourages house flipping and focuses the tax breaks back on families trying to buy or rent a permanent residence. Oh also I had heard that the estate tax will no longer vanish and will instead have its cap doubled... Which frankly is far less outrageous.
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On a lighter note, its seems the GOP has followed through on their suggestion to congressional leaders in states like California that they would take away some of the SALT sting.
This whole process is disturbingly reminiscent of what we went through with the GOP healthcare plans. Every iteration gets slightly less bad, but they are each still demonstrably worse than just doing nothing.
And just like with their healthcare bills, they've had decades of angry opposition to the status quo to formulate their alternative plan, and yet are left making stuff up at the last minute because they don't actually have a plan. They hate the way it is, but they don't actually have any idea on how to make it better, so are instead proposing solutions they then have to discard when it becomes clear they are making it worse.
They said they wanted everyone to have great healthcare, yet every single bill they proposed caused millions of people to lose healthcare instead. They said they wanted to give the middle class a tax cut, yet their plan raises taxes on the middle class. They said they wanted to balance the budget, but their plan adds trillions in new debt.
Here's a tip for you, congressional republicans: If you really want to do all of those things, the best thing for you to do right now is to sit on your hands. If you can't deliver on the changes you promised, can you at least please stop voting to do the exact opposite?
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I finally sat down with my spreadsheet and reviewed what we'll owe this year versus what we may owe under the rumored committee plan. We are a high income family with lots of mortgage interest and greater than 10k in state/property taxes. With the assumptions*** listed below, we will owe about $18k less in federal income tax, and pay very slightly more in FICA taxes. This bill is gross, as they've clearly stripped away nearly all of the tax increases that people in my tax bracket were slated to receive under the original House plan and some that still existed under the Senate plan. Please tell me that some of the assumptions below are mistaken and I'll feel a little better.
***
-MFJ tax brackets of 10%, 12%, 22%, 24%, 32% with 32% starting at $320k
-AMT for MFJ starting at $1million
-Grandfathered mortgage interest or non-grandfathered up to $750k (we would get full deduction under both situations)
-$10k state/municipal/property/sales tax deduction limit (this is the sole negative adjustment, taking about $10k additional deductions away from us)
-Charitable deductions untouched
-No adjustments to 409(a) unqualified deferred comp plans that were originally targets
-Long term capital gains and qualified dividend rates untouched
-Net investment income and additional Medicare taxes untouched
-Child credit for $2k/child that doesn't phase out until an AGI of over $1million (this one's got to be a mistake, really?!?! I've got 3 children, so I'm getting $6k lopped off my taxes, WTF?!)
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-Child credit for $2k/child that doesn't phase out until an AGI of over $1million (this one's got to be a mistake, really?!?! I've got 3 children, so I'm getting $6k lopped off my taxes, WTF?!)
Admittedly it's been hard to keep up with this, but I hadn't seen that. Do you have a source?
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Please tell me that some of the assumptions below are mistaken and I'll feel a little better.
-AMT for MFJ starting at $1million
We haven't seen any detail on AMT other than MFJ exemption be increased to $1M. I believe the media has mistakenly equated this to AMT hits people over $1M AGI. If that is the real exemption number, and all other numbers remain constant, a MFJ taxpayer claiming only the standard deduction will NEVER pay AMT.
Running an extreme example, I find that a person with $1M AGI would have to have about $750,000 in deductions disallowed by the AMT in order to incur AMT. Their "regular" taxable income would be $250, 000 but their AMT income would be $1M. After applying remaining (after partial phase out) exemption, they would pay $49076 in regular tax and $1131 in AMT.
At $2M AGI with $1.5M deductions, they are paying $126K regular taxes and $274K AMT. So, the AMT really does return to its original purpose (ensuring that high income taxpayers with extreme deductions still pay a meaningful tax).
-
I finally sat down with my spreadsheet and reviewed what we'll owe this year versus what we may owe under the rumored committee plan. We are a high income family with lots of mortgage interest and greater than 10k in state/property taxes. With the assumptions*** listed below, we will owe about $18k less in federal income tax, and pay very slightly more in FICA taxes. This bill is gross, as they've clearly stripped away nearly all of the tax increases that people in my tax bracket were slated to receive under the original House plan and some that still existed under the Senate plan. Please tell me that some of the assumptions below are mistaken and I'll feel a little better.
***
-MFJ tax brackets of 10%, 12%, 22%, 24%, 32% with 32% starting at $320k
-AMT for MFJ starting at $1million
-Grandfathered mortgage interest or non-grandfathered up to $750k (we would get full deduction under both situations)
-$10k state/municipal/property/sales tax deduction limit (this is the sole negative adjustment, taking about $10k additional deductions away from us)
-Charitable deductions untouched
-No adjustments to 409(a) unqualified deferred comp plans that were originally targets
-Long term capital gains and qualified dividend rates untouched
-Net investment income and additional Medicare taxes untouched
-Child credit for $2k/child that doesn't phase out until an AGI of over $1million (this one's got to be a mistake, really?!?! I've got 3 children, so I'm getting $6k lopped off my taxes, WTF?!)
F**k me, I just looked at last year's tax return. We itemized $35,809 worth of deductions last year, $20,866 of which was SALT. Our mortgage interest will still qualify. And while it looks like we'll drop from the 28% bracket to the 24% bracket, I don't think that's going to make up for the loss of a nearly $11,000 difference in deductions. And this year, our income looks to be $15-$20k more. I got a feeling I'll be cutting a much bigger check to the IRS come April.
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My interpretation was that it was an IRS ruling that created the problem in the first place, thus within the purview of the executive branch to fix. Obviously, a legislative fix was always an option as well, but not necessarily the only option.
No, the ruling was that this was clearly the intention of the law and therefore it was to be followed as it was the law. There was no confusion in how it was written. There was no other option other than a legislative fix. If there was, don't you think the GOP would have used that against Obama?
50/50 split the difference. The IRS ruling was that fixing the gap through IRS regulatory decision making, while possible, would have huge unintended financial implications to the federal budget and the stability of the program. They decided to not act unilaterally and let congress fix it, which of course the Republican-controlled congress refused to do.
No, that is not true. The IRS enforces the tax law, it does not write it. They legally could not "fix" anything that was decided by Congress. How do people not get this?
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You're seeing different stuff than I am:
-MFJ tax brackets of 10%, 12%, 22%, 24%, 32% with 32% starting at $320k
-AMT for MFJ starting at $1million
I think the highest tax bracket is going to be at 37% and change now (not counting the medicare surtax, which I don't think is touched)
-Grandfathered mortgage interest or non-grandfathered up to $750k (we would get full deduction under both situations)
-$10k state/municipal/property/sales tax deduction limit (this is the sole negative adjustment, taking about $10k additional deductions away from us)
-Charitable deductions untouched
-No adjustments to 409(a) unqualified deferred comp plans that were originally targets
-Long term capital gains and qualified dividend rates untouched
-Net investment income and additional Medicare taxes untouched
-Child credit for $2k/child that doesn't phase out until an AGI of over $1million (this one's got to be a mistake, really?!?! I've got 3 children, so I'm getting $6k lopped off my taxes, WTF?!)
The child tax credit I believe is set at the house bill level of $1600. Then there is the $300 tax credit for the taxfiler and spouse. So you'll get a $5400 credit, not $6,000. Seeing as how parents are getting hammered by SS compared to non-parents, that seems pretty reasonable. Probably be better if there was a smaller tax credit for the first two and much bigger tax credits for each child beyond replacement rate.
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-Child credit for $2k/child that doesn't phase out until an AGI of over $1million (this one's got to be a mistake, really?!?! I've got 3 children, so I'm getting $6k lopped off my taxes, WTF?!)
Admittedly it's been hard to keep up with this, but I hadn't seen that. Do you have a source?
Apparently the phaseout limit is $500k, not $1million, which we are still under.
I searched for "child tax" in the amendments section, and only found one amendment by Rubio that was ruled out of order, so I'm assuming the language above is as current as we have. News reports today are saying they may increase the amount that can be refundable, which will be good for low income earners who would otherwise get almost nothing from these CTC changes, but I'm not hearing the final amount or the income ceiling that will be in the final bill.
https://www.congress.gov/bill/115th-congress/house-bill/1/text?format=xml&q=%7B%22search%22%3A%5B%22hr1%22%5D%7D&r=1 (https://www.congress.gov/bill/115th-congress/house-bill/1/text?format=xml&q=%7B%22search%22%3A%5B%22hr1%22%5D%7D&r=1)
SEC. 11022. Increase in and modification of child tax credit.
(a) In general.—Section 24 is amended by adding at the end the following new subsection:
“(h) Special rules for taxable years 2018 through 2025.—
“(1) IN GENERAL.—In the case of a taxable year beginning after December 31, 2017, and before January 1, 2026, this section shall be applied as provided in paragraphs (2), (3), (5), (6), (7), and (8). In the case of taxable year beginning after December 31, 2017 and before January 1, 2025, this section shall be applied as provided in paragraph (4).
“(2) CREDIT AMOUNT.—Subsection (a) shall be applied by substituting ‘$2,000’ for ‘$1,000’.
“(3) LIMITATION.—In lieu of the amount determined under subsection (b)(2), the threshold amount shall be $500,000.
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Please tell me that some of the assumptions below are mistaken and I'll feel a little better.
-AMT for MFJ starting at $1million
We haven't seen any detail on AMT other than MFJ exemption be increased to $1M. I believe the media has mistakenly equated this to AMT hits people over $1M AGI. If that is the real exemption number, and all other numbers remain constant, a MFJ taxpayer claiming only the standard deduction will NEVER pay AMT.
Running an extreme example, I find that a person with $1M AGI would have to have about $750,000 in deductions disallowed by the AMT in order to incur AMT. Their "regular" taxable income would be $250, 000 but their AMT income would be $1M. After applying remaining (after partial phase out) exemption, they would pay $49076 in regular tax and $1131 in AMT.
At $2M AGI with $1.5M deductions, they are paying $126K regular taxes and $274K AMT. So, the AMT really does return to its original purpose (ensuring that high income taxpayers with extreme deductions still pay a meaningful tax).
Yeah, reading the actual document, it appears that the deduction and phaseout levels are just being increased mildly. Then couple that with the other tax breaks, and it severely lessens the AMT tax. I still need to rerun my numbers so see if we would even pay any, but it will be surely less than the $2.5k AMT we will pay this year, and even that would mean a tax break of over $15k for us.
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https://www.washingtonpost.com/business/economy/gop-consider-plan-to-make-individual-tax-cuts-expire-sooner-shrinking-plans-benefits-for-working-class/2017/12/14/9d83b1ac-e0f2-11e7-89e8-edec16379010_story.html?utm_term=.3d962ee3b56a
Congressional Republicans are looking at shortening the duration of tax cuts that their plan would give to families and individuals, a leading lawmaker said Thursday.
That change would free up more revenue for additional changes to their tax overhaul, but it could also heighten complaints that the bill prioritizes cuts for corporations over households.
Oh, cool. Good job, GOP.
http://www.cnn.com/2017/12/14/politics/marco-rubio-tax-vote/index.html
Marco Rubio is a "no" right now.
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Little Marco is just throwing another one of his tantrums. No sane Republican Senator who is ever planning to run for re-election will vote against the final bill.
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50/50 split the difference. The IRS ruling was that fixing the gap through IRS regulatory decision making, while possible, would have huge unintended financial implications to the federal budget and the stability of the program. They decided to not act unilaterally and let congress fix it, which of course the Republican-controlled congress refused to do.
No, that is not true. The IRS enforces the tax law, it does not write it. They legally could not "fix" anything that was decided by Congress. How do people not get this?
I mean you might be right, but not according to this article:
https://www.healthaffairs.org/action/showDoPubSecure?doi=10.1377%2Fhpb20141110.62257&format=full
While the law sets a clear standard for affordable employee coverage and requires employers to allow dependent children to enroll in a family plan, Congress deferred to business interests in limiting an employer's responsibility for providing "affordable" coverage to individual workers. As a result, there is no explicit standard of affordability for family members of an employee offered job-based family coverage. Moreover, the law neglects to clearly spell out how family members should be treated for purposes of eligibility for premium tax credits or the individual mandate.
The IRS initially proposed regulations using the cost of self-only coverage to define "affordability" for the other family members with respect to premium tax credits, primarily referencing the JCT's interpretation in its original analysis of the ACA. After receiving dissenting comments on the proposed rule, the IRS delayed the final regulation as it relates to family members.
During that time the GAO urged the Department of Treasury and the IRS to examine the impact of its proposed rule on eligible family members and determine whether it would be consistent with the ACA to adopt an approach that would consider the cost of family-based coverage. Given that the law set no standard requiring employers to offer affordable coverage to a worker's family or pay a penalty, the potential cost to the federal government emerged as the key determinant in limiting access to premium tax credits for family members.
The primary concern was that employers would raise the employee's share of family coverage, driving even more families to opt for premium tax credits. Ultimately, these concerns overrode other legal interpretations and fairness arguments when the IRS finalized the rule as proposed and actualized the family glitch.
I don't buy into TexasRunner's Obama-hate over it. In fact I think the agencies acted reasonably and it should have been fixed by Congress. But short of another source I stand by my assessment.
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Given that the law set no standard requiring employers to offer affordable coverage to a worker's family or pay a penalty
This I think is the key phrase. They were worried that companies would use it as a loophole to not have to provide coverage.
Company: "Sure we'll provide an affordable heath plan for you, as required by law. It also covers your family, which is not regulated, and happens to cost A BAZILLION DOLLARS."
Employee: "Oh, okay, I guess I'll just go get on the exchange instead and let the federal government subsidize it."
Given the amount of tears and churn from Republican business owners over Obamacare, I have no doubt that some would have done that. The IRS could have adjusted the subsides to cover spouses if there wasn't a reasonable alternative for them at the employer, but they couldn't require the employers to "either provide a low-cost option for families or pay a fine" like the ACA did for individual insurance, and to do one without the other didn't make sense and would have just opened a loophole that let employers opt-out of the whole thing.
@TexasRunner, I don't know if you've ever considered the alternatives they had, but like I said I think the IRS acted reasonably and it should have been fixed by Congress.
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Little Marco is just throwing another one of his tantrums. No sane Republican Senator who is ever planning to run for re-election will vote against the final bill.
Considering both plans had a much higher child tax deduction to offset the removal of the personal exemption I would say he is making a show of something he know wont get cut.
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Considering both plans had a much higher child tax deduction to offset the removal of the personal exemption I would say he is making a show of something he know wont get cut.
Rubio has been advocating for making the proposed child tax credit refundable against your payroll tax, in order to let it actually benefit poor people. Right now, the child tax credit isn't refundable if you don't owe any taxes, and since approximately half of the US population doesn't owe any net taxes they won't get any benefit from the increased child tax credit. So as written now it's a useless tax break for poor Americans, even though the Republicans have been touting it as central part of their plan.
This is a case of Rubio of trying make the GOP tax plan less shitty for poor people. McConnell. was so opposed to the idea that not only did he tell his conference not to support the idea, he forced the amendment to get 60 votes to pass in order to ensure it would fail.
It's kind of funny, really. Rubio was told that increasing the corporate tax rate from 20% to 20.6% in order to help the working poor was blasphemy against Republicanism, and then the next day they increased it from 20% to 21% in order to pay for tax cuts for people making more than $418,400 per year. They literally told him it cost too much if it helped poor people, and then less than 12 hours later they spent even more in order to help the richest people. I have never seen a more clear articulation of Republican principles.
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Considering both plans had a much higher child tax deduction to offset the removal of the personal exemption I would say he is making a show of something he know wont get cut.
Rubio has been advocating for making the proposed child tax credit refundable against your payroll tax, in order to let it actually benefit poor people. Right now, the child tax credit isn't refundable if you don't owe any taxes, and since approximately half of the US population doesn't owe any net taxes they won't get any benefit from the increased child tax credit. So as written now it's a useless tax break for poor Americans, even though the Republicans have been touting it as central part of their plan.
This is a case of Rubio of trying make the GOP tax plan less shitty for poor people. McConnell. was so opposed to the idea that not only did he tell his conference not to support the idea, he forced the amendment to get 60 votes to pass in order to ensure it would fail.
It's kind of funny, really. Rubio was told that increasing the corporate tax rate from 20% to 20.6% in order to help the working poor was blasphemy against Republicanism, and then the next day they increased it from 20% to 21% in order to pay for tax cuts for people making more than $418,400 per year. They literally told him it cost too much if it helped poor people, and then less than 12 hours later they spent even more in order to help the richest people. I have never seen a more clear articulation of Republican principles.
:Sigh: Too bad Rubio has exactly zero fortitude to actually pick any hill, let alone this one, to die on. He's a total squish in every way.
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:Sigh: Too bad Rubio has exactly zero fortitude to actually pick any hill, let alone this one, to die on. He's a total squish in every way.
Not defending Rubio, not a fan, BUT if they need 1 vote and this is his price he might get it.
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Not defending Rubio, not a fan, BUT if they need 1 vote and this is his price he might get it.
They don't need his vote. They can afford to lose two GOP senators and still pass it, with Pence's tie-breaker.
Bob Corker is an assumed no, since he voted against the Senate tax plan last time.
Rubio can vote no and suffer no consequences. It might even help his career.
Mike Lee was siding with Rubio on the child tax credit, but he'll fold hard. He'll never vote against it.
Murkowski was fully bought and paid for by the offer to drill ANWR. She'd vote for it now even if it meant sacrificing her first born.
Collins is still a maybe, looks like, because it includes repealing the individual mandate. She's been wishy washy on it, but I think she'll fall in line with vague promises of future legislation to fund the ACA exchanges.
And even if she doesn't, McConnell only has to decide if he'd rather give Rubio his child tax credit or give Collins her individual mandate. He has options. I see multiple pathways to this shitshow becoming a law.
At this point, McCain is the wild card. He could potentially still turn on it, or hell he could die tomorrow before they can have the vote and force them to stall it until January, when Doug Jones is seated.
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This is how a tax plan can be a life or death situation. If you haven't seen it, watch it. The man speaking is a Yale educated lawyer who has ALS.
https://youtu.be/jUgKVoIv8Ss
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This is the part of the process I personally find interesting...how do the Republicans decide to get to 50. Who gets abandoned to vote "No", who is courted, who is strong-armed.
I have little doubts they will get there. I agree with @sol that Senator Corker's vote is probably being ignored. Personally I think both Senator Collins' and Senator Murkowski's votes are considered a done deal. I don't understand Senator Rubio's strategy; I don't think he could defend voting "No" and dying on the child tax credit hill unless he thinks he might run against Trump in 2020 and thinks it helps him that way.
One of the news stories today said that the White House was working with Rubio, so maybe they improve the child tax credit somehow to bring him on board. But I also think that increasing the child tax credit is expensive from a budget/deficit point of view, so anything meaningfully different may strain concerns about the debt/deficit from some of the deficit hawks in the Republican party.
I have heard other Senators' names thrown out as possible "No"'s: Senator Flake and Senator Johnson are the two that come to mind. As sol correctly points out, they can currently lose two, and they may end up doing so. Vice President Pence canceled his trip to the Middle East in case his vote is needed (interesting, I guess you can't just phone in a vote?).
Senator McCain is in the hospital, one of Alabama's seats is switching to a Democrat shortly. Perhaps that is the real reason for the Moore recount effort: delay. Senator Franken is being replaced with a(nother) Democrat. The debt showdown will come up again next week. Lots of moving pieces which makes it interesting for me to watch.
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The GOP could get a surprise attack from the Sexual Predator Revenge Army. Angry women have learned to attack hard & fast. It wouldn't be too far-fetched considering what we've been seeing recently.
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Considering both plans had a much higher child tax deduction to offset the removal of the personal exemption I would say he is making a show of something he know wont get cut.
Rubio has been advocating for making the proposed child tax credit refundable against your payroll tax, in order to let it actually benefit poor people. Right now, the child tax credit isn't refundable if you don't owe any taxes, and since approximately half of the US population doesn't owe any net taxes they won't get any benefit from the increased child tax credit. So as written now it's a useless tax break for poor Americans, even though the Republicans have been touting it as central part of their plan.
The child tax credit is not refundable, but the additional child tax credit is. You must have at least 3000 in earned income to get the additional child tax credit, and the additional child tax credit increases as earned income increases above 3000 (much like the EITC.) It's only useless if you have no earned income, in which case you'd have no payroll tax too.
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50/50 split the difference. The IRS ruling was that fixing the gap through IRS regulatory decision making, while possible, would have huge unintended financial implications to the federal budget and the stability of the program. They decided to not act unilaterally and let congress fix it, which of course the Republican-controlled congress refused to do.
No, that is not true. The IRS enforces the tax law, it does not write it. They legally could not "fix" anything that was decided by Congress. How do people not get this?
I mean you might be right, but not according to this article:
https://www.healthaffairs.org/action/showDoPubSecure?doi=10.1377%2Fhpb20141110.62257&format=full
While the law sets a clear standard for affordable employee coverage and requires employers to allow dependent children to enroll in a family plan, Congress deferred to business interests in limiting an employer's responsibility for providing "affordable" coverage to individual workers. As a result, there is no explicit standard of affordability for family members of an employee offered job-based family coverage. Moreover, the law neglects to clearly spell out how family members should be treated for purposes of eligibility for premium tax credits or the individual mandate.
The IRS initially proposed regulations using the cost of self-only coverage to define "affordability" for the other family members with respect to premium tax credits, primarily referencing the JCT's interpretation in its original analysis of the ACA. After receiving dissenting comments on the proposed rule, the IRS delayed the final regulation as it relates to family members.
During that time the GAO urged the Department of Treasury and the IRS to examine the impact of its proposed rule on eligible family members and determine whether it would be consistent with the ACA to adopt an approach that would consider the cost of family-based coverage. Given that the law set no standard requiring employers to offer affordable coverage to a worker's family or pay a penalty, the potential cost to the federal government emerged as the key determinant in limiting access to premium tax credits for family members.
The primary concern was that employers would raise the employee's share of family coverage, driving even more families to opt for premium tax credits. Ultimately, these concerns overrode other legal interpretations and fairness arguments when the IRS finalized the rule as proposed and actualized the family glitch.
I don't buy into TexasRunner's Obama-hate over it. In fact I think the agencies acted reasonably and it should have been fixed by Congress. But short of another source I stand by my assessment.
FROM YOUR OWN SOURCE:
While a statutory change would send a clear message to the administration to take action through rulemaking or guidance, legal and policy experts believe the problem can be addressed by the administration without amending the law.
Seriously people...
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My interpretation was that it was an IRS ruling that created the problem in the first place, thus within the purview of the executive branch to fix. Obviously, a legislative fix was always an option as well, but not necessarily the only option.
No, the ruling was that this was clearly the intention of the law and therefore it was to be followed as it was the law. There was no confusion in how it was written. There was no other option other than a legislative fix. If there was, don't you think the GOP would have used that against Obama?
50/50 split the difference. The IRS ruling was that fixing the gap through IRS regulatory decision making, while possible, would have huge unintended financial implications to the federal budget and the stability of the program. They decided to not act unilaterally and let congress fix it, which of course the Republican-controlled congress refused to do.
No, that is not true. The IRS enforces the tax law, it does not write it. They legally could not "fix" anything that was decided by Congress. How do people not get this?
The legislature makes the general law, but the IRS has the ability to make regulations fleshing out the law. They also make "rulings" interpreting the law.
https://www.irs.gov/irm/part32/irm_32-001-001
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My interpretation was that it was an IRS ruling that created the problem in the first place, thus within the purview of the executive branch to fix. Obviously, a legislative fix was always an option as well, but not necessarily the only option.
No, the ruling was that this was clearly the intention of the law and therefore it was to be followed as it was the law. There was no confusion in how it was written. There was no other option other than a legislative fix. If there was, don't you think the GOP would have used that against Obama?
50/50 split the difference. The IRS ruling was that fixing the gap through IRS regulatory decision making, while possible, would have huge unintended financial implications to the federal budget and the stability of the program. They decided to not act unilaterally and let congress fix it, which of course the Republican-controlled congress refused to do.
No, that is not true. The IRS enforces the tax law, it does not write it. They legally could not "fix" anything that was decided by Congress. How do people not get this?
The legislature makes the general law, but the IRS has the ability to make regulations fleshing out the law. They also make "rulings" interpreting the law.
https://www.irs.gov/irm/part32/irm_32-001-001
Correct. Agency rulemaking (under the Administrative Procedures Act) fills the gaps in statutory language. All agencies promulgate rules pursuant to guiding statutes. These rules more or less have the force or effect of law, provided they are not arbitrary or capricious. They are entitled to what is known as Chevron deference (after the name of the case which stands for the proposition that a court will not substitute its own interpretation for a reasonable interpretation made by an administrative agency). From those regulations (posted in the Code of Federal Regulations), agencies may promulgate policy or program statements, which further clarify how agency employees are to effectuate the governing statute(s) and regulation(s); i.e., they provide further guidance to agency employees. These are afforded far less deference but are afforded some.
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FROM YOUR OWN SOURCE:
While a statutory change would send a clear message to the administration to take action through rulemaking or guidance, legal and policy experts believe the problem can be addressed by the administration without amending the law.
Seriously people...
Try harder. I'm agreeing with you that the IRS could have subsidized family plans for people caught in the situation and "solved the problem". I'm also saying that doing so without adding an "employers must provide reasonably priced family coverage or pay a fine" provision, which the IRS could not have done and does require a legislative change, would have opened a giant loophole in the bill and that every employer that wanted to opt-out of the ACA could have done so simply by providing a family plan with sky-high premiums, which no one would use.
I'm saying it doesn't make sense to have the subsidies without the employer mandate, and adding one without the other would have just basically nullified the whole bill. Given that, the IRS's decision was reasonable and correct, and it should have been fixed by congress who could have added the employer mandate too.
"Seriously people..."
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FROM YOUR OWN SOURCE:
While a statutory change would send a clear message to the administration to take action through rulemaking or guidance, legal and policy experts believe the problem can be addressed by the administration without amending the law.
Seriously people...
Try harder. I'm agreeing with you that the IRS could have subsidized family plans for people caught in the situation and "solved the problem". I'm also saying that doing so without adding an "employers must provide reasonably priced family coverage or pay a fine" provision, which the IRS could not have done and does require a legislative change, would have opened a giant loophole in the bill and that every employer that wanted to opt-out of the ACA could have done so simply by providing a family plan with sky-high premiums, which no one would use.
I'm saying it doesn't make sense to have the subsidies without the employer mandate, and adding one without the other would have just basically nullified the whole bill. Given that, the IRS's decision was reasonable and correct, and it should have been fixed by congress who could have added the employer mandate too.
"Seriously people..."
You are changing your argument.
First you said that you "didn't understand the Obama hate" over not fixing the glitch, then I show you from your own source that he could have fixed the glitch and you tangent to the fact that more subsidies would have been given...
Are you still denying that he could have fixed it or not?
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Are you still denying that he could have fixed it or not?
I believe the argument was that trying to fix it in the way you proposed would have created much larger problems, like invalidating whole sections of the law. The right way to modify a law is with legislation.
For example, the president also could have "fixed" the health exchanges by refusing to allocate funding for reinsurance programs or subsidies, but doing so would have been (and is) a clear violation of the intent of the law as passed by congress and it would have made the exchanges function worse, not better. Yes, he can legally do that. No, it does not fix anything.
You're saying the doctor could have fixed a laceration by amputating the limb. Sure, that's one solution. It is not an improvement, though, and would have catastrophic secondary consequences far beyond the scope of the original problem, so why would he ever do that? You're really mad at Obama for not amputating?
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http://www.cnn.com/2017/12/15/politics/tax-reform-marco-rubio-final-bill/index.html?adkey=bn
Changes are in. Text due out at 5:30 Eastern.
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FROM YOUR OWN SOURCE:
While a statutory change would send a clear message to the administration to take action through rulemaking or guidance, legal and policy experts believe the problem can be addressed by the administration without amending the law.
Seriously people...
Try harder. I'm agreeing with you that the IRS could have subsidized family plans for people caught in the situation and "solved the problem". I'm also saying that doing so without adding an "employers must provide reasonably priced family coverage or pay a fine" provision, which the IRS could not have done and does require a legislative change, would have opened a giant loophole in the bill and that every employer that wanted to opt-out of the ACA could have done so simply by providing a family plan with sky-high premiums, which no one would use.
I'm saying it doesn't make sense to have the subsidies without the employer mandate, and adding one without the other would have just basically nullified the whole bill. Given that, the IRS's decision was reasonable and correct, and it should have been fixed by congress who could have added the employer mandate too.
"Seriously people..."
You are changing your argument.
First you said that you "didn't understand the Obama hate" over not fixing the glitch, then I show you from your own source that he could have fixed the glitch and you tangent to the fact that more subsidies would have been given...
Are you still denying that he could have fixed it or not?
I... I don't know how to respond to this. I literally just answered that question in the text you quoted.
Obama could have mandated that the subsidies applied to families in this situation without legislative changes. Obama could not have invented an employer family-coverage mandate without legislative changes. To do one without the other would be to open a giant loophole that torpedoes the whole bill, so the IRS correctly chose not to do that.
Even if you're 100% correct and Obama could have snapped his fingers and made all the baddies go away without any other consequences, shouldn't the Republican-controlled congress that also refused to fix the issue share at least half the blame?
Edit: And I didn't "change my argument". You successfully educated me about a problem that I didn't previously know existed. You have shown me that there is at least some rational basis for anger over the ACA, even if we disagree over where the blame lies.
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http://www.cnn.com/2017/12/15/politics/tax-reform-marco-rubio-final-bill/index.html?adkey=bn
Changes are in. Text due out at 5:30 Eastern.
Even if Rubio gets his expanded child tax credit, it will still be a farce unless they change the sunsetting provisions.
Remember that every single one of the middle class tax "cuts" are only temporary, and set to turn into tax increases in just a few years. The GOP tax bill is fundamentally a tax cut for billionaires, partially paid for by a middle class tax increase and partially paid for by increasing the national debt. All of these negotiations around details of the temporary child tax credit are just a distraction, because they don't really matter. Republicans want them to completely disappear ASAP, no matter what they look like after negotiations. They're just in there to fool people into supporting a tax increase.
It's no different than a credit card company offering you a $20k loan today, so they can charge you 26.99% interest next month. You'd be a fool to take it, but that up front money is pretty damn tempting to most Americans.
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http://www.cnn.com/2017/12/15/politics/tax-reform-marco-rubio-final-bill/index.html?adkey=bn
Changes are in. Text due out at 5:30 Eastern.
Even if Rubio gets his expanded child tax credit, it will still be a farce unless they change the sunsetting provisions.
Remember that every single one of the middle class tax "cuts" are only temporary, and set to turn into tax increases in just a few years. The GOP tax bill is fundamentally a tax cut for billionaires, partially paid for by a middle class tax increase and partially paid for by increasing the national debt. All of these negotiations around details of the temporary child tax credit are just a distraction, because they don't really matter. Republicans want them to completely disappear ASAP, no matter what they look like after negotiations. They're just in there to fool people into supporting a tax increase.
It's no different than a credit card company offering you a $20k loan today, so they can charge you 26.99% interest next month. You'd be a fool to take it, but that up front money is pretty damn tempting to most Americans.
Nahhh, the middle and lower classes are probably protected until we have a sovereign credit crisis. When the sunset provisions come up, it will be just like the bush tax cuts. There will be tremendous pressure to make them permanent. Maybe the upper bracket tax cuts will be allowed to expire. Maybe the corporate tax rate will be rolled back (although that actually being good policy maybe not). Maybe some more "guard rails" will be put on the ridiculous breaks for partnerships and S-Corps. But we're not going to openly cut entitlements or openly raise taxes on the middle class unless and until it's a crisis. Maybe some tinkering by doing something like chained CPI, maybe do some more "hidden" taxes as mandates. But otherwise, the only thing the american electorate is united on is that they wants lots of government that somebody else pays for.
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The county where I live has just opened up their website for pre-payment of next year's property taxes (in anticipation of the tax bill passing, and at the request of many taxpayers here.)
I am pre-paying the property taxes and I am going to pull forward my January mortgage payment into the last week of December. Just maximizing my 2017 itemized deductions before I (presumably) will be taking the standard deduction next year.
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I have a question. Sorry if it was covered, but I didn't read the whole thread. I thought I saw something about a reduction in the tax brackets for a pass-through business. I think it included sole-proprietors. Anyone have any info. on that? From what I read, I think it may only apply to businesses that make a lot more money than my husband's very small business that he actually has subcontracted out. He only makes about $20,000 /year, but really does hardly any work. But, he does have to pay all of his SS even though he is collecting SS now.
Thanks, Miss Prim
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http://www.cnn.com/2017/12/15/politics/tax-reform-marco-rubio-final-bill/index.html?adkey=bn
Changes are in. Text due out at 5:30 Eastern.
Even if Rubio gets his expanded child tax credit, it will still be a farce unless they change the sunsetting provisions.
Remember that every single one of the middle class tax "cuts" are only temporary, and set to turn into tax increases in just a few years. The GOP tax bill is fundamentally a tax cut for billionaires, partially paid for by a middle class tax increase and partially paid for by increasing the national debt. All of these negotiations around details of the temporary child tax credit are just a distraction, because they don't really matter. Republicans want them to completely disappear ASAP, no matter what they look like after negotiations. They're just in there to fool people into supporting a tax increase.
It's no different than a credit card company offering you a $20k loan today, so they can charge you 26.99% interest next month. You'd be a fool to take it, but that up front money is pretty damn tempting to most Americans.
None of this matters if in 2020 the Dems get back the WH and congress. I'd like to see old tax rates back, expanded EITC targeting the working class, increase in Child Tax credit, return of AMT, punitively high inheritance tax (with no Trustfund based loopholes.) Then possibly increasing incomes eligible for Medicaid, raising incomes that qualify for ACA subsidies and lowering medicare age to 55 or 60. Even without a one time Single payer healthcare vote we can squeeze the system to single payer by covering more people with lower incomes and slowly lowering the Medicare age. Over a long enough timeline The Repubs are going to fail at anything they do because, at the end of the day, their actual policies are highly unpopular and demographics make anyone who espouses those policies harder to elect every year. They would be smart to place their stake in the ground as a center right party that will actually have a chance to win elections over the coming years. By moving far right theyre going to start getting slaughtered over the coming elections and end up with no say over policy for the next 20 years.
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Nahhh, the middle and lower classes are probably protected until we have a sovereign credit crisis. When the sunset provisions come up, it will be just like the bush tax cuts. There will be tremendous pressure to make them permanent. Maybe the upper bracket tax cuts will be allowed to expire. Maybe the corporate tax rate will be rolled back (although that actually being good policy maybe not). Maybe some more "guard rails" will be put on the ridiculous breaks for partnerships and S-Corps. But we're not going to openly cut entitlements or openly raise taxes on the middle class unless and until it's a crisis. Maybe some tinkering by doing something like chained CPI, maybe do some more "hidden" taxes as mandates. But otherwise, the only thing the american electorate is united on is that they wants lots of government that somebody else pays for.
Fine but that means that the actual cost of the bill is going to be much much larger than the $1 - 1.5 Trillion advertised. Which is a requirement based on the budget they passed.
So either we assume that the tax bill represents the Republican's actual desire / plan and that sol's criticism is valid and it's pretty much just a temporary bandaid for the middle-class so they can ram through a huge permanent upper-class cut, or we assume that they really are looking out for the both but are lying in bad faith about how devastating to the federal budget (and probably therefore the entitlement programs) this plan will be. I'm honestly not sure which paints them in a worse light.
Edited to talk about "upper-class cuts" instead of "corporate cuts", since that's what sol was referring to.
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Nahhh, the middle and lower classes are probably protected until we have a sovereign credit crisis. When the sunset provisions come up, it will be just like the bush tax cuts. There will be tremendous pressure to make them permanent. Maybe the upper bracket tax cuts will be allowed to expire. Maybe the corporate tax rate will be rolled back (although that actually being good policy maybe not). Maybe some more "guard rails" will be put on the ridiculous breaks for partnerships and S-Corps. But we're not going to openly cut entitlements or openly raise taxes on the middle class unless and until it's a crisis. Maybe some tinkering by doing something like chained CPI, maybe do some more "hidden" taxes as mandates. But otherwise, the only thing the american electorate is united on is that they wants lots of government that somebody else pays for.
Fine but that means that the actual cost of the bill is going to be much much larger than the $1 - 1.5 Trillion advertised. Which is a requirement based on the budget they passed.
So either we assume that the tax bill represents the Republican's actual desire / plan and that sol's criticism is valid and it's pretty much just a temporary bandaid for individuals so they can ram through a corporate cut, or we assume that they really are looking out for the middle class but are lying in bad faith about how devastating to the federal budget (and probably therefore the entitlement programs) this plan will be. I'm honestly not sure which paints them in a worse light.
Well, first, corporations are just legal fictions. They don't bear any tax burden. Either the owners, workers, or consumers/clients bear the burden of the corporate tax. Not sure if there is a general rule for who bears the corporate tax or if you have to look industry by industry or even company by company.
But ignoring that, I think you're over complicating it. Democrat and republican politicians want to take credit for something now. If there are bad effects in 10, or 20 or 30 years? That might be their problem. Or they might be out of office. For them personally, it's much "safer" to do something with short term benefits and long term harm. Democrats want insanely higher spending with no more tax burden (except for maybe on other people that are not like you and probably deserve the higher burden). Republicans want to promise basically the same spending and lower taxes (or really lower spending, but don't worry, it will just be spending on other people who are not like you that is cut, and that spending is pork anyway, unlike the government spending that ends up in your pocket).
I do think Democrats (probably correctly) think that when push comes to shove, they will be successful in raising taxes, so it's no problem if they over promise now. I think republicans are less wise to be blase about the coming crisis, because I don't think we're going to end up with a solution that doesn't involve much, much higher taxes and very little, if at all, in the way of benefit cuts, unless it's just means testing entitlements (which is really just another form of progressive taxation at this point)
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FROM YOUR OWN SOURCE:
While a statutory change would send a clear message to the administration to take action through rulemaking or guidance, legal and policy experts believe the problem can be addressed by the administration without amending the law.
Seriously people...
Try harder. I'm agreeing with you that the IRS could have subsidized family plans for people caught in the situation and "solved the problem". I'm also saying that doing so without adding an "employers must provide reasonably priced family coverage or pay a fine" provision, which the IRS could not have done and does require a legislative change, would have opened a giant loophole in the bill and that every employer that wanted to opt-out of the ACA could have done so simply by providing a family plan with sky-high premiums, which no one would use.
I'm saying it doesn't make sense to have the subsidies without the employer mandate, and adding one without the other would have just basically nullified the whole bill. Given that, the IRS's decision was reasonable and correct, and it should have been fixed by congress who could have added the employer mandate too.
"Seriously people..."
You are changing your argument.
First you said that you "didn't understand the Obama hate" over not fixing the glitch, then I show you from your own source that he could have fixed the glitch and you tangent to the fact that more subsidies would have been given...
Are you still denying that he could have fixed it or not?
I... I don't know how to respond to this. I literally just answered that question in the text you quoted.
Obama could have mandated that the subsidies applied to families in this situation without legislative changes. Obama could not have invented an employer family-coverage mandate without legislative changes. To do one without the other would be to open a giant loophole that torpedoes the whole bill, so the IRS correctly chose not to do that.
Even if you're 100% correct and Obama could have snapped his fingers and made all the baddies go away without any other consequences, shouldn't the Republican-controlled congress that also refused to fix the issue share at least half the blame?
Edit: And I didn't "change my argument". You successfully educated me about a problem that I didn't previously know existed. You have shown me that there is at least some rational basis for anger over the ACA, even if we disagree over where the blame lies.
My apologies, I was under the impression that you made the statement below:
No, that is not true. The IRS enforces the tax law, it does not write it. They legally could not "fix" anything that was decided by Congress. How do people not get this?
I didn't catch that was a different poster.
Either way, there were several other problems I posted with the ACA that weren't really addressed.
Follow up question for you personally: is this the main reason for your stance on ACA, or are you opposed to the law more generally as well?
Its one of the primary factors.
Another is the individual mandate.
https://www.theatlantic.com/politics/archive/2012/06/how-obama-broke-his-promise-on-individual-mandates/259183/ (https://www.theatlantic.com/politics/archive/2012/06/how-obama-broke-his-promise-on-individual-mandates/259183/)
http://www.politifact.com/truth-o-meter/statements/2009/jul/20/barack-obama/obama-flip-flops-requiring-people-buy-health-care/ (http://www.politifact.com/truth-o-meter/statements/2009/jul/20/barack-obama/obama-flip-flops-requiring-people-buy-health-care/)
https://www.youtube.com/watch?v=EoSnqofelsQ (https://www.youtube.com/watch?v=EoSnqofelsQ)
“If a mandate was a solution, we could try that to solve homelessness by mandating everybody buy a house. The reason they don’t have a house is that they don’t have the money.”
-Barack Obama 2008
Finally, the primary issue I have with ACA is that it did nothing to actually reduce inflated healthcare costs, and didn't just stick my generation with the bill for the boomers, but stuck us with a bill that was drastically inflated!
Also, If you are going to mandate that everyone have health insurance... Wouldn't that make health insurance a utility? Shouldn't we be setting profit caps and transparent financing requirements on an industry that will become a 'forced product'?
It had several problems and, in my opinion, was a method of putting our (then) current system on steroids instead of actually creating a system that works- IE pulling employers out of the equation, setting requirements for open billing, requiring insurance companies to actually pay a significant portion of what they are billed (or all of it), etc. Not taking a shitty patchwork system and applying it 'universally'.
Thoughts?
I know this is a bit of a tangent, start a new thread or find a mothballed one and we can jump over there to discuss if anyone likes.
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As of now, it appears that every single republican in Congress supports the tax bill. Not a single one of them will vote against it, despite almost 70% of the country opposing it.
Flake folded. Rubio folded. Even Corker folded.
Let this moment stand in history, as a turning point for the republican party and for America. Next week every single republican will unify behind the idea of raising taxes on the middle class, and spiking the national debt, in order to give tax cuts to billionaires. Not one will remember their promises to voters, or the ideology their party used to represent.
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As of now, it appears that every single republican in Congress supports the tax bill. Not a single one of them will vote against it, despite almost 70% of the country opposing it.
Flake folded. Rubio folded. Even Corker folded.
Let this moment stand in history, as a turning point for the republican party and for America. Next week every single republican will unify behind the idea of raising taxes on the middle class, and spiking the national debt, in order to give tax cuts to billionaires. Not one will remember their promises to voters, or the ideology their party used to represent.
Up next: Cuts to Social Security, Medicare, Welfare, SSDI, and education to pay for the giveaway to corps and the wealthy. Health care? Pffftttt!
What a world.
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I've not been following the details. Wow, the MSM columnists hate it. Must be great!
Child tax credit... child tax credit... child tax credit.....
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LOL Fucking Bob Corker. What a joke.
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I've not been following the details. Wow, the MSM columnists hate it. Must be great!
Yes, people smarter than you who've read the bill and economists who've done the analysis says it is bad...therefore it is good. SMH. What idiotic "logic."
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Child tax credit... child tax credit... child tax credit.....
Do you like the new child tax credit? You know it's supposed to go away in 2024, right? Republicans need to raise taxes on the middle class to make their tax cut for corporations only add 1.5 trillion to the national debt, so they made the child tax credit bigger today and then smaller in the future, so the real plan is a child tax credit reduction, not expansion.
So I'm not sure if you're cheering it for going up or going down, since it is doing one and then the other.
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Child tax credit... child tax credit... child tax credit.....
Do you like the new child tax credit? You know it's supposed to go away in 2024, right? Republicans need to raise taxes on the middle class to make their tax cut for corporations only add 1.5 trillion to the national debt, so they made the child tax credit bigger today and then smaller in the future, so the real plan is a child tax credit reduction, not expansion.
So I'm not sure if you're cheering it for going up or going down, since it is doing one and then the other.
When it "goes away" in 2024, does it revert back to current tax law ($1K/kid), or does the CTC go away entirely ($0K/kid)? Just curious if anyone knows.
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Child tax credit... child tax credit... child tax credit.....
Do you like the new child tax credit? You know it's supposed to go away in 2024, right? Republicans need to raise taxes on the middle class to make their tax cut for corporations only add 1.5 trillion to the national debt, so they made the child tax credit bigger today and then smaller in the future, so the real plan is a child tax credit reduction, not expansion.
So I'm not sure if you're cheering it for going up or going down, since it is doing one and then the other.
They could but again they are really just exploiting a loop hole to get around their own deficit hawks. Congress generally keeps tax breaks for the middle class because the blow back is huge otherwise.
It ties the hands of congress due to the unpopularity of allowing these to expire.
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When it "goes away" in 2024, does it revert back to current tax law ($1K/kid), or does the CTC go away entirely ($0K/kid)? Just curious if anyone knows.
Predicting what will actually happen to the CTC in 2024 is like predicting the S&P 500 index value: you might be correct, but only if you are lucky.
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As of now, it appears that every single republican in Congress supports the tax bill. Not a single one of them will vote against it, despite almost 70% of the country opposing it.
Flake folded. Rubio folded. Even Corker folded.
Let this moment stand in history, as a turning point for the republican party and for America. Next week every single republican will unify behind the idea of raising taxes on the middle class, and spiking the national debt, in order to give tax cuts to billionaires. Not one will remember their promises to voters, or the ideology their party used to represent.
Just a tad bit melodramatic there, aren't you?
Yes, it's possible middle class taxes will end up higher because of deficit spending now, but if deficit spending now raises middle class taxes, the additional deficit spending from this bill is the least of our worries, as all of this is noise next to entitlements and then defense spending.
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Child tax credit... child tax credit... child tax credit.....
Do you like the new child tax credit? You know it's supposed to go away in 2024, right? Republicans need to raise taxes on the middle class to make their tax cut for corporations only add 1.5 trillion to the national debt, so they made the child tax credit bigger today and then smaller in the future, so the real plan is a child tax credit reduction, not expansion.
So I'm not sure if you're cheering it for going up or going down, since it is doing one and then the other.
When it "goes away" in 2024, does it revert back to current tax law ($1K/kid), or does the CTC go away entirely ($0K/kid)? Just curious if anyone knows.
Everyone is still trying to figure this sort of thing out, but it looks like the bill says it goes back to 1k, but less will be refundable. The doubled standard deduction reverts to today's amount, but with a lower inflation estimate so that the brackets will creep down over time for everyone, raising your rates. And the loss of exemptions and deductions is permanent, so after the doubled standard deductible expires you'll have higher taxable income. So not only will you pay the higher rate on more income, it will be more difficult to qualify for EITC or savers credit or anything else based on AGI. This is all right in line with GOP priorities.
The other big kicker that nobody is talking about yet is how the changes to pass through incomes will hasten the demise of social security and Medicare. By lowering the tax rates there they incentivize people to reclassify income as pass through owner profit instead of wages, which means reduced payroll taxes and thus reduced revenue for these programs. Also right in line with GOP priorities.
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Child tax credit... child tax credit... child tax credit.....
Do you like the new child tax credit? You know it's supposed to go away in 2024, right? Republicans need to raise taxes on the middle class to make their tax cut for corporations only add 1.5 trillion to the national debt, so they made the child tax credit bigger today and then smaller in the future, so the real plan is a child tax credit reduction, not expansion.
So I'm not sure if you're cheering it for going up or going down, since it is doing one and then the other.
There are plenty of tax provisions that set to expire every year but they are normally renewed. It's a common practice around December when congress gets together and decides which tax provisions are renewed, and historically the majority of these provisions are renewed.
So when the taxes are set to increase in 2024 who is to say the tax cuts won't be renewed or made permanently? I have seen you make this argument (you are not the only one some democrats do as well) disingenuously make the argument that middle class taxes will go up because when the tax cuts expire they will pay more t but it's a bit disingenuous to make that argument and not add the caveat that the tax cuts could be extended or made permanently at the time.
Majority of middle class earners they will see a tax cut in the next few years. Those that itemize (remember itemizer represent 30% of all filers meaning the majority of them are probably not part of the middle class but are part of the upper-middle class and above) could see a tax increase especially if their SALT deduction is large.
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So when the taxes are set to increase in 2024 who is to say the tax cuts won't be renewed or made permanently? I have seen you make this argument (you are not the only one some democrats do as well) disingenuously make the argument that middle class taxes will go up because when the tax cuts expire they will pay more then they pay currently but it's a bit disingenuous to make that argument and not add the caveat that the tax cuts could be extended or made permanently at the time.
You're missing the point I made above. Either you have to assume to take the bill at face value (like sol is doing), or you have to assume that the "how much it will add to the deficit" numbers are bald-faced lies intended to hide how much damage this will do to the federal budget (and therefore the entitlement programs). Pick your favorite poison.
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And the loss of exemptions and deductions is permanent, so after the doubled standard deductible expires you'll have higher taxable income. So not only will you pay the higher rate on more income, it will be more difficult to qualify for EITC or savers credit or anything else based on AGI.
I didn't follow this point the first time it was made earlier in this thread, and I still don't. Reducing below-the-line deductions won't impact your AGI.
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When it "goes away" in 2024, does it revert back to current tax law ($1K/kid), or does the CTC go away entirely ($0K/kid)? Just curious if anyone knows.
Predicting what will actually happen to the CTC in 2024 is like predicting the S&P 500 index value: you might be correct, but only if you are lucky.
Yes, obviously things can and will change in the next 7 years. The intent of my question was as @sol interpreted it - what would happen to the CTC solely based on the content of the current tax bill. (Thanks, @sol.)
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fyi
http://docs.house.gov/billsthisweek/20171218/CRPT-115HRPT-466.pdf
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So when the taxes are set to increase in 2024 who is to say the tax cuts won't be renewed or made permanently?
The Republican's own tax plan, that who says.
The bill NEEDS those tax cuts to expire in order to generate revenue to help offset the cost of lowering the uppermost tax bracket. It's the whole point of the bill, not some unintended side effect.
Like if republicans really wanted to cut taxes on the middle class, they could have just done that. They certainly have the votes. They might have even gotten some centrists to vote with them. But they chose NOT to do this. They instead chose to use the middle class as a revenue generator to help pay for tax cuts for billionaires.
It seems weird that people (multiple people on this forum) have all made this same argument, that somehow it will be the democrat's fault when the republicans create, vote for, pass, and implement the republican tax plan without any dem votes. If dems retake power and repeal this horrible bill, good for them. But it doesn't make sense blame democrats today for potentially not doing something in the future to fix what republicans do today.
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The S-corp benefit has been reduced significantly. 20% deduction with a exemption of $157,500/$315,000 (Single/MFJ) down from 23% 250k/500k.
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The Individual Mandate is set to $0 after 12/31/2018 in the just released bill.
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This thread is exhausting. Your politics is ridiculous. (As you might say with ours, but seriously, you guys take it to a whole new level).
Is America Great Again yet?
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This thread is exhausting. Your politics is ridiculous. (As you might say with ours, but seriously, you guys take it to a whole new level).
Is America Great Again yet?
I know, right?
I already have a 20 point question list that I want to sit down with my tax professional and discuss when this thing passes. And, of course, the bill is going to go into effect for 2018 so for planning purposes, I need the information to make any changes right away- right at the start of her tax season. I'm sure all the tax CPA/EAs are going to be FML this season. So much for streamlining the tax system.
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I am pre-paying the property taxes and I am going to pull forward my January mortgage payment into the last week of December. Just maximizing my 2017 itemized deductions before I (presumably) will be taking the standard deduction next year.
According to the papers, the bill specifically prohibits prepaying your 2018 property taxes in 2017. Sorry.
From https://www.nytimes.com/2017/12/15/us/politics/republican-tax-bill.html:
In a pre-emptive move against accounting maneuvers in high-tax states such as New York and California, the bill prohibits taxpayers from prepaying next year’s state and local income or property taxes, in order to deduct them from 2018 taxes. That form of tax planning would have allowed taxpayers to benefit more from the full state and local deduction this year before it is capped next year.
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And it looks like the newly expanded Rubio child tax credit, which gives a higher break to low-income workers, will only apply to kids 16 and under and thus actually costs the bill LESS money than the original version. So they can both claim they have helped working families, and simultaneously pay out less money to working families. I'm disgusted.
I wonder if they used some of the savings to offset lowering that top tax bracket from 39.6 to 37%
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Silly question: is the SALT deduction $10k per return? ie, single or MFJ you get $10k either way? We have a new marriage penalty?
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fyi
http://docs.house.gov/billsthisweek/20171218/CRPT-115HRPT-466.pdf
If the conference agreement says "no provision" does that mean nothing is changing?
On page 632 it list the home sale exemption for capital gains as "no provision" after listing the senate and house amendments.
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I am pre-paying the property taxes and I am going to pull forward my January mortgage payment into the last week of December. Just maximizing my 2017 itemized deductions before I (presumably) will be taking the standard deduction next year.
According to the papers, the bill specifically prohibits prepaying your 2018 property taxes in 2017. Sorry.
From https://www.nytimes.com/2017/12/15/us/politics/republican-tax-bill.html:
In a pre-emptive move against accounting maneuvers in high-tax states such as New York and California, the bill prohibits taxpayers from prepaying next year’s state and local income or property taxes, in order to deduct them from 2018 taxes. That form of tax planning would have allowed taxpayers to benefit more from the full state and local deduction this year before it is capped next year.
It's clear how that could apply to property taxes, but it's not clear that it applies to income taxes. E.g., normal W-2 withholding of state income tax for 2017 paychecks, or estimated tax payments directed to 2017 tax, are applied to the tax imposed for 2017. But yes, an estimated payment directed to 2018 state income tax would not be federally deductible in 2017.
The actual bill text:
...an amount paid in a taxable year beginning before January 1, 2018, with respect to a State or local income
tax imposed for a taxable year beginning after December 31, 2017, shall be treated as paid on the last
day of the taxable year for which such tax is so imposed.
Not clear how much overpayment of state income tax would be allowed, but there seems no restriction other than the $10K itemized deduction limit. And the state income tax refund for 2017 becomes federally taxable in 2018 if it was taken as a 2017 deduction - that is unchanged from previous law.
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Nahhh, the middle and lower classes are probably protected until we have a sovereign credit crisis. When the sunset provisions come up, it will be just like the bush tax cuts. There will be tremendous pressure to make them permanent. Maybe the upper bracket tax cuts will be allowed to expire. Maybe the corporate tax rate will be rolled back (although that actually being good policy maybe not). Maybe some more "guard rails" will be put on the ridiculous breaks for partnerships and S-Corps. But we're not going to openly cut entitlements or openly raise taxes on the middle class unless and until it's a crisis. Maybe some tinkering by doing something like chained CPI, maybe do some more "hidden" taxes as mandates. But otherwise, the only thing the american electorate is united on is that they wants lots of government that somebody else pays for.
Fine but that means that the actual cost of the bill is going to be much much larger than the $1 - 1.5 Trillion advertised. Which is a requirement based on the budget they passed.
So either we assume that the tax bill represents the Republican's actual desire / plan and that sol's criticism is valid and it's pretty much just a temporary bandaid for the middle-class so they can ram through a huge permanent upper-class cut, or we assume that they really are looking out for the both but are lying in bad faith about how devastating to the federal budget (and probably therefore the entitlement programs) this plan will be. I'm honestly not sure which paints them in a worse light.
Edited to talk about "upper-class cuts" instead of "corporate cuts", since that's what sol was referring to.
Is it really lying when when everybody knows (except sol apparently) that that's exactly why they are doing it? And they freely admit that?
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http://taxplancalculator.com/
Nice work by this guy to get his tax calculator updated already. A few tweaks during the week made it a little better for most, especially regarding the child tax credit and another shift in the brackets.
I'm curious as to how payroll departments are going to handle this. I assume the IRS will have to create a modified W4 and everyone will need to submit a new one. I wonder how long until we see the change in our paychecks.
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http://taxplancalculator.com/
Nice work by this guy to get his tax calculator updated already. A few tweaks during the week made it a little better for most, especially regarding the child tax credit and another shift in the brackets.
I'm curious as to how payroll departments are going to handle this. I assume the IRS will have to create a modified W4 and everyone will need to submit a new one. I wonder how long until we see the change in our paychecks.
You can see the change in your paycheck any time you want to. Just submit a new W4 to raise or lower your withholding.
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Nahhh, the middle and lower classes are probably protected until we have a sovereign credit crisis. When the sunset provisions come up, it will be just like the bush tax cuts. There will be tremendous pressure to make them permanent. Maybe the upper bracket tax cuts will be allowed to expire. Maybe the corporate tax rate will be rolled back (although that actually being good policy maybe not). Maybe some more "guard rails" will be put on the ridiculous breaks for partnerships and S-Corps. But we're not going to openly cut entitlements or openly raise taxes on the middle class unless and until it's a crisis. Maybe some tinkering by doing something like chained CPI, maybe do some more "hidden" taxes as mandates. But otherwise, the only thing the american electorate is united on is that they wants lots of government that somebody else pays for.
Fine but that means that the actual cost of the bill is going to be much much larger than the $1 - 1.5 Trillion advertised. Which is a requirement based on the budget they passed.
So either we assume that the tax bill represents the Republican's actual desire / plan and that sol's criticism is valid and it's pretty much just a temporary bandaid for the middle-class so they can ram through a huge permanent upper-class cut, or we assume that they really are looking out for the both but are lying in bad faith about how devastating to the federal budget (and probably therefore the entitlement programs) this plan will be. I'm honestly not sure which paints them in a worse light.
Edited to talk about "upper-class cuts" instead of "corporate cuts", since that's what sol was referring to.
Is it really lying when when everybody knows (except sol apparently) that that's exactly why they are doing it? And they freely admit that?
I don't know, you tell me. Are they lying about how much the bill will cost? How much will it cost then? Is there any way to estimate it? Is literally any agency or organization on the face of the planet estimating how much it will cost assuming that the Republicans are lying about the phase-outs?
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The county where I live has just opened up their website for pre-payment of next year's property taxes (in anticipation of the tax bill passing, and at the request of many taxpayers here.)
I am pre-paying the property taxes and I am going to pull forward my January mortgage payment into the last week of December. Just maximizing my 2017 itemized deductions before I (presumably) will be taking the standard deduction next year.
What are the mechanics of paying your January’s mortgage in December? I though a late-December payment would just be counted as principle pay down and not pay off any accrued interest (is the deductible part)
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The county where I live has just opened up their website for pre-payment of next year's property taxes (in anticipation of the tax bill passing, and at the request of many taxpayers here.)
I am pre-paying the property taxes and I am going to pull forward my January mortgage payment into the last week of December. Just maximizing my 2017 itemized deductions before I (presumably) will be taking the standard deduction next year.
What are the mechanics of paying your January’s mortgage in December? I though a late-December payment would just be counted as principle pay down and not pay off any accrued interest (is the deductible part)
Send a check marked "January 2018 payment" (or send with the January coupon).
My experience is that any payment of the monthly size posted the back half of the month is treated as the next month's payment without any instruction on my part.
It seems like the bill is going to (try to) disallow any benefit from doing this.
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http://taxplancalculator.com/
Nice work by this guy to get his tax calculator updated already. A few tweaks during the week made it a little better for most, especially regarding the child tax credit and another shift in the brackets.
That is nice. Thanks.
For a family with three kids making $100k in Ohio, they come out maybe $2k ahead. $75k/1.5k. $50k/$1.3k. A lot of folks around here are going to like that.
Yes, it's temporary. They get shafted once the kids turn 17 and/or the new provisions sunset in 2025. Still, it's not looking like the average Trumper around here will see this as a negative.
For a couple married filing jointly with no kids it doesn't work out so well. $100k income saves $871, $75k saves $322, $50k loses $260. That $50k cohort probably includes a bunch of Trumpers.
Anyone know if kids over 16 will count as dependents? We lose the exemption for them, currently allowed up to age 24 if they're full time at school.
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Funny when I lived in a lower cost of living area of the state (also made less) I would have gotten a much bigger cut even though under the current tax plan I pay less taxes than I did in the lower cost of living location because of mortgage interest and being able to max out retirement plans.
If I was able to work remotely ina cheap area I would have a negative tax burden with the expanded credit.
Still a crap sandwich of a bill
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Is there anything in the final version that changes the contribution limits, deductibility or funding deadlines for 401k, IRA or HSA?
Thanks.
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Well the last minute change to allow any SALT tax up to $10,000 changed my meh there is a tax bill to me getting a decent temporary cut. Actually I'll be RE by the time stuff sunsets so "I GOT MINE."
But I still think this bill is a disaster for the future because it will lead to major budget problems.
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sounds like awful policy, excellent politics.
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Anyone know if the first in first out (FIFO) rule was put in? Hope not.
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$6000 in Child Tax Credits ( I have 3 kids) x 7 years (2018 through sunset 2025) = $42000 in Federal Taxes I don't have to pay.
This will accelerate my FIRE saving by $500/month.
This is ridiculously terrible policy. Who cares how many children I have? Why should the Federal Government incentive baby making? Why is the cut-off to qualify for Child Credits so high? Does someone making >500K (not me) per year really need an extra 6 K in Federal Tax Credits?
All this is is smoke and mirrors to pacify (mollify) the middle class and upper middle class so voters will "go along to get along". This will be followed by a Cliff in 2025 that will be blamed on the Democrats.
JGS
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$6000 in Child Tax Credits ( I have 3 kids) x 7 years (2018 through sunset 2025) = $42000 in Federal Taxes I don't have to pay.
This will accelerate my FIRE saving by $500/month.
This is ridiculously terrible policy. Who cares how many children I have? Why should the Federal Government incentive baby making? Why is the cut-off to qualify for Child Credits so high? Does someone making >500K (not me) per year really need an extra 6 K in Federal Tax Credits?
All this is is smoke and mirrors to pacify (mollify) the middle class and upper middle class so voters will "get along to go along". This will be followed by a Cliff in 2025 that will be blamed on the Democrats.
JGS
The government cares because our entire government spending philosophy is to promise benefits now that future taxpayers will pay for. Somebody has to actually provide the future taxpayers to screw, so it's in the governments best interest that people get some relief for providing future tax payers.
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Is there anything in the final version that changes the contribution limits, deductibility or funding deadlines for 401k, IRA or HSA?
Thanks.
fyi
http://docs.house.gov/billsthisweek/20171218/CRPT-115HRPT-466.pdf
There are some tweaks to retirement accounts but I don't see anything specific to your question. You can take a look at the referenced PDF, starting at page 636.
One thing that looks like made it in to the final bill - 401k loans will not become due within 60 days of termination of employment, instead you would have until the due date of filing your tax return. So if employment terminates on Jan 1, 2018, you would have until April 15, 2019 to repay the loan. This seems like common sense.
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$6000 in Child Tax Credits ( I have 3 kids) x 7 years (2018 through sunset 2025) = $42000 in Federal Taxes I don't have to pay.
This will accelerate my FIRE saving by $500/month.
This is ridiculously terrible policy. Who cares how many children I have? Why should the Federal Government incentive baby making? Why is the cut-off to qualify for Child Credits so high? Does someone making >500K (not me) per year really need an extra 6 K in Federal Tax Credits?
All this is is smoke and mirrors to pacify (mollify) the middle class and upper middle class so voters will "go along to get along". This will be followed by a Cliff in 2025 that will be blamed on the Democrats.
JGS
This is not really a change in policy, but more just a change in the mechanics of the law. Remember, the $4000 dependent exemption was repealed, so to offset this, the child credit was increased by $1000. So a theoretical average taxpayer in the 25% bracket could come out even, losing the exemption (4000 x.25) but gaining it back in the form of the child credit.
Of course, depending on your specific situation, you may come out better or worse under the new law. For example, the higher phase out is huge bonus to middle-upper income earners who received no credit before, but now receive the full 2000/child.
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http://taxplancalculator.com/
Nice work by this guy to get his tax calculator updated already. A few tweaks during the week made it a little better for most, especially regarding the child tax credit and another shift in the brackets.
That is nice. Thanks.
For a family with three kids making $100k in Ohio, they come out maybe $2k ahead. $75k/1.5k. $50k/$1.3k. A lot of folks around here are going to like that.
Yes, it's temporary. They get shafted once the kids turn 17 and/or the new provisions sunset in 2025. Still, it's not looking like the average Trumper around here will see this as a negative.
For a couple married filing jointly with no kids it doesn't work out so well. $100k income saves $871, $75k saves $322, $50k loses $260. That $50k cohort probably includes a bunch of Trumpers.
Anyone know if kids over 16 will count as dependents? We lose the exemption for them, currently allowed up to age 24 if they're full time at school.
Someone please correct me if I am wrong.
With no personal exemptions anymore, there is no longer any advantage to claim them as dependents. Anyone see anything in this new bill to prevent all families to claim 0 children, hire them to do jobs around the house, and then have them all file their own tax return, regardless of age? Wouldn't they each get a $12,000 deduction. Seems doing this would then allow a family of 4 to have $48,000 of income tax free. Even if you would lose the child tax credit (that will just go away anyway), wouldn't the family be better off?
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Anyone know if the first in first out (FIFO) rule was put in? Hope not.
On page 375 of the conference report, it says this was not included in the bill.
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Someone please correct me if I am wrong.
With no personal exemptions anymore, there is no longer any advantage to claim them as dependents. Anyone see anything in this new bill to prevent all families to claim 0 children, hire them to do jobs around the house, and then have them all file their own tax return, regardless of age? Wouldn't they each get a $12,000 deduction. Seems doing this would then allow a family of 4 to have $48,000 of income tax free. Even if you would lose the child tax credit (that will just go away anyway), wouldn't the family be better off?
Assuming that you are actually paying them for work and it's actually their money afterwards then yes you're probably right, you'd be giving up the Child Tax Credit though. Just claiming it on your taxes without it actually being true would be criminal tax evasion. The IRS might be interested in what a 2-year-old could do to command a $12,000 salary.
https://quickbooks.intuit.com/r/hr-laws-and-regulation/the-tax-implications-of-hiring-your-children/
The tax benefits for hiring your kids can be substantial, which means there’s lots of potential for abuse. There’s nothing wrong with employing your kids, but you may face additional scrutiny from the IRS if you do. Attorney Stephen Fishman recommends that you maintain payroll documentation and records to prove that your children are bona fide employees. Be realistic about your their skills and compensation as well. The IRS isn’t likely to believe that a 14-year-old is doing your accounting, and it will keep an eye out for an unreasonably high pay rate.
That's not really that different from today's state of affairs, except that there's slightly less incentive to claim them as dependents if the exemptions go away.
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First problem: Generally you cannot deduct the cost of hiring folks to do yardwork or clean the house from your own income.
Second problem: If the kid is earning $12,000 in self employment income and claiming it on a tax return, they'd owe an awful lot in self employment tax (15.3%)
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Is literally any agency or organization on the face of the planet estimating how much it will cost assuming that the Republicans are lying about the phase-outs?
Um, literarlly every agency?
You seem confused on this point. Every single analysis of the bill conducted by a government agency has to, by law, assume that the bill will be implemented as written. They cannot offer any analysis of hypothetical changes to the bill in the future, only of what it actually says in its current form.
Then there are some think tanks that offer analysis based on their wish lists or fears. Those have generally said the bill costs 2-3 trillion over the long term, due to increased interest on the newly created debt.
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Is literally any agency or organization on the face of the planet estimating how much it will cost assuming that the Republicans are lying about the phase-outs?
Um, literarlly every agency?
You seem confused on this point. Every single analysis of the bill conducted by a government agency has to, by law, assume that the bill will be implemented as written. They cannot offer any analysis of hypothetical changes to the bill in the future, only of what it actually says in its current form.
Then there are some think tanks that offer analysis based on their wish lists or fears. Those have generally said the bill costs 2-3 trillion over the long term, due to increased interest on the newly created debt.
That was in fact my point. No one is estimating based on theoretical changes that might happen in the future.
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Is there anything in the final version that changes the contribution limits, deductibility or funding deadlines for 401k, IRA or HSA?
Thanks.
fyi
http://docs.house.gov/billsthisweek/20171218/CRPT-115HRPT-466.pdf
There are some tweaks to retirement accounts but I don't see anything specific to your question. You can take a look at the referenced PDF, starting at page 636.
One thing that looks like made it in to the final bill - 401k loans will not become due within 60 days of termination of employment, instead you would have until the due date of filing your tax return. So if employment terminates on Jan 1, 2018, you would have until April 15, 2019 to repay the loan. This seems like common sense.
Changes that I can identify so far:
1) Roth recharacterizations will no longer be allowed but other recharacterizations will. (pg. 639)
2) Loan repayment changes as stated by SaucyAussie. (pg. 645)
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That was in fact my point. No one is estimating based on theoretical changes that might happen in the future.
Perhaps I misunderstood. Do you think republicans are lying when they say the bill will only add 1.5 trillion in new debt, or do you thimk they are lying when they say the middle class tax cuts will be made permanent?
Because if one of those things is true, then the other one isn't. I've been assuming that they wrote the bill they wanted to see implemented, to screw the middle class but add less debt. Some other folks seem to think they want a different bill, one that is nicer to the middle class but screws the national debt.
In either case, corporations and the super wealthy are making out great, so that's clearly their first property with this bill. Then way lower down is the debate about who we should screw over to make that happen. Should it be today's middle class, or tomorrow's future taxpayers (who may also be the middle class)?
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The fact that this will balloon the debt and saddle future generations is obviously bad news. Another primary concern I have is what is this expected to do to charities that depend on tax deductible donations. Raising the deduction while eliminating the personal exemption is basically a wash but it also has the side effect of reducing the tax advantages of charitable giving by reducing the number of people who itemize.
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Another primary concern I have is what is this expected to do to charities that depend on tax deductible donations.
This problem has been widely discussed online, (for example, here (http://money.cnn.com/2017/11/16/pf/tax-reform-charitable-giving/index.html)), with the general consensus being that it could accelerate end-of-year giving right now, at the expense of ongoing gifts in the future. You're right, it effectively ends the tax deduction for most people's charitable giving. Most people don't donate the required tens of thousands of dollars per year you'd need to see any tax benefit, but this is just another way the bill favors the wealthy. If you're rich enough to have a private foundation, the rule changes don't hurt you.
It looks like lots of the tax changes in this bill are covert attempts to support larger GOP policy goals. For example, the changes to pass through income will incentivize more people to become contractors instead of employees, which reduces the payroll taxes paid in to support social security and medicare, thus further undermining the financial viability of programs that Republicans have long claimed are insolvent because they are philosophically opposed to the idea of the social safety net.
There are a handful of other secondary impacts like that, that have not yet been widely discussed but which all seem to align nicely with long-term Republican goals about supporting wealthy capitalists at the expense of the working class.
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That was in fact my point. No one is estimating based on theoretical changes that might happen in the future.
Perhaps I misunderstood. Do you think republicans are lying when they say the bill will only add 1.5 trillion in new debt, or do you thimk they are lying when they say the middle class tax cuts will be made permanent?
Because if one of those things is true, then the other one isn't. I've been assuming that they wrote the bill they wanted to see implemented, to screw the middle class but add less debt. Some other folks seem to think they want a different bill, one that is nicer to the middle class but screws the national debt.
In either case, corporations and the super wealthy are making out great, so that's clearly their first property with this bill. Then way lower down is the debate about who we should screw over to make that happen. Should it be today's middle class, or tomorrow's future taxpayers (who may also be the middle class)?
Yes, I think we're vigorously agreeing with each other. Either you have to take the bill at face value and assume the middle-class phase-outs are intentional and desired, or you have to assume that the intention is to make them permanent eventually and that they're only "temporary" now so that they can lie about the true cost of the bill.
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Yes, I think we're vigorously agreeing with each other.
High fives all around.
(https://encrypted-tbn0.gstatic.com/images?q=tbn:ANd9GcSVz6eJcXhY9A9682YooLs1r3SUYVB4m1T2h2CekpQvUCTEdBtkGg)
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$6000 in Child Tax Credits ( I have 3 kids) x 7 years (2018 through sunset 2025) = $42000 in Federal Taxes I don't have to pay.
This will accelerate my FIRE saving by $500/month.
This is ridiculously terrible policy. Who cares how many children I have? Why should the Federal Government incentive baby making? Why is the cut-off to qualify for Child Credits so high? Does someone making >500K (not me) per year really need an extra 6 K in Federal Tax Credits?
All this is is smoke and mirrors to pacify (mollify) the middle class and upper middle class so voters will "go along to get along". This will be followed by a Cliff in 2025 that will be blamed on the Democrats.
JGS
This is not really a change in policy, but more just a change in the mechanics of the law. Remember, the $4000 dependent exemption was repealed, so to offset this, the child credit was increased by $1000. So a theoretical average taxpayer in the 25% bracket could come out even, losing the exemption (4000 x.25) but gaining it back in the form of the child credit.
Of course, depending on your specific situation, you may come out better or worse under the new law. For example, the higher phase out is huge bonus to middle-upper income earners who received no credit before, but now receive the full 2000/child.
Actually, it appears that the personal exemption is only suspended, until many things revert to the current scenario again in 2026. That actually surprised me, I thought it was one of the permanent changes.
So much for simplifying things, if we all have to learn a new set of rules and brackets and rates, only to return to the current set of rules, etc., in a few years. Reading parts of the document, I was struck by the issue of withholding calculation. It's all based on # of exemptions, but they are essentially = 0 now.
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First problem: Generally you cannot deduct the cost of hiring folks to do yardwork or clean the house from your own income.
Second problem: If the kid is earning $12,000 in self employment income and claiming it on a tax return, they'd owe an awful lot in self employment tax (15.3%)
Yep, get em used to paying those taxes early.
Where was all the liberal screaming when Obama added $9 trillion to the debt?
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$6000 in Child Tax Credits ( I have 3 kids) x 7 years (2018 through sunset 2025) = $42000 in Federal Taxes I don't have to pay.
This will accelerate my FIRE saving by $500/month.
This is ridiculously terrible policy. Who cares how many children I have? Why should the Federal Government incentive baby making? Why is the cut-off to qualify for Child Credits so high? Does someone making >500K (not me) per year really need an extra 6 K in Federal Tax Credits?
All this is is smoke and mirrors to pacify (mollify) the middle class and upper middle class so voters will "go along to get along". This will be followed by a Cliff in 2025 that will be blamed on the Democrats.
JGS
This is not really a change in policy, but more just a change in the mechanics of the law. Remember, the $4000 dependent exemption was repealed, so to offset this, the child credit was increased by $1000. So a theoretical average taxpayer in the 25% bracket could come out even, losing the exemption (4000 x.25) but gaining it back in the form of the child credit.
Of course, depending on your specific situation, you may come out better or worse under the new law. For example, the higher phase out is huge bonus to middle-upper income earners who received no credit before, but now receive the full 2000/child.
Yep. The tax bill eliminated the child tax credit phase out while also doubling the credit itself. People in the 150K to 500K income brackets in low to medium COL locations say “thank you very much.”
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First problem: Generally you cannot deduct the cost of hiring folks to do yardwork or clean the house from your own income.
Second problem: If the kid is earning $12,000 in self employment income and claiming it on a tax return, they'd owe an awful lot in self employment tax (15.3%)
Yep, get em used to paying those taxes early.
Where was all the liberal screaming when Obama added $9 trillion to the debt?
Here we go again! Could someone smarter than me calculate how much of that $9 trillion can be attributed to unpaid for tax cuts, unfunded wars, and the meltdown of the economy that occurred during George Bush’s administration? Do we really need to have this argument again?
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Nahhh, the middle and lower classes are probably protected until we have a sovereign credit crisis. When the sunset provisions come up, it will be just like the bush tax cuts. There will be tremendous pressure to make them permanent. Maybe the upper bracket tax cuts will be allowed to expire. Maybe the corporate tax rate will be rolled back (although that actually being good policy maybe not). Maybe some more "guard rails" will be put on the ridiculous breaks for partnerships and S-Corps. But we're not going to openly cut entitlements or openly raise taxes on the middle class unless and until it's a crisis. Maybe some tinkering by doing something like chained CPI, maybe do some more "hidden" taxes as mandates. But otherwise, the only thing the american electorate is united on is that they wants lots of government that somebody else pays for.
Fine but that means that the actual cost of the bill is going to be much much larger than the $1 - 1.5 Trillion advertised. Which is a requirement based on the budget they passed.
So either we assume that the tax bill represents the Republican's actual desire / plan and that sol's criticism is valid and it's pretty much just a temporary bandaid for the middle-class so they can ram through a huge permanent upper-class cut, or we assume that they really are looking out for the both but are lying in bad faith about how devastating to the federal budget (and probably therefore the entitlement programs) this plan will be. I'm honestly not sure which paints them in a worse light.
Edited to talk about "upper-class cuts" instead of "corporate cuts", since that's what sol was referring to.
Is it really lying when when everybody knows (except sol apparently) that that's exactly why they are doing it? And they freely admit that?
I don't know, you tell me. Are they lying about how much the bill will cost? How much will it cost then? Is there any way to estimate it? Is literally any agency or organization on the face of the planet estimating how much it will cost assuming that the Republicans are lying about the phase-outs?
They're politicians - if they're mouths are moving they are lying. Remember "no new taxes"? Or "you can keep your doctor"? Politicians lying is not a new thing. But this faux outrage at the other guys, when they try to do the same things as our guys, is frankly a little exhausting.
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First problem: Generally you cannot deduct the cost of hiring folks to do yardwork or clean the house from your own income.
Second problem: If the kid is earning $12,000 in self employment income and claiming it on a tax return, they'd owe an awful lot in self employment tax (15.3%)
Yep, get em used to paying those taxes early.
Where was all the liberal screaming when Obama added $9 trillion to the debt?
Here we go again! Could someone smarter than me calculate how much of that $9 trillion can be attributed to unpaid for tax cuts, unfunded wars, and the meltdown of the economy that occurred during George Bush’s administration? Do we really need to have this argument again?
Here's an article that tries to do exactly that.
https://www.thebalance.com/national-debt-under-obama-3306293
To add some perspective, we are currently at around $20 trillion in debt. Under current law, that is projected to grow to $30 trillion over the next ten years. The tax bill adds around $1.5 trillion to that, putting us at around $31.5 trillion. Doesn't it seem silly to hyperventilate over the 1.5, but not concerned about the other $30 trillion?
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The tax bill adds around $1.5 trillion to that, putting us at around $31.5 trillion. Doesn't it seem silly to hyperventilate over the 1.5, but not concerned about the other $30 trillion?
As I've mentioned several times in this thread, that analysis does not account for the interest to be paid on that new debt.
And republicans have styled themselves as the party of fiscal restraint for decades now. Does it seem odd they are now gleefully adding to the debt?
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First problem: Generally you cannot deduct the cost of hiring folks to do yardwork or clean the house from your own income.
Second problem: If the kid is earning $12,000 in self employment income and claiming it on a tax return, they'd owe an awful lot in self employment tax (15.3%)
Yep, get em used to paying those taxes early.
Where was all the liberal screaming when Obama added $9 trillion to the debt?
Here we go again! Could someone smarter than me calculate how much of that $9 trillion can be attributed to unpaid for tax cuts, unfunded wars, and the meltdown of the economy that occurred during George Bush’s administration? Do we really need to have this argument again?
About $12 trillion, presuming we include all the lifetime veteran medical costs.
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First problem: Generally you cannot deduct the cost of hiring folks to do yardwork or clean the house from your own income.
Second problem: If the kid is earning $12,000 in self employment income and claiming it on a tax return, they'd owe an awful lot in self employment tax (15.3%)
What about a rental property. Granted a 2 year old might seem a little extreme, but what about:
1. Gift a rental property to your 10-12 year old or older child.
2. File form 709 so the gift is excluded from taxes ( the value will count toward the lifetime gift exclusion about to double in the new tax plan ($22 million for MFJ)
3. The 10-12 year old now actively participates in the running of the business, including the accounting, hiring handyman, painting, etc.
4. No FiCA taxes on rental income.
5. First 12,000 of income is tax free for that child.
6. YOUR income has dropped by the value it was increased to your child
7. Depreciation (I believe taking it is still MANDATORY) will further decrease annual income for 25 years or so for the child.
8. Rinse and repeat until the full 12,000 is utilized.
Could buying a REIT achieve the same result without doing the actual management?
Disadvantage is you no longer control the property. That could be mitigated in several ways, including taking away the child's cell phone for a week (remember, they are 12 :)
This would be a strategy for excess, not funds you need during your life. It is based on the idea of treating all monies in the family as sort of a pseudo "radram Inc.", where the strategy is to maximize revenues while minimizing expenses. Under those terms, it makes little difference if the home is mine, my wife's, my child's, etc. We are all in this together.
I really think this Form 709 thing is way under-reported, especially when they were talking about the full repeal of the estate tax.
Thoughts?
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They're politicians - if they're mouths are moving they are lying. Remember "no new taxes"? Or "you can keep your doctor"? Politicians lying is not a new thing. But this faux outrage at the other guys, when they try to do the same things as our guys, is frankly a little exhausting.
So we've moved from "it's not lying" to "both parties are the same." Got it.
To add some perspective, we are currently at around $20 trillion in debt. Under current law, that is projected to grow to $30 trillion over the next ten years. The tax bill adds around $1.5 trillion to that, putting us at around $31.5 trillion. Doesn't it seem silly to hyperventilate over the 1.5, but not concerned about the other $30 trillion?
And putting that in better perspective, that's an increase of 15% in how fast it's growing. But we both know it's actually going to be more then that, since everyone is right and they're not going to let the middle-class phase-outs actually happen. So let's spitball 20-25%.
Who said I'm not concerned about the $30 Trillion? Deficit spending to get out of an economic depression (worst since the Great one) is how Keynesian economics is supposed to work. Cutting government income and worsening deficit spending during a time of relative prosperity doesn't make any kind of sense. Except it does, because it's a clear attempt to drive the government into a crisis in the next downturn and fulfill all their "government doesn't work so let's destroy it" fantasies. It's dirty slimy politics, it will do lasting damage to this country's poor and middle class, and there's no reason for any of it. And no I don't think there's any "faux outrage" or "silly hyperventilating" going on here. I will be fine, as will probably most people here. But I am justifiably angry that we have a party that's intentionally trying to run our country into the ground just so their ultra-rich donors can get a good ROI on their campaign contributions and the politicians can say "remember when I gave you free money" in the midterms next year.
Sure, give us tax simplification and reform, but not unfunded cuts. Bring back "I will close the Carried Interest loophole" Trump. Let fiscally responsible politicians work together in good faith to make the country better, even if they sometimes disagree on what direction that should be. But not this nonsense.
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Changes that I can identify so far:
1) Roth recharacterizations will no longer be allowed but other recharacterizations will. (pg. 639)
2) Loan repayment changes as stated by SaucyAussie. (pg. 645)
Thanks so much for finding and posting this part about the Roth recharacterizations:
The conference agreement follows the House bill and the Senate amendment with a
modification. Under the provision, the special rule that allows a contribution to one type of IRA
to be recharacterized as a contribution to the other type of IRA does not apply to a conversion
contribution to a Roth IRA. Thus, recharacterization cannot be used to unwind a Roth
conversion. However, recharacterization is still permitted with respect to other contributions.
For example, an individual may make a contribution for a year to a Roth IRA and, before the due
date for the individual’s income tax return for that year, recharacterize it as a contribution to a
traditional IRA.277
Neither of the original bills were at all clear on this. The meaningful new terminology appears to be their introduction of the term "conversion contribution." Apparently, Roth conversions/recharacterizations will now be officially dead.
(I hate the change. Recharacterizations were great insurance against market drops. My life will be easier, but less lucrative in down years.)
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Anyone know if the first in first out (FIFO) rule was put in? Hope not.
On page 375 of the conference report, it says this was not included in the bill.
Excellent. Finally a clear reference to this being gone. Thanks.
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First problem: Generally you cannot deduct the cost of hiring folks to do yardwork or clean the house from your own income.
Second problem: If the kid is earning $12,000 in self employment income and claiming it on a tax return, they'd owe an awful lot in self employment tax (15.3%)
What about a rental property. Granted a 2 year old might seem a little extreme, but what about:
1. Gift a rental property to your 10-12 year old or older child.
2. File form 709 so the gift is excluded from taxes ( the value will count toward the lifetime gift exclusion about to double in the new tax plan ($22 million for MFJ)
3. The 10-12 year old now actively participates in the running of the business, including the accounting, hiring handyman, painting, etc.
4. No FiCA taxes on rental income.
5. First 12,000 of income is tax free for that child.
6. YOUR income has dropped by the value it was increased to your child
7. Depreciation (I believe taking it is still MANDATORY) will further decrease annual income for 25 years or so for the child.
8. Rinse and repeat until the full 12,000 is utilized.
Could buying a REIT achieve the same result without doing the actual management?
Disadvantage is you no longer control the property. That could be mitigated in several ways, including taking away the child's cell phone for a week (remember, they are 12 :)
This would be a strategy for excess, not funds you need during your life. It is based on the idea of treating all monies in the family as sort of a pseudo "radram Inc.", where the strategy is to maximize revenues while minimizing expenses. Under those terms, it makes little difference if the home is mine, my wife's, my child's, etc. We are all in this together.
I really think this Form 709 thing is way under-reported, especially when they were talking about the full repeal of the estate tax.
Thoughts?
There's always creating a YouTube star: https://www.washingtonpost.com/news/morning-mix/wp/2017/12/11/6-year-old-made-11-million-in-one-year-reviewing-toys-on-you-tube/?utm_term=.3b32efc7e27a (https://www.washingtonpost.com/news/morning-mix/wp/2017/12/11/6-year-old-made-11-million-in-one-year-reviewing-toys-on-you-tube/?utm_term=.3b32efc7e27a)
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First problem: Generally you cannot deduct the cost of hiring folks to do yardwork or clean the house from your own income.
Second problem: If the kid is earning $12,000 in self employment income and claiming it on a tax return, they'd owe an awful lot in self employment tax (15.3%)
What about a rental property. Granted a 2 year old might seem a little extreme, but what about:
1. Gift a rental property to your 10-12 year old or older child.
2. File form 709 so the gift is excluded from taxes ( the value will count toward the lifetime gift exclusion about to double in the new tax plan ($22 million for MFJ)
3. The 10-12 year old now actively participates in the running of the business, including the accounting, hiring handyman, painting, etc.
4. No FiCA taxes on rental income.
5. First 12,000 of income is tax free for that child.
6. YOUR income has dropped by the value it was increased to your child
7. Depreciation (I believe taking it is still MANDATORY) will further decrease annual income for 25 years or so for the child.
8. Rinse and repeat until the full 12,000 is utilized.
Could buying a REIT achieve the same result without doing the actual management?
Disadvantage is you no longer control the property. That could be mitigated in several ways, including taking away the child's cell phone for a week (remember, they are 12 :)
This would be a strategy for excess, not funds you need during your life. It is based on the idea of treating all monies in the family as sort of a pseudo "radram Inc.", where the strategy is to maximize revenues while minimizing expenses. Under those terms, it makes little difference if the home is mine, my wife's, my child's, etc. We are all in this together.
I really think this Form 709 thing is way under-reported, especially when they were talking about the full repeal of the estate tax.
Thoughts?
Taxes are certainly not my area of expertise. Would passive real estate income be considered unearned income and be subject to the so-called kiddie tax? https://www.irs.gov/taxtopics/tc553
Also, are you envisioning doing this with leveraged properties or ones paid off in full? In the first case you'd probably run into issues with the bank not wanting to qualify a 12 year old for a mortgage and the IRS not considering the 12 year old to own the home independently if you're listed on the mortgage docs. In the second case this would require tying up an awful lot of capital to save perhaps $3-4,000 in taxes. And then when your kid grows up and moves away you're out the cost of a house. Now, as you say, if you already have more money than you need for a lifetime, then you can look at the transfer of a house's worth of capital to your teenage child as a feature rather than a bug, but I cannot help but think that by this point in the scenario we'd be letting the tail of taxes wag the dog of estate planning.
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It looks like lots of the tax changes in this bill are covert attempts to support larger GOP policy goals. For example, the changes to pass through income will incentivize more people to become contractors instead of employees, which reduces the payroll taxes paid in to support social security and medicare, thus further undermining the financial viability of programs that Republicans have long claimed are insolvent because they are philosophically opposed to the idea of the social safety net.
Would it reduce payroll taxes? As a self employed person I pay plenty in payroll taxes - self employment tax covers the employee and employer share.
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Would it reduce payroll taxes? As a self employed person I pay plenty in payroll taxes - self employment tax covers the employee and employer share.
It reduces payroll taxes if you retain business income as profit, instead of wages you pay yourself.
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Would it reduce payroll taxes? As a self employed person I pay plenty in payroll taxes - self employment tax covers the employee and employer share.
It reduces payroll taxes if you retain business income as profit, instead of wages you pay yourself.
Sol, while I agree with you completely on your take on this bill, I think we need to stop prognosticating disasters that will happen because of this bill and instead start thinking about ways to live with the consequences. I'm really disappointed that this thread disintegrated into a purely political discussion.
How about we have a productive discussion about how to live with this bill and how to elect people who will have the will to fix it?
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How about we have a productive discussion about how to live with this bill and how to elect people who will have the will to fix it?
Yeah, I thought some of the back and forth in this thread a bit silly given that we all quite like the 0% capital gains/qualified dividend provisions of the previous and new tax code, accessible by not having a big MAGI/W2 income and instead having lots of passive investments.
I've always thought it a bit cheeky decrying the tax breaks for billionaires while ignoring the huge loophole we Mustachians exploit in the USA, enabling us humble millionaires to pull up to $90k/yr in income without paying a dime in income tax. I think a LOT of hard working middle class people paying large amounts of state and federal income tax would find that disgraceful...
So let's accept the new tax code as it is, and see about legally making it work for us. Looks like we retain the 0% cap gain/QD break, and get a max 20% on real estate income while retaining full deductibility of mortgage interest and property tax, plus slightly faster depreciation. RE seems to do very well with this tax code (coincidentally?).
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I've always thought it a bit cheeky decrying the tax breaks for billionaires while ignoring the huge loophole we Mustachians exploit in the USA, enabling us humble millionaires to pull up to $90k/yr in income without paying a dime in income tax. I think a LOT of hard working middle class people paying large amounts of state and federal income tax would find that disgraceful...
It is disgraceful. It’s what allows Warren Buffett (together with we mustachian millionaires) to pay a lower tax rate than his secretary, which is shockingly unfair. And, like Warren Buffett, some of us in this forum complain about that inherent unfairness, loudly and often, and vote against our own personal financial self-interest to try to eliminate it, at the same time that we plan to continue to exploit it for as long as it does remain the law of the land.
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If Buffet wanted the government to have more of his money why is he shielding his estate tax by giving the bulk to the Gates Foundation.
He could always give more.
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They're politicians - if they're mouths are moving they are lying. Remember "no new taxes"? Or "you can keep your doctor"? Politicians lying is not a new thing. But this faux outrage at the other guys, when they try to do the same things as our guys, is frankly a little exhausting.
So we've moved from "it's not lying" to "both parties are the same." Got it.
I get the feeling we are in agreement on this but you just have a hard time admitting it.
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To add some perspective, we are currently at around $20 trillion in debt. Under current law, that is projected to grow to $30 trillion over the next ten years. The tax bill adds around $1.5 trillion to that, putting us at around $31.5 trillion. Doesn't it seem silly to hyperventilate over the 1.5, but not concerned about the other $30 trillion?
And putting that in better perspective, that's an increase of 15% in how fast it's growing. But we both know it's actually going to be more then that, since everyone is right and they're not going to let the middle-class phase-outs actually happen. So let's spitball 20-25%.
I'm just pushing out the raw numbers, I'll let you and others spin it with your partisan nonsense.
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Others may have already commented on this, but if not, I will point out that it appears that the standard deductions are indexed for inflation, using the same chained-CPI measure that will be used to index the brackets themselves, but the SALT $10,000 exemption (and the $750,000 mortgage limit) appear not to be indexed. Over time that should shift more and more people into the standard deduction. At present, I would potentially find it optimal to itemize every other year, if I bunched deductible charitable deductions, but that will cease being an effective strategy as my mortgage interest shrinks. It will be very interesting to see how much of a response there is in high-priced real estate markets (like the one I live in) and for charitable contributions.
I know that there are partisans of maintaining mortgages at current rates, but this will effectively increase my cost of mortgage interest by 50%, since I will move from a scenario where it is a deduction against taxes at a roughly 34% marginal rate to a scenario where it is not deductible at all. Suddenly a 3.125% after tax fixed rate on a roughly 7 year term fixed income investment doesn't look so bad.
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If Buffet wanted the government to have more of his money why is he shielding his estate tax by giving the bulk to the Gates Foundation.
He could always give more.
Because having <1% of the super wealthy do that solves absolutely nothing. It's a structural change needed.
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Others may have already commented on this, but if not, I will point out that it appears that the standard deductions are indexed for inflation, using the same chained-CPI measure that will be used to index the brackets themselves, but the SALT $10,000 exemption (and the $750,000 mortgage limit) appear not to be indexed. Over time that should shift more and more people into the standard deduction. At present, I would potentially find it optimal to itemize every other year, if I bunched deductible charitable deductions, but that will cease being an effective strategy as my mortgage interest shrinks. It will be very interesting to see how much of a response there is in high-priced real estate markets (like the one I live in) and for charitable contributions.
Pretty sure the new tax code said you can no longer prepay your 2018 property tax for a deduction in 2017.
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Pretty sure the new tax code said you can no longer prepay your 2018 property tax for a deduction in 2017.
It seems property tax prepayment may be ok, even if income tax prepayment is not. See: https://www.bogleheads.org/forum/viewtopic.php?p=3666834#p3666834
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Thanks so much for finding and posting this part about the Roth recharacterizations:
NP! I spent a bit a time looking at it to make sure (as best I could be) that it did not affect backdoor Roths or the Roth conversion ladder, the latter of which would have been pretty devastating to the FIRE community.
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To add some perspective, we are currently at around $20 trillion in debt. Under current law, that is projected to grow to $30 trillion over the next ten years. The tax bill adds around $1.5 trillion to that, putting us at around $31.5 trillion. Doesn't it seem silly to hyperventilate over the 1.5, but not concerned about the other $30 trillion?
And putting that in better perspective, that's an increase of 15% in how fast it's growing. But we both know it's actually going to be more then that, since everyone is right and they're not going to let the middle-class phase-outs actually happen. So let's spitball 20-25%.
I'm just pushing out the raw numbers, I'll let you and others spin it with your partisan nonsense.
So in your world comparing "total debt accumulated so far" with "estimated increase in debt over 10 years" and concluding that it's no big deal "just the raw numbers", but pointing out that the "percentage increase in annual deficit" is actually pretty large is "nonsense partisan spin". How odd. However clearly everyone is tired of hearing from me, so I'll shut up now.
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So let's accept the new tax code as it is, and see about legally making it work for us.
I agree, but not just working the tax code to one's advantage, need to protect one's self from the rigged system.
I'm really not that old, but I've seen the debt go from hundreds of millions to billions then trillions which worried me over the years, but honestly it doesn't bother me at all now. The national debt was just one of many concerns over the years, there's consumer debt, pension fund under funding, bond debt and student debt from coast to coast which to me is Puerto Rico in the making, but I have learned not to care as it will never be resolved. Being a fiscal conservative, I've long worried about the next generation, but while worrying I witnessed both parties spending on their usual pet projects to stay in power.
I've seen Democrats come to power promising to spend more over the years while ignoring the debt. I've seen Republicans come to power promising not to spend more, but they too ponied up every time. It's a battle of sorts, while Democrats are in power, typical Republican pet projects aren't funded so when Republicans gain power, there's an effort to fund what hasn't been funded for a certain number of years, then the Democrats do the same when they get power so an endless cycle of each party aching to fund their pet projects.
I find all involved when speaking about the debt, including Mustache millionaires, hypocrites in one way or another.
At the end of the day, it is best to plan in whatever way one can for the next financial crisis and the one after that. It seems these crisis are a means to redistribute wealth - how many that lost their home have recovered with a home and the savings they had, how many are still under water and broke while the mega rich, rich Democrats and Republicans are doing just fine, better than ever. How many went to jail as a result of the last crisis, one, two? I see a rigged system by all of those in power which isn't limited to politicians considering super PACs are in power even without holding the office.
So with the system rigged by both parties, I feel I need to protect myself from the next crisis that will yet again destroy wealth at the bottom and in the middle. They really don't want the masses to gain for very long, to a point, then take it away so one has to be aware to avoid the next crisis, whatever it is.
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Sol, while I agree with you completely on your take on this bill, I think we need to stop prognosticating disasters that will happen because of this bill and instead start thinking about ways to live with the consequences. I'm really disappointed that this thread disintegrated into a purely political discussion.
I'm not even that upset about the financial implications of this bill, honestly. My family will save money this year. We're already rich, and this bill is pretty nice to rich people.
I was just trying to highlight that it seems to be much more than a tax bill. It's the only major piece of legislation that Congress is going to pass in the first year of the new administration, and they've really loaded it up with everything they can think of. It repeals the individual mandate and consequently causes 13 million people to lose health insurance, because their priority is undermining Obamacare. It reduces medicaid and ss funding, because their priority is slashing the social safety net. It raises taxes on the middle class to fund a tax break for the upper class, because their priority is increasing wealth inequality. These things are sort of tax reform issues, but only in the sense that they serve larger ideological goals of the party. I'm shocked they didn't include the personhood for fetuses amendment about 529 plans.
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To add some perspective, we are currently at around $20 trillion in debt. Under current law, that is projected to grow to $30 trillion over the next ten years. The tax bill adds around $1.5 trillion to that, putting us at around $31.5 trillion. Doesn't it seem silly to hyperventilate over the 1.5, but not concerned about the other $30 trillion?
And putting that in better perspective, that's an increase of 15% in how fast it's growing. But we both know it's actually going to be more then that, since everyone is right and they're not going to let the middle-class phase-outs actually happen. So let's spitball 20-25%.
I'm just pushing out the raw numbers, I'll let you and others spin it with your partisan nonsense.
So in your world comparing "total debt accumulated so far" with "estimated increase in debt over 10 years" and concluding that it's no big deal "just the raw numbers", but pointing out that the "percentage increase in annual deficit" is actually pretty large is "nonsense partisan spin". How odd. However clearly everyone is tired of hearing from me, so I'll shut up now.
Not at all, your posts are really good, you clearly are knowledgeable on this topic and are passionate about your politics. We're not all always going to agree on everything.
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What's the word on 457 limits remaining seperate from 401k/403b?
Saw this talked about earlier in senate bill, but not since they are merging the two.
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Changes that I can identify so far:
1) Roth recharacterizations will no longer be allowed but other recharacterizations will. (pg. 639)
2) Loan repayment changes as stated by SaucyAussie. (pg. 645)
Thanks so much for finding and posting this part about the Roth recharacterizations:
The conference agreement follows the House bill and the Senate amendment with a
modification. Under the provision, the special rule that allows a contribution to one type of IRA
to be recharacterized as a contribution to the other type of IRA does not apply to a conversion
contribution to a Roth IRA. Thus, recharacterization cannot be used to unwind a Roth
conversion. However, recharacterization is still permitted with respect to other contributions.
For example, an individual may make a contribution for a year to a Roth IRA and, before the due
date for the individual’s income tax return for that year, recharacterize it as a contribution to a
traditional IRA.277
Neither of the original bills were at all clear on this. The meaningful new terminology appears to be their introduction of the term "conversion contribution." Apparently, Roth conversions/recharacterizations will now be officially dead.
(I hate the change. Recharacterizations were great insurance against market drops. My life will be easier, but less lucrative in down years.)
This went over my head. Assuming the Tax Bill passes,
In 2018 can I do a Roth Conversion as before.
Am I correct, if I do this I can't undo it?
Why would I want to undo it?
Thanks
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I've always thought it a bit cheeky decrying the tax breaks for billionaires while ignoring the huge loophole we Mustachians exploit in the USA, enabling us humble millionaires to pull up to $90k/yr in income without paying a dime in income tax. I think a LOT of hard working middle class people paying large amounts of state and federal income tax would find that disgraceful...
It is disgraceful. It’s what allows Warren Buffett (together with we mustachian millionaires) to pay a lower tax rate than his secretary, which is shockingly unfair. And, like Warren Buffett, some of us in this forum complain about that inherent unfairness, loudly and often, and vote against our own personal financial self-interest to try to eliminate it, at the same time that we plan to continue to exploit it for as long as it does remain the law of the land.
In reference to "0% capital gains/qualified dividend provisions"
I think it is great, in that it lets those that actually save their money and invest it, the ability to grow a nestegg while working. If you want to limit it to some income level then start taxing it, OK, what level do you suggest?
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Sol, while I agree with you completely on your take on this bill, I think we need to stop prognosticating disasters that will happen because of this bill and instead start thinking about ways to live with the consequences. I'm really disappointed that this thread disintegrated into a purely political discussion.
I'm not even that upset about the financial implications of this bill, honestly. My family will save money this year.
I was just trying to highlight that it seems to be much more than a tax bill. It's the only major piece of legislation that Congress is going to pass in the first year of the new administration, and they've really loaded it up with everything they can think of. It repeals the individual mandate and consequently causes 13 million people to lose health insurance,
Do they lose it because they decide, since I don't get a penalty I'm not buying insurance? I don't get how a lack of mandate means they lose health insurance.
because their priority is undermining Obamacare. It reduces medicaid and ss funding, because their priority is slashing the social safety net. It raises taxes on the middle class to fund a tax break for the upper class, because their priority is increasing wealth inequality. These things are sort of tax reform issues, but only in the sense that they serve larger ideological goals of the party. I'm shocked they didn't include the personhood for fetuses amendment about 529 plans.
Sol, you're just starting to liberal dribble. You usually have good arguments. Regroup and get off the bandwagon.
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This went over my head. Assuming the Tax Bill passes,
In 2018 can I do a Roth Conversion as before.
Am I correct, if I do this I can't undo it?
Why would I want to undo it?
Thanks
Lets say you do a Roth conversion of 100 shares of stock worth $10,000 in January. You owe taxes on $10,000.
The market crashes, and the stock you converted is now worth $5,000. You still owe taxes on $10,000.
However, if you instead recharacterize back to Traditional you owe taxes on $0.
You then do a Roth conversion of 100 shares of stock worth $5,000. You owe taxes on $5,000, even though it's the same number of shares of the same stock you converted in January.
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What's the word on 457 limits remaining seperate from 401k/403b?
Saw this talked about earlier in senate bill, but not since they are merging the two.
Conference report leaves that out (no change from current law).
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Sol, while I agree with you completely on your take on this bill, I think we need to stop prognosticating disasters that will happen because of this bill and instead start thinking about ways to live with the consequences. I'm really disappointed that this thread disintegrated into a purely political discussion.
I'm not even that upset about the financial implications of this bill, honestly. My family will save money this year.
I was just trying to highlight that it seems to be much more than a tax bill. It's the only major piece of legislation that Congress is going to pass in the first year of the new administration, and they've really loaded it up with everything they can think of. It repeals the individual mandate and consequently causes 13 million people to lose health insurance,
Do they lose it because they decide, since I don't get a penalty I'm not buying insurance? I don't get how a lack of mandate means they lose health insurance.
because their priority is undermining Obamacare. It reduces medicaid and ss funding, because their priority is slashing the social safety net. It raises taxes on the middle class to fund a tax break for the upper class, because their priority is increasing wealth inequality. These things are sort of tax reform issues, but only in the sense that they serve larger ideological goals of the party. I'm shocked they didn't include the personhood for fetuses amendment about 529 plans.
Sol, you're just starting to liberal dribble. You usually have good arguments. Regroup and get off the bandwagon.
If more healthy people opt out then costs go up, because there's a higher percentage of sick people buying insurance. It's how insurance works.
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Do they lose it because they decide, since I don't get a penalty I'm not buying insurance? I don't get how a lack of mandate means they lose health insurance.
Did you not read the CBO report?
It spells out how any why the various millions of people lose insurance for different reasons. Yes, some of them lose it because they will choose to be uninsured. Of those, some will need healthcare they cannot afford, and so the rest of us will pay for it. Others will lose coverage because of the medicaid changes, others because they can no longer afford the increased premiums that will result from repealing the mandate.
Sol, you're just starting to liberal dribble.
How do you figure? They DID propose a personhood amendment for fetuses. They DID create a bill that raises taxes on the poor and provides multiple tax cuts for the wealthy. They DID change the tax rates on pass-through entities, in order to reduce funding for social programs through payroll taxes.
These aren't really "dribble" (did you mean drivel?) they are the facts of the Republican bill about to be passed without any Democratic support, and which is opposed by roughly 70% of the country.
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Do they lose it because they decide, since I don't get a penalty I'm not buying insurance? I don't get how a lack of mandate means they lose health insurance.
Did you not read the CBO report?
It spells out how any why the various millions of people lose insurance for different reasons. Yes, some of them lose it because they will choose to be uninsured. Of those, some will need healthcare they cannot afford, and so the rest of us will pay for it. Others will lose coverage because of the medicaid changes, others because they can no longer afford the increased premiums that will result from repealing the mandate.
Don't forget insurers dropping out, and some markets being without any plans at all. Because that's a thing that almost happened for 2018 without the new tax law.
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Yeah funny how these liberals in other developed countries have FAR cheaper and just as good healthcare.
Maybe they have "death panels" over there....
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When can I expect changes in payroll tax withholdings? Seems like the biggest holdup at this point is administrative changes in payroll depts?
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When can I expect changes in payroll tax withholdings?
Whenever you submit a change request?
I don't think anything will necessarily change in corporate payroll deparments. The current withholdings and exemptions system was already a holdover from previous tax systems, and I don't think it needs to change for 2018. They certainly could change it, I just don't think it's mandatory.
All that will change is how you file your taxes at the end of the year. The form will be different in 2019, for the 2018 tax year under the new system.
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When can I expect changes in payroll tax withholdings?
Whenever you submit a change request?
I don't think anything will necessarily change in corporate payroll deparments. The current withholdings and exemptions system was already a holdover from previous tax systems, and I don't think it needs to change for 2018. They certainly could change it, I just don't think it's mandatory.
All that will change is how you file your taxes at the end of the year. The form will be different in 2019, for the 2018 tax year under the new system.
Huh. Guess I will need to up my allowances, depending on what happens this week.
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Did you not read the CBO report?
It spells out how any why the various millions of people lose insurance for different reasons. Yes, some of them lose it because they will choose to be uninsured. Of those, some will need healthcare they cannot afford, and so the rest of us will pay for it. Others will lose coverage because of the medicaid changes, others because they can no longer afford the increased premiums that will result from repealing the mandate.
Do you think that at least some individual states will still enact their own mandates and stabilize the insurance markets in those states? Another thing too, hopefully the motivation by Republicans to continue to dismantle the ACA will cease with the passage of this bill and repeal of the mandate. That would leave subsidies intact, at least for states with stable insurance markets like, California for instance.
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When can I expect changes in payroll tax withholdings?
Whenever you submit a change request?
I don't think anything will necessarily change in corporate payroll deparments. The current withholdings and exemptions system was already a holdover from previous tax systems, and I don't think it needs to change for 2018. They certainly could change it, I just don't think it's mandatory.
All that will change is how you file your taxes at the end of the year. The form will be different in 2019, for the 2018 tax year under the new system.
I don't believe sol's comments in his last two paragraphs are accurate.
Today I heard Treasury Secretary Mnuchin say in a radio interview that the IRS is already preparing new withholding tables for employers to determine how much to withhold from paychecks based on the new lowered tax brackets. He indicated that people could see lower withholding from their paychecks in February.
I have to believe the W-4 will have to change as well, but he didn't mention that form specifically.
If I were still working I'd probably make a note to check my withholding in March and make sure it was still appropriate.
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Do they lose it because they decide, since I don't get a penalty I'm not buying insurance? I don't get how a lack of mandate means they lose health insurance.
A very large portion of that 13 million is people not getting into Medicaid. The lack of a mandate means they have no incentive to visit healthcare.gov which is where they would be notified of their eligability for Medicaid. No mandate or outreach = no signups = no coverage for people who would be eligible for the program.
The individual market is a relatively small number of people compared to Medicaid. Smaller still, vanishingly so, is the number of people who refuse to buy insurance and have paid the penalty on principal. The only significant effect of mandate repeal on the individual is that people will buy short term junk insurance in higher numbers.
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So let's accept the new tax code as it is, and see about legally making it work for us.
I agree, but not just working the tax code to one's advantage, need to protect one's self from the rigged system.
I'm really not that old, but I've seen the debt go from hundreds of millions to billions then trillions which worried me over the years, but honestly it doesn't bother me at all now. The national debt was just one of many concerns over the years, there's consumer debt, pension fund under funding, bond debt and student debt from coast to coast which to me is Puerto Rico in the making, but I have learned not to care as it will never be resolved. Being a fiscal conservative, I've long worried about the next generation, but while worrying I witnessed both parties spending on their usual pet projects to stay in power.
I've seen Democrats come to power promising to spend more over the years while ignoring the debt. I've seen Republicans come to power promising not to spend more, but they too ponied up every time. It's a battle of sorts, while Democrats are in power, typical Republican pet projects aren't funded so when Republicans gain power, there's an effort to fund what hasn't been funded for a certain number of years, then the Democrats do the same when they get power so an endless cycle of each party aching to fund their pet projects.
I find all involved when speaking about the debt, including Mustache millionaires, hypocrites in one way or another.
At the end of the day, it is best to plan in whatever way one can for the next financial crisis and the one after that. It seems these crisis are a means to redistribute wealth - how many that lost their home have recovered with a home and the savings they had, how many are still under water and broke while the mega rich, rich Democrats and Republicans are doing just fine, better than ever. How many went to jail as a result of the last crisis, one, two? I see a rigged system by all of those in power which isn't limited to politicians considering super PACs are in power even without holding the office.
So with the system rigged by both parties, I feel I need to protect myself from the next crisis that will yet again destroy wealth at the bottom and in the middle. They really don't want the masses to gain for very long, to a point, then take it away so one has to be aware to avoid the next crisis, whatever it is.
Very good words. If the unwashed masses actually had a clue to how the system is stacked against them there would be a revolt. As a Mustacian Millionaire I practice stealth wealth. There may be a time in the future where the working poor come for the heads of the elite class. I snottedly made comments recently on this forum stating that being +500k in wealth is chicken feed. That's how far removed I am from my humble days where I labored with a shovel for little more than minimum wage. Keep your heads and your noses low.
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When can I expect changes in payroll tax withholdings?
Whenever you submit a change request?
I don't think anything will necessarily change in corporate payroll deparments. The current withholdings and exemptions system was already a holdover from previous tax systems, and I don't think it needs to change for 2018. They certainly could change it, I just don't think it's mandatory.
All that will change is how you file your taxes at the end of the year. The form will be different in 2019, for the 2018 tax year under the new system.
I don't believe sol's comments in his last two paragraphs are accurate.
Today I heard Treasury Secretary Mnuchin say in a radio interview that the IRS is already preparing new withholding tables for employers to determine how much to withhold from paychecks based on the new lowered tax brackets. He indicated that people could see lower withholding from their paychecks in February.
I have to believe the W-4 will have to change as well, but he didn't mention that form specifically.
If I were still working I'd probably make a note to check my withholding in March and make sure it was still appropriate.
Yeah, Mnuchin said the same thing on Face the Nation this AM (same interview on the radio?) so that was why I was asking.
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I have a concern:
Previous entry:
I'm really not that old, but I've seen the debt go from hundreds of millions to billions then trillions which worried me over the years, but honestly it doesn't bother me at all now. The national debt was just one of many concerns over the years, there's consumer debt, pension fund under funding, bond debt and student debt from coast to coast which to me is Puerto Rico in the making, but I have learned not to care as it will never be resolved.
Ok - Money is like any other commodity. It follows the rules of supply and demand. By spending money that isn't honestly there, it is like getting stuff at a reduced value. It is increasing the supply of money. Increasing the supply with the same number of folks out there using it, will diminish its value. As you diminish the the value, it means that it takes more money to buy goods.
This is inflation.
They say that inflation is low. Have you not seen prices rising?
How will that help future Mustachians? Well, golly, if you are retired for 40 years, you may be facing money problems. You may be finding yourself back to work in your old age, Bucko. If you were a software engineer or some such you will be hopelessly rusty and out of date.
Is there enough protection using index funds and the 4 percent rule? Will stocks rise as fast as the inflation?
Very good words. If the unwashed masses actually had a clue to how the system is stacked against them there would be a revolt.
I'm not sure whether myself and the rest of the unwashed masses just won't have that revolt. Events of this time remind me of the description of the gilded age I've read about in the history books.
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Is there enough protection using index funds and the 4 percent rule?
Short answers are
- if the future is no worse than the worst of the past, then yes.
- if the future is worse than the worst of the past, then no.
See Stop worrying about the 4% rule (https://forum.mrmoneymustache.com/investor-alley/stop-worrying-about-the-4-rule/) for over 1000 posts debating this.
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When can I expect changes in payroll tax withholdings?
Whenever you submit a change request?
I don't think anything will necessarily change in corporate payroll deparments. The current withholdings and exemptions system was already a holdover from previous tax systems, and I don't think it needs to change for 2018. They certainly could change it, I just don't think it's mandatory.
All that will change is how you file your taxes at the end of the year. The form will be different in 2019, for the 2018 tax year under the new system.
I don't believe sol's comments in his last two paragraphs are accurate.
Today I heard Treasury Secretary Mnuchin say in a radio interview that the IRS is already preparing new withholding tables for employers to determine how much to withhold from paychecks based on the new lowered tax brackets. He indicated that people could see lower withholding from their paychecks in February.
I have to believe the W-4 will have to change as well, but he didn't mention that form specifically.
If I were still working I'd probably make a note to check my withholding in March and make sure it was still appropriate.
Yeah, Mnuchin said the same thing on Face the Nation this AM (same interview on the radio?) so that was why I was asking.
ugh... I hope they revise the W-4 to be something more simple like "withhold x%, x$, or my expected MAGI is $X"
my wife is taking 5 mo unpaid leave next year and I just did all the work to figure out she needs 27 allowances or something absurd like that
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Do they lose it because they decide, since I don't get a penalty I'm not buying insurance? I don't get how a lack of mandate means they lose health insurance.
A very large portion of that 13 million is people not getting into Medicaid. The lack of a mandate means they have no incentive to visit healthcare.gov which is where they would be notified of their eligability for Medicaid. No mandate or outreach = no signups = no coverage for people who would be eligible for the program.
The individual market is a relatively small number of people compared to Medicaid. Smaller still, vanishingly so, is the number of people who refuse to buy insurance and have paid the penalty on principal. The only significant effect of mandate repeal on the individual is that people will buy short term junk insurance in higher numbers.
One tiny little bright sliver: Medicaid eligibility is often retroactive without a defined enrollment period. So if you have a catastrophic problem, the hospital will likely help you sign up (because they like being paid something instead of nothing). It won't do crap for preventive care, but some people will get covered this way.
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When can I expect changes in payroll tax withholdings?
Whenever you submit a change request?
I don't think anything will necessarily change in corporate payroll deparments. The current withholdings and exemptions system was already a holdover from previous tax systems, and I don't think it needs to change for 2018. They certainly could change it, I just don't think it's mandatory.
All that will change is how you file your taxes at the end of the year. The form will be different in 2019, for the 2018 tax year under the new system.
I don't believe sol's comments in his last two paragraphs are accurate.
Today I heard Treasury Secretary Mnuchin say in a radio interview that the IRS is already preparing new withholding tables for employers to determine how much to withhold from paychecks based on the new lowered tax brackets. He indicated that people could see lower withholding from their paychecks in February.
I have to believe the W-4 will have to change as well, but he didn't mention that form specifically.
If I were still working I'd probably make a note to check my withholding in March and make sure it was still appropriate.
I recall from the Bush temporary cuts, I didn't need to do anything. Payroll adjusted based on who knows what. I think I had changes in base take home pay again without doing anything but that was a long, time ago in a galaxy far away.
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When can I expect changes in payroll tax withholdings?
Whenever you submit a change request?
I don't think anything will necessarily change in corporate payroll deparments. The current withholdings and exemptions system was already a holdover from previous tax systems, and I don't think it needs to change for 2018. They certainly could change it, I just don't think it's mandatory.
All that will change is how you file your taxes at the end of the year. The form will be different in 2019, for the 2018 tax year under the new system.
I don't believe sol's comments in his last two paragraphs are accurate.
Today I heard Treasury Secretary Mnuchin say in a radio interview that the IRS is already preparing new withholding tables for employers to determine how much to withhold from paychecks based on the new lowered tax brackets. He indicated that people could see lower withholding from their paychecks in February.
I have to believe the W-4 will have to change as well, but he didn't mention that form specifically.
If I were still working I'd probably make a note to check my withholding in March and make sure it was still appropriate.
I recall from the Bush temporary cuts, I didn't need to do anything. Payroll adjusted based on who knows what. I think I had changes in base take home pay again without doing anything but that was a long, time ago in a galaxy far away.
And they sent us all a check in the mail back then.
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This is interesting
https://www.bloomberg.com/news/articles/2017-12-18/finance-gurus-devise-funky-workarounds-to-loss-of-salt-deduction
TL;DR -- If you make a charitable contribution to a state, you get a dollar for dollar credit on your state income taxes. How many states will move to such a system....Charitable deductions are fully deductible on federal taxes.
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If you make a charitable contribution to a state, you get a dollar for dollar credit on your state income taxes. How many states will move to such a system....Charitable deductions are fully deductible on federal taxes.
Unless the charitable donation offsets your property taxes, I don't see the advantage in it.
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Do you think that at least some individual states will still enact their own mandates and stabilize the insurance markets in those states? Another thing too, hopefully the motivation by Republicans to continue to dismantle the ACA will cease with the passage of this bill and repeal of the mandate. That would leave subsidies intact, at least for states with stable insurance markets like, California for instance.
Yes...California's proposal for Single Payer in CA - http://www.latimes.com/politics/essential/la-pol-ca-essential-politics-updates-first-fiscal-analysis-of-single-payer-1495475434-htmlstory.html
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I'm really not that old, but I've seen the debt go from hundreds of millions to billions then trillions which worried me over the years, but honestly it doesn't bother me at all now. The national debt was just one of many concerns over the years, there's consumer debt, pension fund under funding, bond debt and student debt from coast to coast which to me is Puerto Rico in the making, but I have learned not to care as it will never be resolved. Being a fiscal conservative, I've long worried about the next generation, but while worrying I witnessed both parties spending on their usual pet projects to stay in power.
I can't find this post anymore, but it made me laugh and I saw two people quote it.
I had to go back to 1862 when the debt was in the hundreds of millions (incidentally, that was the only year it was hundreds of millions; it went from 10's of millions prior, to $1B in 1863).
The last time the national debt was in the 100's of billions was 1981 ($997B).
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Do they lose it because they decide, since I don't get a penalty I'm not buying insurance? I don't get how a lack of mandate means they lose health insurance.
A very large portion of that 13 million is people not getting into Medicaid. The lack of a mandate means they have no incentive to visit healthcare.gov which is where they would be notified of their eligability for Medicaid. No mandate or outreach = no signups = no coverage for people who would be eligible for the program.
The individual market is a relatively small number of people compared to Medicaid. Smaller still, vanishingly so, is the number of people who refuse to buy insurance and have paid the penalty on principal. The only significant effect of mandate repeal on the individual is that people will buy short term junk insurance in higher numbers.
One tiny little bright sliver: Medicaid eligibility is often retroactive without a defined enrollment period. So if you have a catastrophic problem, the hospital will likely help you sign up (because they like being paid something instead of nothing). It won't do crap for preventive care, but some people will get covered this way.
Maybe, but if you have a problem that is bad but you think isn't catastrophic, and you don't have insurance, and you don't know that you're eligible for Medicaid solely because of your income level, how likely is it you're going to go to the hospital at all?
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Do you think that at least some individual states will still enact their own mandates and stabilize the insurance markets in those states? Another thing too, hopefully the motivation by Republicans to continue to dismantle the ACA will cease with the passage of this bill and repeal of the mandate. That would leave subsidies intact, at least for states with stable insurance markets like, California for instance.
Yes...California's proposal for Single Payer in CA - http://www.latimes.com/politics/essential/la-pol-ca-essential-politics-updates-first-fiscal-analysis-of-single-payer-1495475434-htmlstory.html
And this more recent - http://www.sacbee.com/opinion/california-forum/article189661334.html
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Does anyone know if Capital Gain Loss will still be available as a deduction? Could not find it in the conference bill, so assume no change?
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Do they lose it because they decide, since I don't get a penalty I'm not buying insurance? I don't get how a lack of mandate means they lose health insurance.
A very large portion of that 13 million is people not getting into Medicaid. The lack of a mandate means they have no incentive to visit healthcare.gov which is where they would be notified of their eligability for Medicaid. No mandate or outreach = no signups = no coverage for people who would be eligible for the program.
The individual market is a relatively small number of people compared to Medicaid. Smaller still, vanishingly so, is the number of people who refuse to buy insurance and have paid the penalty on principal. The only significant effect of mandate repeal on the individual is that people will buy short term junk insurance in higher numbers.
One tiny little bright sliver: Medicaid eligibility is often retroactive without a defined enrollment period. So if you have a catastrophic problem, the hospital will likely help you sign up (because they like being paid something instead of nothing). It won't do crap for preventive care, but some people will get covered this way.
Maybe, but if you have a problem that is bad but you think isn't catastrophic, and you don't have insurance, and you don't know that you're eligible for Medicaid solely because of your income level, how likely is it you're going to go to the hospital at all?
I didn't say it was awesome. :-\
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If you make a charitable contribution to a state, you get a dollar for dollar credit on your state income taxes. How many states will move to such a system....Charitable deductions are fully deductible on federal taxes.
Unless the charitable donation offsets your property taxes, I don't see the advantage in it.
For you or in general? It will certainly help those who pay high state income taxes. I know for myself I’ll pay 30k in state taxes and 15k in property taxes next year. It’s the difference between being able to deduct 40k vs 10k.
Sent from my iPhone using Tapatalk
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One tiny little bright sliver: Medicaid eligibility is often retroactive without a defined enrollment period. So if you have a catastrophic problem, the hospital will likely help you sign up (because they like being paid something instead of nothing). It won't do crap for preventive care, but some people will get covered this way.
The person would need to be under the income limits for those retroactive months (up to 3) to qualify.
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If you make a charitable contribution to a state, you get a dollar for dollar credit on your state income taxes. How many states will move to such a system....Charitable deductions are fully deductible on federal taxes.
Unless the charitable donation offsets your property taxes, I don't see the advantage in it.
how do you not see the advantage of it - a state would allow you to donate money to them - and refund you dollar for dollar on what your income tax would have been
for example i have 10k in income tax in my state - not able to itemize on my federal return. flip side i donate 10k to my state who gives me 10k back on my income taxes- 10k is fully deductible. now i'd still need property taxes and mortgage interest and other donation to get to the 24k MFJ standard deduction but. i dont quite get what it offsetting property tax would do unless you live in a no income tax state with higher than 10k in property tax then the local Muni's could possibly implement something similar.
I was more intrigued by the payroll tax section than others b/c that really helps mustachians. If states go to employer paid payroll tax vs income tax. that would greatly help more states become income tax free states and be more inviting to the retiree
'If employers pay the payroll tax and reduce employees’ salaries by the same amount, workers wouldn’t have to deduct anything and would wind up being paid the same amount. That would allow states to collect the same revenue while preserving individuals’ deductions on federal returns.'
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One tiny little bright sliver: Medicaid eligibility is often retroactive without a defined enrollment period. So if you have a catastrophic problem, the hospital will likely help you sign up (because they like being paid something instead of nothing). It won't do crap for preventive care, but some people will get covered this way.
The person would need to be under the income limits for those retroactive months (up to 3) to qualify.
Well yeah, but we're talking about people who aren't aware they're eligible, so that's going to be the majority of the people in that particular situation. Presumably, a portion people with a life event that triggers eligibility will apply at that time to maintain coverage. It's far from ideal.
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If you make a charitable contribution to a state, you get a dollar for dollar credit on your state income taxes. How many states will move to such a system....Charitable deductions are fully deductible on federal taxes.
Unless the charitable donation offsets your property taxes, I don't see the advantage in it.
how do you not see the advantage of it - a state would allow you to donate money to them - and refund you dollar for dollar on what your income tax would have been
Right, it's the dollar for dollar refund that is key to making this advantageous for people. It doesn't make sense to donate money to the state unless it also offsets your property taxes.
It does seem legally questionable to me, if they try it. By what authority can a state selectively forgive property tax bills for some residents but not others, based on their charitable giving? Property tax rates are set by statute. You can't just change them to zero on a whim. How would they verify the contributions in a way that was not transparently identical to just paying property taxes? I would expect lawsuits from conservative political activists.
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If you make a charitable contribution to a state, you get a dollar for dollar credit on your state income taxes. How many states will move to such a system....Charitable deductions are fully deductible on federal taxes.
Unless the charitable donation offsets your property taxes, I don't see the advantage in it.
how do you not see the advantage of it - a state would allow you to donate money to them - and refund you dollar for dollar on what your income tax would have been
Right, it's the dollar for dollar refund that is key to making this advantageous for people. It doesn't make sense to donate money to the state unless it also offsets your property taxes.
It does seem legally questionable to me, if they try it. By what authority can a state selectively forgive property tax bills for some residents but not others, based on their charitable giving? Property tax rates are set by statute. You can't just change them to zero on a whim. How would they verify the contributions in a way that was not transparently identical to just paying property taxes? I would expect lawsuits from conservative political activists.
i dont understand why you keep targetting property taxes here.
if i owe a state income taxes of 10k - not federally deductible
and the state lets me donate 10k to them and gives me a state income tax refund of 10k - i deduct my donation of 10k from my federal taxes now
property taxes do not matter at all.
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i dont understand why you keep targetting property taxes here.
I didn't mean to target property taxes. Property, income, it's all the same for this purpose.
I'm just not seeing how a state can legally forgive taxes due based on a charitable donation, which by definition cannot be for your own benefit.
I'm not philosophically opposed to the idea, I just don't see how it could possibly be legal.
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i dont understand why you keep targetting property taxes here.
I didn't mean to target property taxes. Property, income, it's all the same for this purpose.
I'm just not seeing how a state can legally forgive taxes due based on a charitable donation, which by definition cannot be for your own benefit.
I'm not philosophically opposed to the idea, I just don't see how it could possibly be legal.
Same way my zoo membership is tax-deductible? (translation: I have no idea, but it is)
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Sol, while I agree with you completely on your take on this bill, I think we need to stop prognosticating disasters that will happen because of this bill and instead start thinking about ways to live with the consequences. I'm really disappointed that this thread disintegrated into a purely political discussion.
I'm not even that upset about the financial implications of this bill, honestly. My family will save money this year. We're already rich, and this bill is pretty nice to rich people.
I was just trying to highlight that it seems to be much more than a tax bill. It's the only major piece of legislation that Congress is going to pass in the first year of the new administration, and they've really loaded it up with everything they can think of. It repeals the individual mandate and consequently causes 13 million people to lose health insurance, because their priority is undermining Obamacare. It reduces medicaid and ss funding, because their priority is slashing the social safety net. It raises taxes on the middle class to fund a tax break for the upper class, because their priority is increasing wealth inequality. These things are sort of tax reform issues, but only in the sense that they serve larger ideological goals of the party. I'm shocked they didn't include the personhood for fetuses amendment about 529 plans.
If I read correctly, 529s can now be used by rich people to send their kids to private K-12 schools and home schooling. Unreal. So now rich families get a tax break for their kids' educations, while public school families get a tax increase (since their SALT deductions are capped at 10k).
All deductions, exemptions and credits now adjusted for inflation in accordance with "chained CPI," which means their value will diminish over time as they lose out to real inflation.
I went line by line and compared what my taxes in 2016 would have been under the new plan. I would have paid $65 more in federal taxes under this GOP plan. No big deal to me personally, but this whole bill is still a monumental ass-raping of the American people as a whole.
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All,
Suggest a review of the Kitces (https://www.kitces.com/blog/final-gop-tax-plan-summary-tcja-2017-individual-tax-brackets-pass-through-strategies/) analysis on the tax plan along with recommended 2017 actions.
It’s a well done analysis which skips the debate about the reasoning behind the changes.
WoodSpinner
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Does anyone know if Capital Gain Loss will still be available as a deduction? Could not find it in the conference bill, so assume no change?
I don't know if this was the change you are referring to but there is a change to carry forward loss limitations for non-corporations (p.579). Excess business losses are to be rolled into net operating loss and written off (with limitations) in the current tax year as opposed to being held until the taxpayer sells their interest in that passive activity. This change (I believe) would be a boon to those who invest passive in fun, hobby businesses that lose money on the regular basis.
If you are referring to mandating FIFO as the only option for selling securities, no, that did not make it.
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Didn't we establish in this thread that we cannot deduct any 2018 property taxes that we might prepay in 2017?
Because yahoo front page just ran an article encouraging people do this to get a bigger itemizing boost in 2017...
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Didn't we establish in this thread that we cannot deduct any 2018 property taxes that we might prepay in 2017?
Because yahoo front page just ran an article encouraging people do this to get a bigger itemizing boost in 2017...
You're probably better off taking your financial advice from the forum instead of from Yahoo.
I am consistently shocked by the mindless and ill informed drivel that passes for journalism these days. If you can't hire an editor, then maybe don't employ college kids to write front page stories without supervision.
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If you make a charitable contribution to a state, you get a dollar for dollar credit on your state income taxes. How many states will move to such a system....Charitable deductions are fully deductible on federal taxes.
Unless the charitable donation offsets your property taxes, I don't see the advantage in it.
For you or in general? It will certainly help those who pay high state income taxes. I know for myself I’ll pay 30k in state taxes and 15k in property taxes next year. It’s the difference between being able to deduct 40k vs 10k.
Sent from my iPhone using Tapatalk
If you are paying $30k in state taxes you are making a lot of money. Do you get any break from them bumping up the AMT threshold? Fed tax in your bracket. In other words clearly you get fucked on SALT, but does it balance out?
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Didn't we establish in this thread that we cannot deduct any 2018 property taxes that we might prepay in 2017?
I'm not sure if any consensus was reached on this point among the participants in this thread, but, in my view, the limitation imposed on deducting prepaid 2018 taxes (which refers to amounts "paid in a taxable year beginning before January 1, 2018, with respect to a State or local income tax imposed for a taxable year beginning after December 31, 2017" (emphasis added); see the amendment to §64(b) of the tax code implemented by §11042 of the bill), based on the plain meaning of its words, applies only to prepaid income taxes, and not prepaid property taxes.
This post, like all of my posts in the forum, does not constitute tax or legal advice.
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Didn't we establish in this thread that we cannot deduct any 2018 property taxes that we might prepay in 2017?
Because yahoo front page just ran an article encouraging people do this to get a bigger itemizing boost in 2017...
https://www.congress.gov/congressional-report/115th-congress/house-report/466/1?overview=closed
SEC. 11042. LIMITATION ON DEDUCTION FOR STATE AND LOCAL, ETC. TAXES.
(a) In General.--Subsection (b) of section 164 is amended by adding at the end the following new paragraph:
(6) Limitation on individual deductions for taxable years 2018 through 2025.--In the case of an individual and a taxable year beginning after December 31, 2017, and before January 1, 2026--
(A) foreign real property taxes shall not be taken into account under subsection (a)(1), and
(B) the aggregate amount of taxes taken into account under paragraphs (1), (2), and (3) of subsection (a) and paragraph (5) of this subsection for any taxable year shall not exceed $10,000 ($5,000 in the case of a married individual filing a separate return).
The preceding sentence shall not apply to any foreign taxes described in subsection (a)(3) or to any taxes described in paragraph (1) and (2) of subsection (a) which are paid or accrued in carrying on a trade or business or an activity described in section 212. For purposes of subparagraph (B), an amount paid in a taxable year beginning before January 1, 2018, with respect to a State or local income tax imposed for a taxable year beginning after December 31, 2017, shall be treated as paid on the last day of the taxable year for which such tax is so imposed.''.
(b) Effective Date.--The amendment made by this section shall apply to taxable years beginning after December 31, 2016.
What some of us are pointing out is that the conference report specifically only mentions State or local income tax with regards to taxes that can only be deducted in the year in which they are imposed. Property tax and sales tax are left out.
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If you make a charitable contribution to a state, you get a dollar for dollar credit on your state income taxes. How many states will move to such a system....Charitable deductions are fully deductible on federal taxes.
Unless the charitable donation offsets your property taxes, I don't see the advantage in it.
For you or in general? It will certainly help those who pay high state income taxes. I know for myself I’ll pay 30k in state taxes and 15k in property taxes next year. It’s the difference between being able to deduct 40k vs 10k.
Sent from my iPhone using Tapatalk
If you are paying $30k in state taxes you are making a lot of money. Do you get any break from them bumping up the AMT threshold? Fed tax in your bracket. In other words clearly you get fucked on SALT, but does it balance out?
I don't know who the current plan would affect me. The one calculator I plugged my info into indicated I would save 3% initially and then lose at as the rates revert back but the deductions don't. I don't know how the AMT changes will affect me. I have a feeling it'll basically be the same.
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If you make a charitable contribution to a state, you get a dollar for dollar credit on your state income taxes. How many states will move to such a system....Charitable deductions are fully deductible on federal taxes.
Unless the charitable donation offsets your property taxes, I don't see the advantage in it.
For you or in general? It will certainly help those who pay high state income taxes. I know for myself I’ll pay 30k in state taxes and 15k in property taxes next year. It’s the difference between being able to deduct 40k vs 10k.
Sent from my iPhone using Tapatalk
If you are paying $30k in state taxes you are making a lot of money. Do you get any break from them bumping up the AMT threshold? Fed tax in your bracket. In other words clearly you get fucked on SALT, but does it balance out?
I don't know who the current plan would affect me. The one calculator I plugged my info into indicated I would save 3% initially and then lose at as the rates revert back but the deductions don't. I don't know how the AMT changes will affect me. I have a feeling it'll basically be the same.
Again its temporary like all other individual deductions but:
"Proposed: Increase the exemption to $70,300 for singles and $109,400 for joint filers. Increase the phase-out threshold to $500,000 for singles and $1 million for joint filers. The higher limits would expire on Jan. 1, 2026"
Probably not enough info to go on, but you may see a healthy cut if you were paying AMT anyway.
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If you make a charitable contribution to a state, you get a dollar for dollar credit on your state income taxes. How many states will move to such a system....Charitable deductions are fully deductible on federal taxes.
Unless the charitable donation offsets your property taxes, I don't see the advantage in it.
For you or in general? It will certainly help those who pay high state income taxes. I know for myself I’ll pay 30k in state taxes and 15k in property taxes next year. It’s the difference between being able to deduct 40k vs 10k.
Sent from my iPhone using Tapatalk
If you are paying $30k in state taxes you are making a lot of money. Do you get any break from them bumping up the AMT threshold? Fed tax in your bracket. In other words clearly you get fucked on SALT, but does it balance out?
I don't know who the current plan would affect me. The one calculator I plugged my info into indicated I would save 3% initially and then lose at as the rates revert back but the deductions don't. I don't know how the AMT changes will affect me. I have a feeling it'll basically be the same.
Again its temporary like all other individual deductions but:
"Proposed: Increase the exemption to $70,300 for singles and $109,400 for joint filers. Increase the phase-out threshold to $500,000 for singles and $1 million for joint filers. The higher limits would expire on Jan. 1, 2026"
Probably not enough info to go on, but you may see a healthy cut if you were paying AMT anyway.
If that means no AMT unless income for joint filers is > $1M then that's good for me. I do pay some AMT now, and we don't make more than $1M, so....
I know this has been discussed but it irks me that there is still ways to be very wealthy and not pay tax similar to what a high wage earner would pay. They could fix this so easily be taxing all income the same (maybe giving an adjustment based on inflation for investment income). They could probably lower rates further if they did this. Then they would have a truly progressive tax system that wasn't overbearing. That's what real reform would look like.
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I am fairly bad at estimating AMT tax because the rules are always stated in a convoluted way. But I think that means that up to $1 million dollars for joint filers your AMT calculation will get the full AMT deduction which will now be bumped to $109k. Where as for every dollar past $1 million you start to lose the $109k exemption. Compared to today's phase out of $160k this is a drastic shift.
This combine with the 3% cut to all brackets could mean your tax bill still gets a break. Also if your mortgage deduction if its over $750k will get grandfathered in. I would still bet if people complain enough California will do something to ease the pain of the new SALT rules.
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I am fairly bad at estimating AMT tax because the rules are always stated in a convoluted way. But I think that means that up to $1 million dollars for joint filers your AMT calculation will get the full AMT deduction which will now be bumped to $109k. Where as for every dollar past $1 million you start to lose the $109k exemption. Compared to today's phase out of $160k this is a drastic shift.
This combine with the 3% cut to all brackets could mean your tax bill still gets a break. Also if your mortgage deduction if its over $750k will get grandfathered in. I would still bet if people complain enough California will do something to ease the pain of the new SALT rules.
Wow, that could be a huge benefit for me personally. I paid a bunch of AMT a few years ago from exercising stock options with my previous employer. This AMT is refundable in future years to the extent that our tax in the regular system exceeds our tax in the AMT system. We've been getting a little bit of it back each year because we aren't subject to AMT anymore, but the difference between the two systems isn't that huge for us, given our income and deductions. Increasing the exemption amount should help us get our money back sooner.
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Woodspinner, thank you so much for that recommendation. What a clear summary of the tax legislation in its current form.
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If you make a charitable contribution to a state, you get a dollar for dollar credit on your state income taxes. How many states will move to such a system....Charitable deductions are fully deductible on federal taxes.
Unless the charitable donation offsets your property taxes, I don't see the advantage in it.
For you or in general? It will certainly help those who pay high state income taxes. I know for myself I’ll pay 30k in state taxes and 15k in property taxes next year. It’s the difference between being able to deduct 40k vs 10k.
Sent from my iPhone using Tapatalk
If you are paying $30k in state taxes you are making a lot of money. Do you get any break from them bumping up the AMT threshold? Fed tax in your bracket. In other words clearly you get fucked on SALT, but does it balance out?
I don't know who the current plan would affect me. The one calculator I plugged my info into indicated I would save 3% initially and then lose at as the rates revert back but the deductions don't. I don't know how the AMT changes will affect me. I have a feeling it'll basically be the same.
Again its temporary like all other individual deductions but:
"Proposed: Increase the exemption to $70,300 for singles and $109,400 for joint filers. Increase the phase-out threshold to $500,000 for singles and $1 million for joint filers. The higher limits would expire on Jan. 1, 2026"
Probably not enough info to go on, but you may see a healthy cut if you were paying AMT anyway.
For comparison, the current AMT exemption amounts are:
Married taxpayers filing jointly: $84,500 Single taxpayers: $54,300
So I don't think that this is a significant increase.
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Am I correctly understanding that the new rules on residential real estate allow a deduction of up to 25% of wages (which are normally zero) PLUS 2.5% of the unadjusted cost basis?
For a 300k rental house that's a new $7500 deduction every year, that didn't exist before.
I mean I'll gladly take it, I'm just incredulous that was the intention of the bill's drafters.
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If you make a charitable contribution to a state, you get a dollar for dollar credit on your state income taxes. How many states will move to such a system....Charitable deductions are fully deductible on federal taxes.
Unless the charitable donation offsets your property taxes, I don't see the advantage in it.
For you or in general? It will certainly help those who pay high state income taxes. I know for myself I’ll pay 30k in state taxes and 15k in property taxes next year. It’s the difference between being able to deduct 40k vs 10k.
Sent from my iPhone using Tapatalk
If you are paying $30k in state taxes you are making a lot of money. Do you get any break from them bumping up the AMT threshold? Fed tax in your bracket. In other words clearly you get fucked on SALT, but does it balance out?
I don't know who the current plan would affect me. The one calculator I plugged my info into indicated I would save 3% initially and then lose at as the rates revert back but the deductions don't. I don't know how the AMT changes will affect me. I have a feeling it'll basically be the same.
Again its temporary like all other individual deductions but:
"Proposed: Increase the exemption to $70,300 for singles and $109,400 for joint filers. Increase the phase-out threshold to $500,000 for singles and $1 million for joint filers. The higher limits would expire on Jan. 1, 2026"
Probably not enough info to go on, but you may see a healthy cut if you were paying AMT anyway.
If that means no AMT unless income for joint filers is > $1M then that's good for me. I do pay some AMT now, and we don't make more than $1M, so....
I know this has been discussed but it irks me that there is still ways to be very wealthy and not pay tax similar to what a high wage earner would pay. They could fix this so easily be taxing all income the same (maybe giving an adjustment based on inflation for investment income). They could probably lower rates further if they did this. Then they would have a truly progressive tax system that wasn't overbearing. That's what real reform would look like.
I think that this would have a very large impact anyone interested in trying to figure out how much money was enough.
Right now, FIRE works so well because long term capital gains get a sweetheart tax rate.
If they were taxed as normal income, I think all of our FI numbers would increase dramatically.
I think that the whole concept of FIRE is about how to be at least relatively "wealthy and not pay tax similar to what a high wage earner would pay". I guess it just depends on where you draw the line between "relatively wealthy" and "very wealthy".
I think most Americans would consider someone with $1M to $1.5M in savings very wealthy. From the "what's your FI number" post, I think many of us are shooting for numbers in that range. I definitely wouldn't want to pay "normal" tax rates on that income.
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Am I correctly understanding that the new rules on residential real estate allow a deduction of up to 25% of wages (which are normally zero) PLUS 2.5% of the unadjusted cost basis?
For a 300k rental house that's a new $7500 deduction every year, that didn't exist before.
I mean I'll gladly take it, I'm just incredulous that was the intention of the bill's drafters.
Oh yeah, that's the "Corker fix" https://www.washingtonpost.com/business/economy/last-minute-real-estate-perk-in-tax-reform-prompts-blowback-for-corker/2017/12/18/6be3a9ba-e406-11e7-ab50-621fe0588340_story.html?utm_term=.091b462e6d46
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I've always thought it a bit cheeky decrying the tax breaks for billionaires while ignoring the huge loophole we Mustachians exploit in the USA, enabling us humble millionaires to pull up to $90k/yr in income without paying a dime in income tax. I think a LOT of hard working middle class people paying large amounts of state and federal income tax would find that disgraceful...
Could someone please clarify this -- how does one accomplish this?
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i dont understand why you keep targetting property taxes here.
I didn't mean to target property taxes. Property, income, it's all the same for this purpose.
I'm just not seeing how a state can legally forgive taxes due based on a charitable donation, which by definition cannot be for your own benefit.
I'm not philosophically opposed to the idea, I just don't see how it could possibly be legal.
Same way my zoo membership is tax-deductible? (translation: I have no idea, but it is)
No it wouldn’t work. Otherwise I’m starting a car donation charity. Just donate $20k and I’ll give you a free car! You get a fat tax deduction and I’ll take a nice salary to administer the charity
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If you make a charitable contribution to a state, you get a dollar for dollar credit on your state income taxes. How many states will move to such a system....Charitable deductions are fully deductible on federal taxes.
Unless the charitable donation offsets your property taxes, I don't see the advantage in it.
For you or in general? It will certainly help those who pay high state income taxes. I know for myself I’ll pay 30k in state taxes and 15k in property taxes next year. It’s the difference between being able to deduct 40k vs 10k.
Sent from my iPhone using Tapatalk
If you are paying $30k in state taxes you are making a lot of money. Do you get any break from them bumping up the AMT threshold? Fed tax in your bracket. In other words clearly you get fucked on SALT, but does it balance out?
I don't know who the current plan would affect me. The one calculator I plugged my info into indicated I would save 3% initially and then lose at as the rates revert back but the deductions don't. I don't know how the AMT changes will affect me. I have a feeling it'll basically be the same.
Again its temporary like all other individual deductions but:
"Proposed: Increase the exemption to $70,300 for singles and $109,400 for joint filers. Increase the phase-out threshold to $500,000 for singles and $1 million for joint filers. The higher limits would expire on Jan. 1, 2026"
Probably not enough info to go on, but you may see a healthy cut if you were paying AMT anyway.
For comparison, the current AMT exemption amounts are:
Married taxpayers filing jointly: $84,500 Single taxpayers: $54,300
So I don't think that this is a significant increase.
Its not, but the phase out I imagine bites most people in the mid $200k earning range, since you immediately start to lose that exemption amount. Though it seems like the phase out was pretty generous only fully dispersing at ~$477k.
But I have to imagine that having no phase out at those incomes could be a big deal. It could easily be $40k extra un-taxed dollars at a 37%-39% rate which is a nice bit of money back. But thats just speculation without people running numbers.
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I think that this would have a very large impact anyone interested in trying to figure out how much money was enough.
Right now, FIRE works so well because long term capital gains get a sweetheart tax rate.
If they were taxed as normal income, I think all of our FI numbers would increase dramatically.
I think that the whole concept of FIRE is about how to be at least relatively "wealthy and not pay tax similar to what a high wage earner would pay". I guess it just depends on where you draw the line between "relatively wealthy" and "very wealthy".
I think most Americans would consider someone with $1M to $1.5M in savings very wealthy. From the "what's your FI number" post, I think many of us are shooting for numbers in that range. I definitely wouldn't want to pay "normal" tax rates on that income.
Those with savings of $1M to $1.5M would be withdrawing 40-60k a year in a reasonable scenario. If treated as normal income, they would get the 24k personal deduction and any other deductions that still exist. I don't think they would pay much (or any) taxes on that.
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Am I correctly understanding that the new rules on residential real estate allow a deduction of up to 25% of wages (which are normally zero) PLUS 2.5% of the unadjusted cost basis?
For a 300k rental house that's a new $7500 deduction every year, that didn't exist before.
I mean I'll gladly take it, I'm just incredulous that was the intention of the bill's drafters.
Oh yeah, that's the "Corker fix" https://www.washingtonpost.com/business/economy/last-minute-real-estate-perk-in-tax-reform-prompts-blowback-for-corker/2017/12/18/6be3a9ba-e406-11e7-ab50-621fe0588340_story.html?utm_term=.091b462e6d46
I believe that is now being called the #corkerkickback
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Am I correctly understanding that the new rules on residential real estate allow a deduction of up to 25% of wages (which are normally zero) PLUS 2.5% of the unadjusted cost basis?
For a 300k rental house that's a new $7500 deduction every year, that didn't exist before.
I mean I'll gladly take it, I'm just incredulous that was the intention of the bill's drafters.
Oh yeah, that's the "Corker fix" https://www.washingtonpost.com/business/economy/last-minute-real-estate-perk-in-tax-reform-prompts-blowback-for-corker/2017/12/18/6be3a9ba-e406-11e7-ab50-621fe0588340_story.html?utm_term=.091b462e6d46
I believe that is now being called the #corkerkickback
What a shame. #corkerporker has such a nice ring to it.
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Am I correctly understanding that the new rules on residential real estate allow a deduction of up to 25% of wages (which are normally zero) PLUS 2.5% of the unadjusted cost basis?
For a 300k rental house that's a new $7500 deduction every year, that didn't exist before.
I mean I'll gladly take it, I'm just incredulous that was the intention of the bill's drafters.
My read is the calc is 20% of your qualified business income subject to a limit of$7,500 in your example.
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Does anyone know if there were any changes to deducting health savings accounts? And if you can still deduct them above the line?
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The county where I live has just opened up their website for pre-payment of next year's property taxes (in anticipation of the tax bill passing, and at the request of many taxpayers here.)
I am pre-paying the property taxes and I am going to pull forward my January mortgage payment into the last week of December. Just maximizing my 2017 itemized deductions before I (presumably) will be taking the standard deduction next year.
What are the mechanics of paying your January’s mortgage in December? I though a late-December payment would just be counted as principle pay down and not pay off any accrued interest (is the deductible part)
Send a check marked "January 2018 payment" (or send with the January coupon).
My experience is that any payment of the monthly size posted the back half of the month is treated as the next month's payment without any instruction on my part.
It seems like the bill is going to (try to) disallow any benefit from doing this.
Thanks, I looked into it and it seems like I can just click "pay" online since next month's balance shows up right now. I was a bit paranoid that my autopay would double-withdraw but I've got an email from customer service saying it will skip the payment if it's paid early. So I can't really lose, except a few cents in interest. Might as well try.
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I've always thought it a bit cheeky decrying the tax breaks for billionaires while ignoring the huge loophole we Mustachians exploit in the USA, enabling us humble millionaires to pull up to $90k/yr in income without paying a dime in income tax. I think a LOT of hard working middle class people paying large amounts of state and federal income tax would find that disgraceful...
Could someone please clarify this -- how does one accomplish this?
I believe this is a reference to qualified dividends and long term capital gains being taxed at 0% if you are in or below the 15% federal tax bracket. If all your income is qualified dividends and long term capital gains, then with standard deductions, you can have about $90k income and not pay any federal income tax.
See an article on this topic here:
http://gocurrycracker.com/never-pay-taxes-again/
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I've always thought it a bit cheeky decrying the tax breaks for billionaires while ignoring the huge loophole we Mustachians exploit in the USA, enabling us humble millionaires to pull up to $90k/yr in income without paying a dime in income tax. I think a LOT of hard working middle class people paying large amounts of state and federal income tax would find that disgraceful...
Could someone please clarify this -- how does one accomplish this?
I believe this is a reference to qualified dividends and long term capital gains being taxed at 0% if you are in or below the 15% federal tax bracket. If all your income is qualified dividends and long term capital gains, then with standard deductions, you can have about $90k income and not pay any federal income tax.
See an article on this topic here:
http://gocurrycracker.com/never-pay-taxes-again/
Yep. I love America.
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Sadly it doesn't work if you are a resident of Oregon as they tax pretty much all of your income at about 9%.
It doesn't work if you want a subsidy for your healthcare costs either.
But then if you ARE an Oregon resident AND you want a subsidy its amazing how low you can get that "income" if you have to..:)
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https://www.vox.com/policy-and-politics/2017/12/18/16791174/republican-tax-bill-congress-conference-tax-policy-center
They took two independently shitty bills and made them even shittier when reconciling them.
By 2027, the top 1% will see 83% of the tax cut. Amazing.
It is historically perhaps the least popular piece of legislation https://fivethirtyeight.com/features/will-passing-the-tax-bill-help-the-gop-in-2018-probably-not/
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I'll be FIREd before 2027, I hope. I will take the little nominal individual rate cuts while still working, then get out of the workforce before they sunset. "What about everybody else?" asks my wife. I guess they are on their own.
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Am I correctly understanding that the new rules on residential real estate allow a deduction of up to 25% of wages (which are normally zero) PLUS 2.5% of the unadjusted cost basis?
For a 300k rental house that's a new $7500 deduction every year, that didn't exist before.
I mean I'll gladly take it, I'm just incredulous that was the intention of the bill's drafters.
I'm still working through the proposed legislation, but, based on my review of the conference report explanatory notes (I haven't yet reviewed the actual proposed statutory text on this point), I believe the formula you're citing (25% of wages + 2.5% of unadjusted basis) is merely (one component of) a cap on the otherwise applicable deduction, which is 20% of all qualified business income.
The general rule appears to be that you can deduct 20% of your qualified business income. But, if your overall taxable income exceeds a specified threshold, that deduction is subject to the following limitation: the deduction cannot exceed the greater of (a) 50% of the total wages paid to the business' employees and (b) the sum of 25% of the total wages paid to the business' employees plus 2.5% of the unadjusted basis of all qualified property.
So, in your example, the deduction would not automatically be equal to $7500--instead, the deduction would be equal to 20% of the net rental income (assuming the rental income qualifies as "qualified business income"), capped at $7500 if the taxpayer's taxable income exceeds the specified threshold.
This post, like all of my posts in the forum, does not constitute tax or legal advice.
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(https://pbs.twimg.com/media/DRa8scQXUAMQp1h.jpg)
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I believe the formula you're citing (25% of wages + 2.5% of unadjusted basis) is merely (one component of) a cap on the otherwise applicable deduction, which is 20% of all qualified business income.
The next question, then, is what counts as qualified business income. At first glance it looks like only your schedule E line 24 rental income counts, which penalizes several types of RE investors, including me.
I "make" far more in equity paydown and capital value growth than I do in monthly cash excess. My rents are only a few hundred dollars month higher than my mortgage payments, but my tenants pay thousands of dollars in loan equity for me each month. Since line 24 income is AFTER you deduct all expenses including depreciation and property taxes and insurance and mortgage interest, this new 20% deduction for rentals would have saved me... $173 last year.
I'll still take it, don't get me wrong. But it's slightly disappointing. Where's my big beautiful tax cut? I'm rich, dammit, this bill was supposed to help me!
Maybe it's time for me to refinance my properties to get my payments down and my cash flow up, at the expense of total return. This new tax bill does at least change the calculus of that decision.
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Don't be fooled by this chart, D&S. 2025 is the year republicans want you to look at because it is the last year with individual tax cuts. They all expire after that. Look at 2026 or 2027 if you want to see what republicans are really shooting for. They are counting on future gridlock to prevent any chance that their plan will be stopped.
(https://pbs.twimg.com/media/DRa8scQXUAMQp1h.jpg)
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I believe the formula you're citing (25% of wages + 2.5% of unadjusted basis) is merely (one component of) a cap on the otherwise applicable deduction, which is 20% of all qualified business income.
The next question, then, is what counts as qualified business income. At first glance it looks like only your schedule E line 24 rental income counts, which penalizes several types of RE investors, including me.
I "make" far more in equity paydown and capital value growth than I do in monthly cash excess. My rents are only a few hundred dollars month higher than my mortgage payments, but my tenants pay thousands of dollars in loan equity for me each month. Since line 24 income is AFTER you deduct all expenses including depreciation and property taxes and insurance and mortgage interest, this new 20% deduction for rentals would have saved me... $173 last year.
I'll still take it, don't get me wrong. But it's slightly disappointing. Where's my big beautiful tax cut? I'm rich, dammit, this bill was supposed to help me!
Maybe it's time for me to refinance my properties to get my payments down and my cash flow up, at the expense of total return. This new tax bill does at least change the calculus of that decision.
Right, you need to look really closely at accelerating depreciation with the new deduction. Not electing to accelerate depreciation increases your profit and therefore a bigger deduction over a longer period of time, than if you just expensed everything right away. YMMV
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which penalizes several types of RE investors, including me.
The reason landlords like you (and me) are able to report such little rental income is that we're already benefitting from a host of tax advantages for real estate investors, including, as you mentioned, the ability to deduct paper depreciation expense. Now you're asking for the ability to double-dip by taking the new qualified business income deduction on those same already-deductible dollars?
Where's my big beautiful tax cut? I'm rich, dammit, this bill was supposed to help me!
You can join the ranks of the merely-rich-but-not-ultra-rich complaining about their unfair shake (https://www.nytimes.com/2017/12/18/business/dealbook/tax-bill-wealthy.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region®ion=top-news&WT.nav=top-news), to the sound of the world's tiniest violin.
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You can join the ranks of the merely-rich-but-not-ultra-rich complaining about their unfair shake (https://www.nytimes.com/2017/12/18/business/dealbook/tax-bill-wealthy.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region®ion=top-news&WT.nav=top-news), to the sound of the world's tiniest violin.
I'm not complaining about my taxes, I'm complaining about the lies.
I support raising taxes. I think our country should spend more on infrastructure, and on subsidized health insurance, because these things increase economic output and would thus raise tax revenue in the future. They will help balance the budget in the long term.
The GOP tax bill does not. It raises taxes on most Americans in order to lower taxes on the super wealthy, who do not spend their excess millions and who do not generate future tax revenue. Their plan increases the debt for no discernable reason other than increasing wealth inequality.
If the GOP is going to publicly claim that their tax increase is going to save me money, then please show me the money. Right now, all I'm seeing is trillions in new debt, higher taxes paid by most Americans, and juicy perks for the obscenely rich. Oh, plus fewer people getting that great healthcare they were promised. Color me disappointed.
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Don't be fooled by this chart, D&S. 2025 is the year republicans want you to look at because it is the last year with individual tax cuts. They all expire after that. Look at 2026 or 2027 if you want to see what republicans are really shooting for. They are counting on future gridlock to prevent any chance that their plan will be stopped.
It looks crappy even before you get to 2026 & 2027.
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I'm not complaining about my taxes, I'm complaining about the lies.
I know, just some friendly ribbing. I'm as disgusted with this legislation as you are (and simultaneously trying to figure out how to maximally exploit it, such as it is, to my own personal advantage).
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Don't be fooled by this chart, D&S. 2025 is the year republicans want you to look at because it is the last year with individual tax cuts. They all expire after that. Look at 2026 or 2027 if you want to see what republicans are really shooting for. They are counting on future gridlock to prevent any chance that their plan will be stopped.
It looks crappy even before you get to 2026 & 2027.
Then you're going to be really disappointed in the bill's rates once they're fully phased in. That 2025 chart still has the doubled standard deduction and expanded child tax credit in it. Those are disappearing in 2026, but your personal and dependent deductions are not coming back.
That's the whole point of the tax bill (I mean on the individual side, since the real money is all on the corporate side). It lowers rates but increases the amount of income you pay taxes on by taking away your deductions and exemptions. It temporarily increases the child tax credit and standard deduction in order to soften the blow, but they ultimately need to repeal that softening for normal families in order to fund lowering the tax rate in the top bracket.
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Don't be fooled by this chart, D&S. 2025 is the year republicans want you to look at because it is the last year with individual tax cuts. They all expire after that. Look at 2026 or 2027 if you want to see what republicans are really shooting for. They are counting on future gridlock to prevent any chance that their plan will be stopped.
It looks crappy even before you get to 2026 & 2027.
Then you're going to be really disappointed in the bill's rates once they're fully phased in. That 2025 chart still has the doubled standard deduction and expanded child tax credit in it. Those are disappearing in 2026, but your personal and dependent deductions are not coming back.
That's the whole point of the tax bill (I mean on the individual side, since the real money is all on the corporate side). It lowers rates but increases the amount of income you pay taxes on by taking away your deductions and exemptions. It temporarily increases the child tax credit and standard deduction in order to soften the blow, but they ultimately need to repeal that softening for normal families in order to fund lowering the tax rate in the top bracket.
I'll also add they changed inflation index, which will serve as a long term tax increase. This bill is beyond depressing.
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And, of course, the child tax credit is not indexed to inflation at all, in either the temporary $2000 dollar value or the old (and eventually new again) $1000 dollar value, so those whither away over time as well. Same for the $10,000 SALT deduction limit, which is forever.
Yes, incredibly depressing.
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And, of course, the child tax credit is not indexed to inflation at all, in either the temporary $2000 dollar value or the old (and eventually new again) $1000 dollar value, so those whither away over time as well. Same for the $10,000 SALT deduction limit, which is forever.
Yes, incredibly depressing.
And, I've heard a lot of economists and other commentators say that the increased deficit is likely to lead to higher inflation...
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And, of course, the child tax credit is not indexed to inflation at all, in either the temporary $2000 dollar value or the old (and eventually new again) $1000 dollar value, so those whither away over time as well. Same for the $10,000 SALT deduction limit, which is forever.
Yes, incredibly depressing.
On the bright side, there is a temporary tax cut for many high earners with kids, for the next few years. By the time they expire my tax deductions will be headed off to college and my reported income will drop dramatically after I retire so income taxes will matter less.
They left capital gains and dividend income and roth ira rollovers alone, so an industrious mustachian who is nearing retirement still has a viable path through retirement, by transitioning to living off of investments instead of wages.
I just wish they hadn't repealed the individual mandate, because that is expected to raise premiums for everyone left buying insurance. Now the question becomes how to game that system as rates skyrocket. Maybe the indexed silver plan will spike and bronze plans will stay affordable, or maybe it will suddenly make sense to go uninsured and then sign up only when you incur major expenses (aka supporting the death spiral). My guess, though, is that managing your income (and/or relocating) to qualify for state expanded Medicaid is about to get a whole lot more attractive.
Unfortunately, the days of paying no taxes on $100k of wage income, like in that gocurrycracker post, appear to be waning. By 2026, this bill will make that impossible. Or at least require vastly different strategies than we use today.
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Don't be fooled by this chart, D&S. 2025 is the year republicans want you to look at because it is the last year with individual tax cuts. They all expire after that. Look at 2026 or 2027 if you want to see what republicans are really shooting for. They are counting on future gridlock to prevent any chance that their plan will be stopped.
It looks crappy even before you get to 2026 & 2027.
Then you're going to be really disappointed in the bill's rates once they're fully phased in. That 2025 chart still has the doubled standard deduction and expanded child tax credit in it. Those are disappearing in 2026, but your personal and dependent deductions are not coming back.
That's the whole point of the tax bill (I mean on the individual side, since the real money is all on the corporate side). It lowers rates but increases the amount of income you pay taxes on by taking away your deductions and exemptions. It temporarily increases the child tax credit and standard deduction in order to soften the blow, but they ultimately need to repeal that softening for normal families in order to fund lowering the tax rate in the top bracket.
I'm assuming you mean exemptions in the section I bolded above. Actually, personal exemptions are only SUSPENDED until 2026, then they return. They ditched the House repeal of the exemptions.
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Wow, that is super misleading. Thanks for pointing that out.
Don't be fooled by this chart, D&S. 2025 is the year republicans want you to look at because it is the last year with individual tax cuts. They all expire after that. Look at 2026 or 2027 if you want to see what republicans are really shooting for. They are counting on future gridlock to prevent any chance that their plan will be stopped.
(https://pbs.twimg.com/media/DRa8scQXUAMQp1h.jpg)
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And, of course, the child tax credit is not indexed to inflation at all, in either the temporary $2000 dollar value or the old (and eventually new again) $1000 dollar value, so those whither away over time as well. Same for the $10,000 SALT deduction limit, which is forever.
Yes, incredibly depressing.
On the bright side, there is a temporary tax cut for many high earners with kids, for the next few years. By the time they expire my tax deductions will be headed off to college and my reported income will drop dramatically after I retire so income taxes will matter less.
They left capital gains and dividend income and roth ira rollovers alone, so an industrious mustachian who is nearing retirement still has a viable path through retirement, by transitioning to living off of investments instead of wages.
I just wish they hadn't repealed the individual mandate, because that is expected to raise premiums for everyone left buying insurance. Now the question becomes how to game that system as rates skyrocket. Maybe the indexed silver plan will spike and bronze plans will stay affordable, or maybe it will suddenly make sense to go uninsured and then sign up only when you incur major expenses (aka supporting the death spiral). My guess, though, is that managing your income (and/or relocating) to qualify for state expanded Medicaid is about to get a whole lot more attractive.
Unfortunately, the days of paying no taxes on $100k of wage income, like in that gocurrycracker post, appear to be waning. By 2026, this bill will make that impossible. Or at least require vastly different strategies than we use today.
At the moment at least we have found the high deductible bronze plan for a "mere" $1100/m (without subsidy) works for us by buying the expensive asthma inhalers from Canada. This is the first time we have done this but our doc was quite happy to send the prescription to Canada Drugs and the $234/month inhaler (yes you read that right $234/m just to breath) cost us $33. The inhaler came from a licensed pharmacy the UK so I no problem with its authenticity.
I'm sure our beloved HC cartel will shut down personal importation one day (because the FDA has our best interests at heart don't ya know?), but it seems to work for now.
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https://www.vox.com/platform/amp/policy-and-politics/2017/12/19/16786006/looting-of-america?utm_campaign=mattyglesias&utm_content=chorus&utm_medium=social&utm_source=twitter&__twitter_impression=true
Politicians are making decisions to enrich their donors — and at times themselves personally — with a reckless disregard for any kind of objective policy analysis or consideration of public opinion.
A businessman president who promised — repeatedly — that he would not personally benefit from his own tax proposals is poised to sign into law a bill that’s full of provisions that benefit him and his family. Congressional Republicans who spent years insisting that “dynamic scoring” would capture the deficit-reducing power of tax cuts are now plowing ahead with a bill so fast that they don’t have time to get one done, because it turns out they can’t be bothered to meet their own targets.
Across the board, it’s about letting whoever’s powerful now squeeze as much out as they can without worrying too much about the consequences — like enormous, deficit-financed tax cuts passed with no regard for budgetary or economic effects.
Somewhere in its murky origins, “tax reform,” as conceived by is Republican authors, was supposed to be a policy-driven bill aimed at creating a simpler and fairer tax code that would generate broadly superior economic outcomes for most people — a normal governing objective even if it was always the case that substantial disagreement would exist over the merits of marginal corporate tax rate cuts as a growth-boosting policy.
But along the way, virtually all of the high-minded aspirations were dropped and all of the normal aspects of congressional process broken — to the point where the bill’s leading architects won’t even mention the policy changes that are at the heart of the bill. In the end, instead of taking on the special interests as promised, it gives away the store to almost every lobby shop in town — with last-minute additions that personally enrich the Trump family and a decent chunk of the members of Congress voting for it.
“Not economic growth judged by us,” Rep. Kevin Brady (R-TX), the Chair of the House’s tax-writing committee, told Vox in March, “but by the independent Joint Committee on Taxation.”
And of course it wasn’t going to be a bonanza for the rich. Trump went so far as to promise that the rich wouldn’t benefit “at all” from his plan, and he certainly swore repeatedly that he would not personally benefit.
The House bill slashed the top tax rate a little and the Senate bill slashed it a little more, so the conference committee compromised on a bigger rate cut than either had proposed.
Meanwhile, after all the months of work, Republicans ultimately settled on not actually eliminating any significant deductions or loopholes after all.
Why? Well it certainly seems to have had something to do with the orgy of lobbying that, according to the New York Times, led more than half of the city’s 11,000 registered lobbyists to report having worked on the tax bill. The swamp is running wild.
But Trump and Ryan have completely dissolved the norm against dishonesty to the point where there are no longer any whistleblowers in the Republican caucus or the world of conservative media. You just say whatever you want, and dole out favors to your friends — moving at such a rapid pace that the country’s ability to process what’s happening gets overwhelmed.
It is hard to overstate just how bad this bill is...from the lies of the GOP, to letting the "swamp" write the damn thing, to the temporary nature of the tax cuts for middle and low income families, to the ballooning deficit price tag attached - brought to us by the formally "fiscally conservative" GOP.
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Passed by the House!
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That's the whole point of the tax bill (I mean on the individual side, since the real money is all on the corporate side). It lowers rates but increases the amount of income you pay taxes on by taking away your deductions and exemptions. It temporarily increases the child tax credit and standard deduction in order to soften the blow, but they ultimately need to repeal that softening for normal families in order to fund lowering the tax rate in the top bracket.
I don't agree that the point of this bill is to increase taxes directly on the majority of income earners.
I say directly because one clear desire the republicans have is to cut major social programs while not giving us break on payroll tax which in an of itself is a tax hike. Also the new breaks are not tied to inflation like today's personal exemptions which makes them more risky bets long term. Granted over the 8 year period I don't expect inflation to impact the value much but again long term its not great.
The temporary move is a clear dodge of their own senate deficit hawk rules to try to bullshit the true cost of this legislation to get under the 1.5 Trillion dollar estimated loss. Cynically the Republicans could be doing this knowing there will be a huge income loss and growth wont fill the void, but its a short term win. A glass half full view may be some Repubs still believe that the estimates are wrong and growth will fill the void. Thus allowing an easy continuation of the breaks.
The reality is though that this creates a guaranteed budget battle for whoever is in control at that point . They will be forced to renew the breaks or be blamed for a large middle class tax hike. I find it unlikely the future congress wont find away to extend these, given the inventiable blow back. The downside is I am sure some shitty provisions will be pork barreled in with it.
Still though, your fears are valid that compared to today's long standing tax code, this leaves a none zero chance that 8 years down the road a baked in tax hike will hit the majority of American households.
Oh and side note. I am not sure wtf happened to, "We are going to simplify taxes" but this legislation just made taxes even more convoluted and challenging. Fear not Intuit and CPAs your jobs are safe. Granted I am not a fan of simple tax codes anyway.
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And, of course, the child tax credit is not indexed to inflation at all, in either the temporary $2000 dollar value or the old (and eventually new again) $1000 dollar value, so those whither away over time as well. Same for the $10,000 SALT deduction limit, which is forever.
Yes, incredibly depressing.
On the bright side, there is a temporary tax cut for many high earners with kids, for the next few years. By the time they expire my tax deductions will be headed off to college and my reported income will drop dramatically after I retire so income taxes will matter less.
They left capital gains and dividend income and roth ira rollovers alone, so an industrious mustachian who is nearing retirement still has a viable path through retirement, by transitioning to living off of investments instead of wages.
I just wish they hadn't repealed the individual mandate, because that is expected to raise premiums for everyone left buying insurance. Now the question becomes how to game that system as rates skyrocket. Maybe the indexed silver plan will spike and bronze plans will stay affordable, or maybe it will suddenly make sense to go uninsured and then sign up only when you incur major expenses (aka supporting the death spiral). My guess, though, is that managing your income (and/or relocating) to qualify for state expanded Medicaid is about to get a whole lot more attractive.
Unfortunately, the days of paying no taxes on $100k of wage income, like in that gocurrycracker post, appear to be waning. By 2026, this bill will make that impossible. Or at least require vastly different strategies than we use today.
At the moment at least we have found the high deductible bronze plan for a "mere" $1100/m (without subsidy) works for us by buying the expensive asthma inhalers from Canada. This is the first time we have done this but our doc was quite happy to send the prescription to Canada Drugs and the $234/month inhaler (yes you read that right $234/m just to breath) cost us $33. The inhaler came from a licensed pharmacy the UK so I no problem with its authenticity.
I'm sure our beloved HC cartel will shut down personal importation one day (because the FDA has our best interests at heart don't ya know?), but it seems to work for now.
Just claim it is for your cat. OA the is much cheaper for my car from Canada as well
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And, of course, the child tax credit is not indexed to inflation at all, in either the temporary $2000 dollar value or the old (and eventually new again) $1000 dollar value, so those whither away over time as well. Same for the $10,000 SALT deduction limit, which is forever.
Yes, incredibly depressing.
To be fair, that is one of the redeeming qualities of the bill. Between the limit to $10k and not increasing it with inflation, and putting the standard deduction at $24k for couples and indexing it to chained CPI, that sets the stage for SALT to be completely eliminated as a deduction going forward (which it should be).
Then the corporate rate being 21% is a huge improvement.
Just need some of the more ridiculous changes to be eliminated over time (the 20% deduction for pass through income probably being the biggest).
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LOL. The GOP has to re-vote on it tomorrow.
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LOL. The GOP has to re-vote on it tomorrow.
What's even funnier is that, reportedly, one of the three provisions that is failing to survive the Byrd bath is totally nonsubstantive: the provision that does nothing more than give the legislation its name, the "Tax Cuts and Jobs Act."
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Then the corporate rate being 21% is a huge improvement.
Improvement from what? As in, it's an improvement just because it's a lower number? Any arguments for lowering the corporate tax rate does not make any logical sense. This bill is a turd.
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Then the corporate rate being 21% is a huge improvement.
Improvement from what? As in, it's an improvement just because it's a lower number? Any arguments for lowering the corporate tax rate does not make any logical sense. This bill is a turd.
Lower corporate tax rates mean either lower prices for goods and services offered by those corporation or increases in the value of the company which are passed on to shareholders. Since most of us here invest in the stock market and buy goods and services from corporations this will be a net gain on those accounts.
It would be nice if the government just spent less money when they had less tax revenue. But of course hell will freeze over before a politician will stop spending other peoples money.
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Lower corporate tax rates mean either lower prices for goods and services offered by those corporation
Nope.
or increases in the value of the company which are passed on to shareholders.
Yep.
It's interesting that I don't hear many stating that these corporations will pass the savings onto their employees. You know, like Walmart and Amazon could pay a living wage. I think it's because we all know that it's not going to happen. The rich will keep the savings. That's how this works.
Edit: to add that the bill remains a turd
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Then the corporate rate being 21% is a huge improvement.
Improvement from what? As in, it's an improvement just because it's a lower number? Any arguments for lowering the corporate tax rate does not make any logical sense. This bill is a turd.
Lower corporate tax rates mean either lower prices for goods and services offered by those corporation or increases in the value of the company which are passed on to shareholders. Since most of us here invest in the stock market and buy goods and services from corporations this will be a net gain on those accounts.
It would be nice if the government just spent less money when they had less tax revenue. But of course hell will freeze over before a politician will stop spending other peoples money.
Setting aside the argument that lower corp tax will spur growth.
They are skipping part of what needs to happen to keep this above board. They are still cutting revenue. So they should be telling us up front what spending is on the chopping block or recapturing the revenue with more individual taxes.
I am not convinced the corporate tax cut will do anything more than temporarily extend an already ridiculous bull market. Maybe it will be good timing and counter balance the impact of the quantitative unwind.
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Lower corporate tax rates mean either lower prices for goods and services offered by those corporation
Nope.
or increases in the value of the company which are passed on to shareholders.
Yep.
It's interesting that I don't hear many stating that these corporations will pass the savings onto their employees. You know, like Walmart and Amazon could pay a living wage. I think it's because we all know that it's not going to happen. The rich will keep the savings. That's how this works.
Edit: to add that the bill remains a turd
Those jobs are on the verge of going away forever so at this point they will either pay next to nothing, or they will can half the staff, replace them with automated checkout and pay the remainder a little bit more than nothing until they can fully automate a store. That should definitely happen in our lifetimes.
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Lower corporate tax rates mean either lower prices for goods and services offered by those corporation
Nope.
or increases in the value of the company which are passed on to shareholders.
Yep.
It's interesting that I don't hear many stating that these corporations will pass the savings onto their employees. You know, like Walmart and Amazon could pay a living wage. I think it's because we all know that it's not going to happen. The rich will keep the savings. That's how this works.
Edit: to add that the bill remains a turd
Those jobs are on the verge of going away forever so at this point they will either pay next to nothing, or they will can half the staff, replace them with automated checkout and pay the remainder a little bit more than nothing until they can fully automate a store. That should definitely happen in our lifetimes.
Amazon could replace cashiers with automated checkout machines?
wat?
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Amazon is replacing more and more of their warehouse employees with robots.
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Amazon is replacing more and more of their warehouse employees with robots.
Fair point. That does add speed and efficiency, providing benefits to customers as well.
I am not a big fan of the trend towards self checkout lanes. They're abysmally slow compared to a competent cashier and I do not like them.
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Yeah people seem to have quite polarized views on them.
I tend to like self checkouts because often the store can put in four of them to replace a single human manned checkout lane, so the wait is usually shorter and you don't have to make small talk. But I agree with you the actual checkout process takes longer. McDonalds is also replacing more and more of their order takers with automated checkout kiosks, I'll be interested to hear what people think that does for usability and wait times to order. Overall I'd argue automation is good for customers. If nothing else, it should reduce prices or prevent them from increasing as rapidly as they otherwise would have.
But this is getting a bit off topic. There are good arguments that all things being equal tax cuts will result in increased profits/share prices (good for investors). There are plausible arguments that in certain specific circumstances* tax cuts may get passed on in the form of lower prices (good for consumers). But generally if you make a business more profitable, it's not going to spend any more money on employee salaries because salaries are set by supply and demand for people with the skillsets the company needs (so tax cuts don't do anything for employees).
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And, of course, the child tax credit is not indexed to inflation at all, in either the temporary $2000 dollar value or the old (and eventually new again) $1000 dollar value, so those whither away over time as well. Same for the $10,000 SALT deduction limit, which is forever.
Yes, incredibly depressing.
To be fair, that is one of the redeeming qualities of the bill. Between the limit to $10k and not increasing it with inflation, and putting the standard deduction at $24k for couples and indexing it to chained CPI, that sets the stage for SALT to be completely eliminated as a deduction going forward (which it should be).
Why "should"? I've always thought that permitting deductions to decrease the barriers to moving to the places that make the nation's economy function was a pretty good idea.
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Then the corporate rate being 21% is a huge improvement.
Improvement from what? As in, it's an improvement just because it's a lower number? Any arguments for lowering the corporate tax rate does not make any logical sense. This bill is a turd.
An improvement from a ridiculous tax policy. You don't want a 50% tax rate on capital income. I'm not sure you want a 36% rate, but it's a hell of a lot better than 50%.
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Yeah people seem to have quite polarized views on them.
I tend to like self checkouts because often the store can put in four of them to replace a single human manned checkout lane, so the wait is usually shorter and you don't have to make small talk. But I agree with you the actual checkout process takes longer. McDonalds is also replacing more and more of their order takers with automated checkout kiosks, I'll be interested to hear what people think that does for usability and wait times to order. Overall I'd argue automation is good for customers. If nothing else, it should reduce prices or prevent them from increasing as rapidly as they otherwise would have.
But this is getting a bit off topic. There are good arguments that all things being equal tax cuts will result in increased profits/share prices (good for investors). There are plausible arguments that in certain specific circumstances* tax cuts may get passed on in the form of lower prices (good for consumers). But generally if you make a business more profitable, it's not going to spend any more money on employee salaries because salaries are set by supply and demand for people with the skillsets the company needs (so tax cuts don't do anything for employees).
I’ve used the mcdonalds terminals. They are a little slow (if you are practiced with your order the animations prevent you from confirming your selection immediately) but overall I think they reduce wait times and free up employees to actually clean the dining room. Also I can add free sauces to my order whereas a human once added a zero cost sauce then added a manual up charge.
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Amazon is replacing more and more of their warehouse employees with robots.
Fair point. That does add speed and efficiency, providing benefits to customers as well.
I am not a big fan of the trend towards self checkout lanes. They're abysmally slow compared to a competent cashier and I do not like them.
I much prefer self checkout, mainly because you can have 3-4 times the number of checkouts, making the lines much smaller. My experience is that self checkout is much faster.
Each machine is a little slower, but that is due to the settings on each machine. I have noticed the wait time between each scan is increased, many cashier lanes do not require the weight to reconcile with what was scanned, and cashiers are allowed to enter multiples for each scan.
If those were added to self checkout, very few cashiers would be faster than me.
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At our local Walmart it is almost always faster to do self checkout. Even if you have to wait behind 3-4 people (for the bank of 4 machines), it is faster than waiting behind 1 or 2 in a regular line.
I don't think I could ever beat a cashier at Aldi though.
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At our local Walmart it is almost always faster to do self checkout. Even if you have to wait behind 3-4 people (for the bank of 4 machines), it is faster than waiting behind 1 or 2 in a regular line.
I don't think I could ever beat a cashier at Aldi though.
This is dead on. Self checkout being added to our local Walmart last year is the only reason I ever go there now. It used to be a 10-45 minute wait (yes, really) every single time.
At some other stores it's a wash. I still prefer the self-checkout when available (one local grocery chain removed all their self checkouts last year, which is unbelievably backwards and as a result I go there less often). They really sucked when they were first introduced but they're a lot better now.
Aldi and Costco cashiers are by far the best. Even if there's a long line, they move *fast*.
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And, of course, the child tax credit is not indexed to inflation at all, in either the temporary $2000 dollar value or the old (and eventually new again) $1000 dollar value, so those whither away over time as well. Same for the $10,000 SALT deduction limit, which is forever.
Yes, incredibly depressing.
To be fair, that is one of the redeeming qualities of the bill. Between the limit to $10k and not increasing it with inflation, and putting the standard deduction at $24k for couples and indexing it to chained CPI, that sets the stage for SALT to be completely eliminated as a deduction going forward (which it should be).
Why "should"? I've always thought that permitting deductions to decrease the barriers to moving to the places that make the nation's economy function was a pretty good idea.
There's no reason for a chosen level of local services to impact your federal tax liability. Just as a random example, say town A has a voter referendum and decides it wants to levy an additional 30 mills to the property tax rate to construct and run some public pools in town (and assume that works out to an average of $100 for property tax bill). And say the adjacent Town B has a voter referendum and rejects additional taxes for public pools, under the logic that people that want to swim can build their own pool or join a pool, and peopel that don't want to swim shouldn't have to pay for it. Both decisions seem pretty squarely within the realm of reasonable choices for a town. Why should Residents of Town A get a tax break for choosing to have public pools? They are getting $100 worth of benefits on average and paying for $80. Town B residents are essentially paying more taxes because they are not running their swimming pool costs through the local government. It's just a ridiculous policy.
There are plenty of inequitable parts of the tax code, and peopel from high tax jurisdictions like to point to other inequities to justify SALT deductions, but they're really unrelated, and there's no reason to not address unjustifiable policy just because there are other poor policies not being addressed.
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there's no reason to not address unjustifiable policy just because there are other poor policies not being addressed.
This a great point. Why do we still have the carried interest loophole?
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https://politics.theonion.com/gop-leaders-celebrate-decisive-win-over-americans-1821450809
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there's no reason to not address unjustifiable policy just because there are other poor policies not being addressed.
There is a minor flaw in that logic that I believe I see often when politicians push policy based on fiscal ideology for instances. Sorry if this goes on a tangent that isn't meaningful to how you posed this thought.
Just an attempt at a broad example.
A person may fairly believe that we should slash taxes as much as possible and de-fund major government programs like safety nets that possibly trap people that use them. In a theoretical frame work they would probably also include a more suitable form of relief for struggling people or a slew of other aspects of the model would make jobs more plentiful.
The problem is if you apply that possibly good principle, "keep taxes to a minimum", that change may not mesh well with a reality where we don't take the extra steps to fix the other broken puzzle pieces such as programs people rely on with no suitable alternative in sight.
I am concerned whenever legislation is ham-handedly pushed with its major underpinning being political philosophy and not a deep study of its true impact in our actual system.
Expert opinions of this bill's long term economic impact are far far far from rosy. Could economists all be wrong? Sure, but why ignore the only valid opinions and trust our fate to a massive tax change almost no one has any time to study rushed through congress in about as much time as it took to scribble down on 500 pieces of paper.
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there's no reason to not address unjustifiable policy just because there are other poor policies not being addressed.
This a great point. Why do we still have the carried interest loophole?
Charitably? Allowing sweat equity to be treated like real equity is sort of related to the american dream and while hedge fund people using carried interest get all the press (which is wrong to begin with; it's really private equity people that use it), it's mainly used by people providing the sweat equity in small partnerships.
Realistically, it's a hugely lucrative tax treatment, but since it applies to so few people, it's not terribly expensive. There is economic literature pointing out that those are the unjustified tax treatments (and also subsidies) that are surprisingly easy to maintain, because you have extremely concentrated benefits that make it worthwhile for the beneficiaries to push for them, and extremely small, dispersed costs, which make it more likely that they will be part of a log rolling vote.
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there's no reason to not address unjustifiable policy just because there are other poor policies not being addressed.
This a great point. Why do we still have the carried interest loophole?
According to Cohn they tried to get rid of it. Apparently the hedge fund lobby is pretty entrenched and buys a lot of votes...
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The amendments discussed so far are kinda cute. Rubio and Cruz wanted larger child tax credits and expanded 529s, respectively.
Cruz's amendment isn't for "expanded" 529s, it's to allow Christian home-schoolers to tax shelter any income they spend on homeschooling, including the fraction of their home allocated to homeschooling and all of the food supplied during the "school day". It's an ugly farce.
Just another federal giveaway to the religious right. Move along, there's nothing new to see here.
Looks like this made it in the final bill.
Jesus saves, bitches.
edit: according to the following paragraph, it doesn't look like home-schooling expenses are allowed:
(7) TREATMENT OF ELEMENTARY AND SECONDARY TUITION.—Any reference in this subsection to the term ‘qualified higher education expense’ shall include a reference to expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.
So maybe Jesus doesn't save after all.
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The amendments discussed so far are kinda cute. Rubio and Cruz wanted larger child tax credits and expanded 529s, respectively.
Cruz's amendment isn't for "expanded" 529s, it's to allow Christian home-schoolers to tax shelter any income they spend on homeschooling, including the fraction of their home allocated to homeschooling and all of the food supplied during the "school day". It's an ugly farce.
Just another federal giveaway to the religious right. Move along, there's nothing new to see here.
Looks like this made it in the final bill.
Jesus saves, bitches.
edit: according to the following paragraph, it doesn't look like home-schooling expenses are allowed:
(7) TREATMENT OF ELEMENTARY AND SECONDARY TUITION.—Any reference in this subsection to the term ‘qualified higher education expense’ shall include a reference to expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.
So maybe Jesus doesn't save after all.
Yep, thanks Wyden and Sanders. I had some respect for Sen. Wyden in terms of his stance on civil liberties but this erases a lot of that. We homeschool our three oldest (and will homeschool the others once they're old enough). Though this wouldn't have made much of a difference since our total homeschool expenses for 2017 were $1,550, it would have helped a little. It's ok, at least the state-run schools aren't getting any funding for our kids. 50 out of 51 for high school graduation rates - that's the kind of school system I want my kids to be enrolled in :rolleyes:
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edit: according to the following paragraph, it doesn't look like home-schooling expenses are allowed:
(7) TREATMENT OF ELEMENTARY AND SECONDARY TUITION.—Any reference in this subsection to the term ‘qualified higher education expense’ shall include a reference to expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.
How is "private" defined? In other words, does it extend beyond non-religious, tuition-charging schools to include home schooling, which is certainly a "private" thing...?
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50 out of 51 for high school graduation rates - that's the kind of school system I want my kids to be enrolled in :rolleyes:
Isn't that a 98% graduation rate? That's pretty good, Google says the national average is 83.2%.
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50 out of 51 for high school graduation rates - that's the kind of school system I want my kids to be enrolled in :rolleyes:
Isn't that a 98% graduation rate? That's pretty good, Google says the national average is 83.2%.
New Mexico ranks 50th out of 51 for high school graduation rates at just 71%. Only the District of Columbia is lower at 69%. Still, better than a few years ago when it was 67% or so. In Albuquerque though it's only 66%.
https://www.abqjournal.com/1103190/nm-high-school-graduation-rate-shows-improvement.html
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I believe there will be a lot of latitude in the definitions given to "expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.”
Tuition in connection with enrollment OR attendance sounds like attendance at a brick and mortar school isn't required. Indeed, tuition for online college classes has long been considered a qualifying higher education cost, and I don't think they will segregate elementary education in this regard.
There are many accredited homeschool programs that may very well be covered under this paragraph. Accredited means different things to different states, but I think that it will come down to tax court to make those decisions upon appeal of an audit at some time in the future.
I don't think many of the state-affiliated charter homeschools (K12, etc) actually charge parents tuition, but I am not sure on that.
Last time I checked california homeschool laws (admittedly, over 10 years ago), they required all homeschools to be certified by the state as a "private school", presumably just to make it more difficult for the parents. Any state still utilizing that language will certainly have to concede that their homeschool parents qualify under this paragraph. As to what constitutes "tuition," well, that will be the next definition to hammer out.
I think there is a lot of room to refine definitions and, in the view of a homeschooler with 4 children and many years ahead of us, to push the envelope. I am surprised at the number of people who seem hostile towards the thought of a tax deduction for parents who are shelling out their own money to educate their children. First, we all pay property taxes and general taxes to support the public education system for those who choose to utilize it, we haven't managed to segregate from that. So the future funding of all public schoolers isn't impacted by us keeping our children out of them. Second, why the animosity towards homeschoolers but not private schools? Are we somehow harming the general society in some way, specifically above and beyond any harm done by private schools? That eludes me.
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It looks like senators Collins has already folded on her demand to have healthcare subsidies for the poor included in the year end spending bill. This was the promise she extracted from McConnel in exchange for her vote on the tax bill that destabilizes the insurance market, and she was widely criticized for buying his vague assurances and then vehemently defended her decision by saying he was going to make good.
But, no. They're will be no insurance subsidies in the CR, and she has publicly committed to voting for it without them.
I could have sworn republicans were supposed to be the ones with spines.
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I think there is a lot of room to refine definitions and, in the view of a homeschooler with 4 children and many years ahead of us, to push the envelope. I am surprised at the number of people who seem hostile towards the thought of a tax deduction for parents who are shelling out their own money to educate their children. First, we all pay property taxes and general taxes to support the public education system for those who choose to utilize it, we haven't managed to segregate from that. So the future funding of all public schoolers isn't impacted by us keeping our children out of them. Second, why the animosity towards homeschoolers but not private schools? Are we somehow harming the general society in some way, specifically above and beyond any harm done by private schools? That eludes me.
We homeschool our kids, and I'm curious to see how all of this plays out.
I'm betting the IRS guidelines should clarify this section, but the homeschool groups (where parents group together and take turns teaching their respective strong suits) around here would benefit.
I don't really get the homeschool hate on here, but maybe its a religion-hate thing...?
Edit to add: Does anyone disagree with the ability to tax-deduct the portion of your home used for a home business? Thats been on the books for years. Why would working from home get preferential treatment but schooling from home not?
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Can I use 529 money to pay (public) Kindergarten tuition? Since Kasich's brilliant decision not to fund Kindergarten the same way we fund every other grade, my district started charging for full day.
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Can I use 529 money to pay (public) Kindergarten tuition? Since Kasich's brilliant decision not to fund Kindergarten the same way we fund every other grade, my district started charging for full day.
It would appear so. Thats very clearly schooling expenses and as a brick-and-mortar institution, not going to get IRS'd out in any clarifications.
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I think there is a lot of room to refine definitions and, in the view of a homeschooler with 4 children and many years ahead of us, to push the envelope. I am surprised at the number of people who seem hostile towards the thought of a tax deduction for parents who are shelling out their own money to educate their children. First, we all pay property taxes and general taxes to support the public education system for those who choose to utilize it, we haven't managed to segregate from that. So the future funding of all public schoolers isn't impacted by us keeping our children out of them. Second, why the animosity towards homeschoolers but not private schools? Are we somehow harming the general society in some way, specifically above and beyond any harm done by private schools? That eludes me.
Since homeschooling is generally associated with (Christian) religion there's certainly animosity from that respect. I think a lot of it comes down to violating the status quo. Educating your children outside the state-run public schools is very threatening to those that want everyone to fit neatly into secular society. It is also threatening to the education complex as its seen as taking money away from public schools since school funding is linked to the number of enrolled students.
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And, of course, the child tax credit is not indexed to inflation at all, in either the temporary $2000 dollar value or the old (and eventually new again) $1000 dollar value, so those whither away over time as well. Same for the $10,000 SALT deduction limit, which is forever.
Yes, incredibly depressing.
To be fair, that is one of the redeeming qualities of the bill. Between the limit to $10k and not increasing it with inflation, and putting the standard deduction at $24k for couples and indexing it to chained CPI, that sets the stage for SALT to be completely eliminated as a deduction going forward (which it should be).
Why "should"? I've always thought that permitting deductions to decrease the barriers to moving to the places that make the nation's economy function was a pretty good idea.
There's no reason for a chosen level of local services to impact your federal tax liability. Just as a random example, say town A has a voter referendum and decides it wants to levy an additional 30 mills to the property tax rate to construct and run some public pools in town (and assume that works out to an average of $100 for property tax bill). And say the adjacent Town B has a voter referendum and rejects additional taxes for public pools, under the logic that people that want to swim can build their own pool or join a pool, and peopel that don't want to swim shouldn't have to pay for it. Both decisions seem pretty squarely within the realm of reasonable choices for a town. Why should Residents of Town A get a tax break for choosing to have public pools? They are getting $100 worth of benefits on average and paying for $80. Town B residents are essentially paying more taxes because they are not running their swimming pool costs through the local government. It's just a ridiculous policy.
There are plenty of inequitable parts of the tax code, and peopel from high tax jurisdictions like to point to other inequities to justify SALT deductions, but they're really unrelated, and there's no reason to not address unjustifiable policy just because there are other poor policies not being addressed.
Let's imagine that the $100/property spending was not on a pool, but was instead on productivity-enhancing programs (let's say job training and infrastructure), and that the resultant productivity differentials between Town A and Town B were such that the Town A folks earned enough more that they paid higher federal taxes than the Town B people, even after taking into account the federal deduction of the Town A property taxes. I'm curious---would it be ridiculous for the federal government to incentivize that Town A spending, if it made federal receipts higher?
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Educating your children outside the state-run public schools is very threatening to those that want everyone to fit neatly into secular society. It is also threatening to the education complex as its seen as taking money away from public schools since school funding is linked to the number of enrolled students.
No, this isn't my objection at all.
I'm fully supportive of religious education. I'm fully opposed to federal subsidies going to support religious education.
I prefer my government to stay out of my religion. Thomas Jefferson and I are buds, in that respect. America was founded by people who were so persecuted by state-supported religion that they felt they need to risk everything to start anew on a hostile continent, and the memory of those first settlers echoes in everything we do in America today. We love religion, we're just REALLY opposed to state-sponsored religion, in all of it's possible incarnations.
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Educating your children outside the state-run public schools is very threatening to those that want everyone to fit neatly into secular society. It is also threatening to the education complex as its seen as taking money away from public schools since school funding is linked to the number of enrolled students.
No, this isn't my objection at all.
I'm fully supportive of religious education. I'm fully opposed to federal subsidies going to support religious education.
I prefer my government to stay out of my religion. Thomas Jefferson and I are buds, in that respect. America was founded by people who were so persecuted by state-supported religion that they felt they need to risk everything to start anew on a hostile continent, and the memory of those first settlers echoes in everything we do in America today. We love religion, we're just REALLY opposed to state-sponsored religion, in all of it's possible incarnations.
Since money from a 529-plan can be used to pay for tuition at a religious college do you oppose that as well? Or student loans (which are even more of a direct subsidy) being used at religious colleges?
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...
Since homeschooling is generally associated with (Christian) religion there's certainly animosity from that respect. I think a lot of it comes down to violating the status quo. Educating your children outside the state-run public schools is very threatening to those that want everyone to fit neatly into secular society. It is also threatening to the education complex as its seen as taking money away from public schools since school funding is linked to the number of enrolled students.
This interests me.
So you are saying that some would object to a child not going to a school because the federal funding that is set on a per-child basis is going to be reduced. But if the federal funding (that is given on a per child basis) is truly a payment for the associated costs of the number of children in a school, then either (1) my child's lack of attendance equals out the lack of funding that (logically) should be specifically used for my child OR (2) federal funding given on a per child basis is not actually spend on a per child basis.
I'll tell you why thats a big deal. Federal funding has been linked to the number of kids because the assumption is that the spending should be based on the number of children. My child's absence does not negate my 'portion' of the federal taxation and spending on schooling, therefore I am actually (technically) paying more than my fair share as I have resources available to use that I intentionally forego and still pay for. That is without including property tax / state tax (though I have no state tax).
The 'hate' of homeschooling is logically inconsistent from a financial standpoint which only leaves (1) the educational standpoint or (2) the religious standpoint.
To address #1, homeschoolers consistent perform better than their peers on testing and have higher college GPAs given that parents include them in some form of structured education (whether that be a structured, solo lesson plan, homeschool group, or online education such as Khan Academy).
Source 1: https://www.nmu.edu/education/sites/DrupalEducation/files/UserFiles/Moreau_Kathi_MP.pdf (https://www.nmu.edu/education/sites/DrupalEducation/files/UserFiles/Moreau_Kathi_MP.pdf) (page 19 specifically)
Source 2: https://www.nheri.org/research/research-facts-on-homeschooling.html (https://www.nheri.org/research/research-facts-on-homeschooling.html) See 'Academic Performance'
Source 3: Ray, Brian D. https://eric.ed.gov/?id=EJ682480 (https://eric.ed.gov/?id=EJ682480)
Source 4: http://www.othereducation.org/index.php/OE/article/view/10 (http://www.othereducation.org/index.php/OE/article/view/10)
Source 5: https://www.parentingscience.com/homeschooling-outcomes.html (https://www.parentingscience.com/homeschooling-outcomes.html)
Source 6: Kunzman R. 2009. Understanding homeschooling: A better approach to regularization. Theory and Research in Education, 7: 311–330. http://www.eric.ed.gov/ERICWebPortal/search/detailmini.jsp?_nfpb=true&_&ERICExtSearch_SearchValue_0=EJ860946&ERICExtSearch_SearchType_0=no&accno=EJ860946 (http://www.eric.ed.gov/ERICWebPortal/search/detailmini.jsp?_nfpb=true&_&ERICExtSearch_SearchValue_0=EJ860946&ERICExtSearch_SearchType_0=no&accno=EJ860946)
Source 7: Martin-Chang S, Gould ON, and Meuse, R E. The impact of schooling on academic achievement: Evidence from homeschooled and traditionally schooled students. Canadian Journal of Behavioural Science 43(3): 195-202.
Source 8: Rudner L. 1999. Scholastic Achievement and Demographic Characteristics of Home School Students in 1998. Education Policy Analysis Archives, 7(1) 1-38.
....
So that leave us with #2, the religious standpoint.
Now, can someone explain to me why there is blanket condemnation of the travel ban but yet its ok to be against homechooling "Because Christianity!"
How can you rectify the disapproval on a religious-based travel ban but then disagree with homeschooling for religious (or anti-religious) reasons? Why does one religion deserve the support of free will and exercise but another does not?
Those who are against homeschooling either (1) don't understand the data, (2) don't understand the positive financial implications or (3) disagree with it due to a religious or anti-religious viewpoint. Show me otherwise.
A new thread is here for this discussion, because I don't want to muck up this one any more than it already is:
https://forum.mrmoneymustache.com/welcome-to-the-forum/prove-to-me-why-anti-homeschooling-attitudes-are-ok/ (https://forum.mrmoneymustache.com/welcome-to-the-forum/prove-to-me-why-anti-homeschooling-attitudes-are-ok/)
...
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edit: according to the following paragraph, it doesn't look like home-schooling expenses are allowed:
(7) TREATMENT OF ELEMENTARY AND SECONDARY TUITION.—Any reference in this subsection to the term ‘qualified higher education expense’ shall include a reference to expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.
How is "private" defined? In other words, does it extend beyond non-religious, tuition-charging schools to include home schooling, which is certainly a "private" thing...?
It doesn't like they bothered to define it, but it mentions "expenses for tuition".
This Internet Lawyer reads it as an inability to expense anything other than tuition, and I don't see how a homeschooling family could realistically charge "tuition" to themselves.
This would mean no pre-tax dollars for sports or school trips either.
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Educating your children outside the state-run public schools is very threatening to those that want everyone to fit neatly into secular society. It is also threatening to the education complex as its seen as taking money away from public schools since school funding is linked to the number of enrolled students.
No, this isn't my objection at all.
I'm fully supportive of religious education. I'm fully opposed to federal subsidies going to support religious education.
I prefer my government to stay out of my religion. Thomas Jefferson and I are buds, in that respect. America was founded by people who were so persecuted by state-supported religion that they felt they need to risk everything to start anew on a hostile continent, and the memory of those first settlers echoes in everything we do in America today. We love religion, we're just REALLY opposed to state-sponsored religion, in all of it's possible incarnations.
+1
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Since money from a 529-plan can be used to pay for tuition at a religious college do you oppose that as well? Or student loans (which are even more of a direct subsidy) being used at religious colleges?
Yes, and I would rescind federal funding to institutions that overtly proselytizes any religion or doctrine, with "overtly" being TBD, but some examples are here:
https://collegetimes.co/strict-college-campuses/
Look, I have a very low view of religion in general, but you could take out the religious aspect of homeschooling away entirely and I'd still find it counterproductive because it removes good students from the general population pool.
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Yes, and I would rescind federal funding to institutions that overtly proselytizes any religion or doctrine, with "overtly" being TBD, but some examples are here:
https://collegetimes.co/strict-college-campuses/
Look, I have a very low view of religion in general, but you could take out the religious aspect of homeschooling away entirely and I'd still find it counterproductive because it removes good students from the general population pool.
This is an interesting point. I started a tangent thread up-post and actually would like to see a bit more on this or see this thought-out if your willing to expand. Its an interesting aspect that I haven't ever considered.
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Since money from a 529-plan can be used to pay for tuition at a religious college do you oppose that as well?
Of course.
I oppose federal dollars being used to advance religious agendas. I oppose federal aid to seminary or religious colleges. I oppose mandatory prayer in school. I oppose tax breaks for churches (especially the ones that endorse political candidates).
I want everyone, of every religion, to have complete freedom to worship as they see fit. But with that even playing field, I think, has to come a complete abdication by the government of any control over religious matters. Uncle Sam should not be supporting one religion over another, IMO, and it's basically impossible to support any specific one without relatively disadvantaging some others.
Now, can someone explain to me why there is blanket condemnation of the travel ban but yet its ok to be against homechooling "Because Christianity!"
I oppose the travel bans because it uses federal regulation to single out one religion over others. It's fundamentally discriminatory against the freedom of religion enshrined in the Constitution.
I am NOT against homeschooling. I love homeschooling. I'm just against federal regulations that support one type of religion over another, for the exact same reason that I'm against the travel ban.
I also love churches, but I don't think they should be getting tax breaks either. If you love your religion, whatever it is, you should support it without asking the rest of us to do so, too.
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I also love churches, but I don't think they should be getting tax breaks either. If you love your religion, whatever it is, you should support it without asking the rest of us to do so, too.
Sol, you and I actually have something we agree on. I wish all churches (regardless of religion or lack thereof) were not tax-free entities. From the opposite side of the fishbowl, it would be much easier on everybody inside as well. Personal political opinions wouldn't be stifled and any giving would occur at whatever level the 'givee' sees fit in lieu of the mental block of "I don't get any benefit beyond XXX number of dollars", which I consider to be counter-productive in both secular and religious donations.
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I do think there's going to be challenges from homeschool parents who use accredited programs, as they do pay "tuition, books, and fees". I do not know, however, if the traditional uses of a 529 for college expenses includes books and fees, or simply tuition. Regardless, I do think that there will be plenty of homeschool parents who go for this, and it will probably play out in tax court upon appeal of an audit. I can't see that the legislature will try to wade in here and define the terms. I do believe the language to indicate a spirit of inclusiveness, however, and the intent to duplicate the college-level applications of the 529 funds to the primary level.
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I do not know, however, if the traditional uses of a 529 for college expenses includes books and fees, or simply tuition.
I think the current 529 rules are pretty broad and include things like room and board, a laptop for school, parking passes on campus, etc. Pretty much anything education related.
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There's no reason for a chosen level of local services to impact your federal tax liability. Just as a random example, say town A has a voter referendum and decides it wants to levy an additional 30 mills to the property tax rate to construct and run some public pools in town (and assume that works out to an average of $100 for property tax bill). And say the adjacent Town B has a voter referendum and rejects additional taxes for public pools, under the logic that people that want to swim can build their own pool or join a pool, and peopel that don't want to swim shouldn't have to pay for it. Both decisions seem pretty squarely within the realm of reasonable choices for a town. Why should Residents of Town A get a tax break for choosing to have public pools? They are getting $100 worth of benefits on average and paying for $80. Town B residents are essentially paying more taxes because they are not running their swimming pool costs through the local government. It's just a ridiculous policy.
There are plenty of inequitable parts of the tax code, and peopel from high tax jurisdictions like to point to other inequities to justify SALT deductions, but they're really unrelated, and there's no reason to not address unjustifiable policy just because there are other poor policies not being addressed.
Let's imagine that the $100/property spending was not on a pool, but was instead on productivity-enhancing programs (let's say job training and infrastructure), and that the resultant productivity differentials between Town A and Town B were such that the Town A folks earned enough more that they paid higher federal taxes than the Town B people, even after taking into account the federal deduction of the Town A property taxes. I'm curious---would it be ridiculous for the federal government to incentivize that Town A spending, if it made federal receipts higher?
Now you're getting back into the debate over whether or not higher tax rates CAUSE higher state economic productivity.
I thought we put this to bed back on page 8 of this thread (https://forum.mrmoneymustache.com/welcome-to-the-forum/republican-tax-plan-2017/msg1768410/#msg1768410).
If we could show a causal relationship between higher state SALT taxes and higher per capita state GDP (after controlling for variation in cost of living*), I would agree that there was a good justification for the deduction to encourage states to raise sales, income, and property taxes. However I haven't seen evidence to suggest that such a causal relationship exists.
*You need higher salaries and hence have to pay higher taxes to support the same level of economic productivity if the cost of living is higher.
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Looks like this made it in the final bill.
Jesus saves, bitches.
Please do not use that name disrespectfully.
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Looks like this made it in the final bill.
Jesus saves, bitches.
Please do not use that name disrespectfully.
And I would like religion to not influence law or politics, but we can't have everything we want.
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Looks like this made it in the final bill.
Jesus saves, bitches.
Please do not use that name disrespectfully.
And I would like religion to not influence law or politics, but we can't have everything we want.
I don't expect anything. I am bound to speak up for the One I love, who also loves me. So I did.
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There's no reason for a chosen level of local services to impact your federal tax liability. Just as a random example, say town A has a voter referendum and decides it wants to levy an additional 30 mills to the property tax rate to construct and run some public pools in town (and assume that works out to an average of $100 for property tax bill). And say the adjacent Town B has a voter referendum and rejects additional taxes for public pools, under the logic that people that want to swim can build their own pool or join a pool, and peopel that don't want to swim shouldn't have to pay for it. Both decisions seem pretty squarely within the realm of reasonable choices for a town. Why should Residents of Town A get a tax break for choosing to have public pools? They are getting $100 worth of benefits on average and paying for $80. Town B residents are essentially paying more taxes because they are not running their swimming pool costs through the local government. It's just a ridiculous policy.
There are plenty of inequitable parts of the tax code, and peopel from high tax jurisdictions like to point to other inequities to justify SALT deductions, but they're really unrelated, and there's no reason to not address unjustifiable policy just because there are other poor policies not being addressed.
Let's imagine that the $100/property spending was not on a pool, but was instead on productivity-enhancing programs (let's say job training and infrastructure), and that the resultant productivity differentials between Town A and Town B were such that the Town A folks earned enough more that they paid higher federal taxes than the Town B people, even after taking into account the federal deduction of the Town A property taxes. I'm curious---would it be ridiculous for the federal government to incentivize that Town A spending, if it made federal receipts higher?
Now you're getting back into the debate over whether or not higher tax rates CAUSE higher state economic productivity.
I thought we put this to bed back on page 8 of this thread (https://forum.mrmoneymustache.com/welcome-to-the-forum/republican-tax-plan-2017/msg1768410/#msg1768410).
If we could show a causal relationship between higher state SALT taxes and higher per capita state GDP (after controlling for variation in cost of living*), I would agree that there was a good justification for the deduction to encourage states to raise sales, income, and property taxes. However I haven't seen evidence to suggest that such a causal relationship exists.
*You need higher salaries and hence have to pay higher taxes to support the same level of economic productivity if the cost of living is higher.
I don't see anything on page 8 (or anywhere in this thread) that put anything to bed.
I asked my question to better understand whether Jrr85 objects on philosophical grounds or on the basis of (supposed) outcomes. It seems like you object on the basis of (supposed) outcomes. I'm not aware of evidence of a causal relationship between spending in aggregate and economic growth, but you may want to check out this paper, regarding the education component.http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.366.5485&rep=rep1&type=pdf
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I'm not aware of evidence of a causal relationship between spending in aggregate and economic growth, but you may want to check out this paper, regarding the education component.http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.366.5485&rep=rep1&type=pdf
Well that is a giant paper. I will admit up front that don't pretend to understand most of the math behind their models, so I'd be interested to hear more of your own thoughts on the validity of their model, particular the way they are looking at migration and how close states are to the technological production possibility frontier. And why don't economists believe in abstracts?
The TL;DR version for people who don't want to read (or skim) through it themselves: The authors conclude that in the average state, increased funding for 4 year colleges produces additional economic growth beyond the stimulatory effects of the additional government spending itself, but increased funding for 2 year colleges does not. The result seems plausible to me. But if correct, that would suggest some state spending stimulates economic growth and other spending does not, so a more targeted program (for example a federal matching program for state spending on the most advanced educational institutions in the state or other spending shown to produce excess economic growth) would be much more cost effective at promoting the desired behavior than a SALT income tax deduction.
Also this bit from the discussion is a fascinating idea that could explain part of the difference in both state tax burdens and and in how much different states are willing to support their own public research institutions.
We find that exogenous shocks to research-type education have positive growth effects only in states fairly close to the technological frontier. In part, this is because research-type investment shocks induce the beneficiaries of such education to migrate to close-to-the frontier states from far-from-the-frontier states. Put another way, Massachusetts, California, or New Jersey may benefit more from an investment in Mississippi's research universities than Mississippi does.
I have several concerns about SALT deductions, including the fact that they make the federal tax code less progressive than it otherwise would be. But to me the weirdest bit is that the same people tend to argue opposite and contradictory positions when it comes to individuals and states.
Generally it is people who strongly support the idea that rich people should pay more federal taxes than poor people (a position I share) are the same ones who turn around and what to reduce the difference between the amount rich states pay in federal taxes (per person) and the amount poor states pay in federal taxes (a position I don't share).
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Looks like this made it in the final bill.
Jesus saves, bitches.
Please do not use that name disrespectfully.
And I would like religion to not influence law or politics, but we can't have everything we want.
I don't expect anything. I am bound to speak up for the One I love, who also loves me. So I did.
Thank you for this. Well put. God bless you brother.
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Since money from a 529-plan can be used to pay for tuition at a religious college do you oppose that as well? Or student loans (which are even more of a direct subsidy) being used at religious colleges?
Yes, and I would rescind federal funding to institutions that overtly proselytizes any religion or doctrine, with "overtly" being TBD, but some examples are here:
https://collegetimes.co/strict-college-campuses/
Look, I have a very low view of religion in general, but you could take out the religious aspect of homeschooling away entirely and I'd still find it counterproductive because it removes good students from the general population pool.
Fox and Friends should have done a story about how President Trump was planning to give a HUUUUGE tax cut to Muslims to teach their kids the Quran and attend Madrasses...
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Looks like this made it in the final bill.
Jesus saves, bitches.
Please do not use that name disrespectfully.
And I would like religion to not influence law or politics, but we can't have everything we want.
I don't expect anything. I am bound to speak up for the One I love, who also loves me. So I did.
Thank you for this. Well put. God bless you brother.
Sigh, since this thread has turned towards religion in several ways...
As a fellow Christian, I have to speak out against this. You control your own behavior, you do not control the behavior of those around you. Christianity is supposed to be attractive (a "shining city on a hill"), not prescriptive ("do what I say regardless of your beliefs"). The people Jesus hated (if that's the right word) most in the world were the Pharisees who were shoving their religious laws down other people's throats. This behavior is not helpful, at best.
Now hopefully we can get back to the actual topic at hand.
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I have several concerns about SALT deductions, including the fact that they make the federal tax code less progressive than it otherwise would be. But to me the weirdest bit is that the same people tend to argue opposite and contradictory positions when it comes to individuals and states.
Generally it is people who strongly support the idea that rich people should pay more federal taxes than poor people (a position I share) are the same ones who turn around and what to reduce the difference between the amount rich states pay in federal taxes (per person) and the amount poor states pay in federal taxes (a position I don't share).
To live in the United States is to live and work in one or a couple of the individual states. So long as those states make different contributions to the nation, focusing on the federal tax obligations of taxpayers alone seems curiously narrow to me. I've never heard an argument that SALT deductions should allow similarly situated taxpayers in a high-tax state to pay less in total taxes than a taxpayer in a low-tax state. But neither have I heard much challenge to the claim that a relative handful of states, which tend to be high-tax ones, host disproportionate amounts of the nation's productivity and innovation. The SALT deductions seem to me no more than a recognition that the willingness of states (and state populations) to subject themselves to higher-tax (and spending) environments has spillover benefits for the nation as a whole. Certainly those relationships could be studied more closely, but I've heard no convincing reason to drop a feature that has heretofore been in the federal tax code throughout its history, and believe instead that it is a politically-motivated decision that will be detrimental to the nation.
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it is a politically-motivated decision that will be detrimental to the nation.
It may have been unintentional, but this seems a particularly apt summary for the whole topic of this thread.
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But neither have I heard much challenge to the claim that a relative handful of states, which tend to be high-tax ones, host disproportionate amounts of the nation's productivity and innovation. The SALT deductions seem to me no more than a recognition that the willingness of states (and state populations) to subject themselves to higher-tax (and spending) environments has spillover benefits for the nation as a whole.
It would seem then that your position boils down to the fact that your default assumption is indeed that higher tax rates do CAUSE higher productivity unless you see evidence to the contrary, and my default assumption is that tax rates and productivity don't have direct causal relationships with each other* unless there is evidence to demonstrate that they do.
In the absence of evidence, it seems unlikely that we are going to reach an agreement on this topic.
*And I do agree it is likely that certain types of state spending do increase innovation and productivity. But if we wanted to promote those specific types of spending, we could do it directly rather than subsidizing all types of state taxation/spending.
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But neither have I heard much challenge to the claim that a relative handful of states, which tend to be high-tax ones, host disproportionate amounts of the nation's productivity and innovation. The SALT deductions seem to me no more than a recognition that the willingness of states (and state populations) to subject themselves to higher-tax (and spending) environments has spillover benefits for the nation as a whole.
It would seem then that your position boils down to the fact that your default assumption is indeed that higher tax rates do CAUSE higher productivity unless you see evidence to the contrary, and my default assumption is that tax rates and productivity don't have direct causal relationships with each other* unless there is evidence to demonstrate that they do.
In the absence of evidence, it seems unlikely that we are going to reach an agreement on this topic.
*And I do agree it is likely that certain types of state spending do increase innovation and productivity. But if we wanted to promote those specific types of spending, we could do it directly rather than subsidizing all types of state taxation/spending.
I suspect causality, but don't think it's essential to finding a reason to think federal tax law should grant the SALT deductions: Even with only a correlation between state taxes and the positive factors we're talking about, once those states exist, decreasing marginal disincentives to migration toward those states can be positive for the nation as a whole, regardless of whether the state taxing and spending caused the advantages. A different approach might be to adjust standard deductions based on cost of living, or change the bracket borders based on cost of living, but offering a system in which taxpayers had the real ability to itemize some of the most common increased costs (larger mortgages, greater taxes) seemed plausible to me, too.
I don't see state and local property and sales taxes quite the same way as income taxes, though, in that income taxes are a direct cost of income production, which seems to be the whole justification for preserving businesses' ability to deduct state and local taxes. It would have seemed more internally coherent to me (considered against business treatment) to eliminate property and sales tax deductions, eliminate the mortgage interest deduction, but keep state and local income tax deductions.
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It would have seemed more internally coherent to me (considered against business treatment) to eliminate property and sales tax deductions, eliminate the mortgage interest deduction, but keep state and local income tax deductions.
The problem is these breaks have been intertwined because of the nature of itemizing versus the standard deduction. If you wanted to be more fair about these deductions everyone would start from the baseline of a standard deduction. Then further deductions would simply go on top as added intensives to, have kids, buy a home, get educated or avoid double taxation in states that chose to tax income instead of property.
For some reason we are stilled tied to this complicated system of creating a gateway to get to itemizing to access deductions which it would seem we should get by default. How many people in California have suffered through a "double tax" because they never had enough deductions to break past the standard deduction? Its a really stupid system and its only purpose as I can see it is to lessen the amount of people who can access deductions changing the true cost of the tax break.
Buying a home should have never been a gateway to other tax breaks. Each break needs to stand on its owns or not exist.
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I suspect causality, but don't think it's essential to finding a reason to think federal tax law should grant the SALT deductions: Even with only a correlation between state taxes and the positive factors we're talking about, once those states exist, decreasing marginal disincentives to migration toward those states can be positive for the nation as a whole, regardless of whether the state taxing and spending caused the advantages.
So your view is that it's inherently good for the nation as a whole if more people move to New York, New Jersey, Massachusetts, and Connecticut? (As these are the four states which combine significantly higher SALT taxes paid per capita and higher federal taxes paid per capita.) I'm not clear why packing more people into those four states is a desirable goal in your view, though. Moving more people from low cost of living states to extremely high cost of living states -- which all four of those already are -- is going to drive up cost of living in those four states even higher which would decrease happiness for both current residents and new migrants. But yes, if your goal is to encourage migration to those four states, a SALT deduction is a good thing. But that's a different argument from saying the SALT deduction encourages increased economic growth.
And even here, if you decide that this is your goal, there are more cost effective means to achieve the same result. In the economic models I'm familiar with, cost of living is a much bigger barrier to migration to major coastal cities than higher tax rates. Changes to zoning and permitting processes can dramatically increase how fast cities add new housing stock and reduce the riskiness of starting new projects, which brings down rents and property purchase prices. So if as a society we want to encourage more people to move to greater NYC and Boston, we could create federal tax incentives for cities to make getting permits for new high rises both faster and more predictable.
would have seemed more internally coherent to me (considered against business treatment) to eliminate property and sales tax deductions, eliminate the mortgage interest deduction, but keep state and local income tax deductions.
Here I am in complete agreement with you. When it comes to both SALT tax deductions and interest charge deductions, the treatment should be the same for individuals and businesses, whether that is providing a deduction or not providing a deduction.
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I just learned that the medical expense deduction, which was "saved" in the new tax law, wasn't saved at all. It disappears in two years. It didn't even get the same five year phase out that the individual tax cuts got, it was singled out for more rapid elimination. This is going to seriously harm seniors in assisted living facilities. The AARP went on record as supporting the preservation of this deduction, despite opposing the rest of the bill, but I don't think they realized it was for only two years.
The press has reported on the tax bill much differently than they reported on the health care bill. In that case, when the republican bill cut people from Medicaid they reported it as people being cut, with a delayed phase-in of the cuts. With the tax bill they are instead just saying the harm was avoided, and ignoring the future phase-in. I'm baffled.
Similarly with the child tax credi, everyone is thrilled it is being "expanded" even though eligibility is being restricted so that fewer people will get it. How is it an expansion of benefits when the government is saving money on it? That's a tax increase, not a tax cut!
How did we let them get away with this?
How is eligibility for the child tax credit being restricted? Everything I've seen shows the amount that is refundable is going up and the income limits being raised. is it some interplay with the earned income tax credit or something?
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[snip]
1) Not only do I not think that federal tax payments are the only way a person, place or population contributes to the national well-being, but I don't think I've even heard someone imply that before.
2) Looking at only the states as states loses the granularity of considering the state effects on individuals, regardless of the overall tax levels within the state. Take California, which likely has the biggest number of state and federal "high" taxpayers, regardless of what the overall per capita amounts may be.
3) Yes, I'm optimistic about the benefits of decreasing barriers to people moving to where they can be most productive.
The federal system is a great lab for different approaches, but they developed over a long time within a particular framework; I think changing the framework for political purposes, while masquerading as a move to fairness that rests on a narrow focus on aspects of the framework in isolation even while they run counter to the big picture, is disingenuous and dangerous. If the rules change, people will make different decisions than they would have made under the status quo. I wonder, as one example, with the increasing ease of telecommuting, if a policy change that exacerbates the financial differences between locations will cause more people to opt out of being at headquarters, and whether that will suppress the benefits of network effects. Or will it put upward pressure on salaries in areas that are already HCOL, beyond the equilibrium that had existed between those places and the rest of the country? I don't know what the potential effects will be, of course, but I suspect that the motives for the changes were not to "help the country" and were instead to achieve some political ends.
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I just learned that the medical expense deduction, which was "saved" in the new tax law, wasn't saved at all. It disappears in two years. It didn't even get the same five year phase out that the individual tax cuts got, it was singled out for more rapid elimination. This is going to seriously harm seniors in assisted living facilities. The AARP went on record as supporting the preservation of this deduction, despite opposing the rest of the bill, but I don't think they realized it was for only two years.
The press has reported on the tax bill much differently than they reported on the health care bill. In that case, when the republican bill cut people from Medicaid they reported it as people being cut, with a delayed phase-in of the cuts. With the tax bill they are instead just saying the harm was avoided, and ignoring the future phase-in. I'm baffled.
Similarly with the child tax credi, everyone is thrilled it is being "expanded" even though eligibility is being restricted so that fewer people will get it. How is it an expansion of benefits when the government is saving money on it? That's a tax increase, not a tax cut!
How did we let them get away with this?
How is eligibility for the child tax credit being restricted? Everything I've seen shows the amount that is refundable is going up and the income limits being raised. is it some interplay with the earned income tax credit or something?
He's likely talking about the $2000 Child Tax Credit ends at 17, so dependents that are college age (17-24) will only get $500 credit. Not a great deal if you have a couple kids in school at the same time (and compared to current $4050 exemptions).
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I just learned that the medical expense deduction, which was "saved" in the new tax law, wasn't saved at all. It disappears in two years.
...
How did we let them get away with this?
Because it doesn't disappear in two years.
The medical expense deduction threshold is lowered to 7.5 percent for [2017 and] 2018, and reverts to [the current law's] 10 percent thereafter. (https://taxfoundation.org/conference-report-tax-cuts-and-jobs-act/)
ETA: See Sec. 11027 in TCJA_Conference_Report.pdf (https://files.taxfoundation.org/20171215175456/TCJA_Conference_Report.pdf).
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would have seemed more internally coherent to me (considered against business treatment) to eliminate property and sales tax deductions, eliminate the mortgage interest deduction, but keep state and local income tax deductions.
Here I am in complete agreement with you. When it comes to both SALT tax deductions and interest charge deductions, the treatment should be the same for individuals and businesses, whether that is providing a deduction or not providing a deduction.
What is your argument for this? I can get arguing that businesses shouldn't get to deduct SALT just to completely separate federal and state taxing decisions. But I don't get why individual and business salt should be treated the same. There are lots of business expenses that individuals also pay that you are going to have to allow to be deducted for business but not individuals if you aren't going to move to a revenue based tax.
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I just learned that the medical expense deduction, which was "saved" in the new tax law, wasn't saved at all. It disappears in two years.
...
How did we let them get away with this?
Because it doesn't disappear in two years.
The medical expense deduction threshold is lowered to 7.5 percent for [2017 and] 2018, and reverts to [the current law's] 10 percent thereafter. (https://taxfoundation.org/conference-report-tax-cuts-and-jobs-act/)
ETA: See Sec. 11027 in TCJA_Conference_Report.pdf (https://files.taxfoundation.org/20171215175456/TCJA_Conference_Report.pdf).
That is not what I was reading, but it looks like you're right. It's still a new bill, I expect I'll continue to find bad information for at least a few more weeks until we all get a chance to chew on the details.
For clarification, the medical expense deduction looks like it stays in, under the new bill
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I feel similarly about funding abortion as Sol does about funding churches. A parallel to Sol's position on churches would be to exclude medical expenses related to abortion from being tax deductible. While I do not support tax funding of abortion and feel that consumers should have the option to choose medical plans that do not fund abortion, I think those that choose plans that support abortion should still get the full benefit of medical tax deductions for those plans and services. The parallel is allowing education based tax breaks to be used with schools that include religious education as we do now.
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Any of you smart people know:
If I sell a home that I have lived in for at least 2 of the last 5 years, which is currently a rental home, can I still exclude the capital gains that occurred over the years it was my primary residence? Or does it now need to be my current primary residence when I sell it?
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I don't know what the potential effects will be, of course, but I suspect that the motives for the changes were not to "help the country" and were instead to achieve some political ends.
Again I don't disagree with you here. It's pretty clear the motivation for capping salt deductions in this particular bill was to find a way to raise taxes on individuals (without calling it a tax increase) to partially offset the cost of the big cut to the corporate tax rate. I don't think raising taxes on individuals to pay for taxes on companies is a good idea regardless of the mechanism you use to do it.
1) Not only do I not think that federal tax payments are the only way a person, place or population contributes to the national well-being, but I don't think I've even heard someone imply that before.
And I'm not saying that's the only way a person place or population contributions to the national well-being. But so far, unless I've missed something, it's the only example you've put forward of people in Massachusetts, Connecticut, New Jersey, and New York doing more than their fair share.
If we put aside federal tax payments per capita, are there other specific ways that you feel like people in Massachusetts, Connecticut, New Jersey, and New York contribute more than their fair share to national well being?
2) Looking at only the states as states loses the granularity of considering the state effects on individuals, regardless of the overall tax levels within the state. Take California, which likely has the biggest number of state and federal "high" taxpayers, regardless of what the overall per capita amounts may be.
Indeed California likely does have the most high income taxpayers as it has the most people of any state in the union. But if your argument is just that "high" tax payers currently pay too much tax regardless of state, then we could just cut the top marginal federal income tax rate, and this would provide an equal benefit to "high" taxpayers whether they live in New York, California, or Mississippi.
Having said that, personally I think our tax code needs to be MORE progressive, not less progressive so I would not be in favor of cutting the top marginal tax rate, and I wish the current tax bill hadn't done so.
3) Yes, I'm optimistic about the benefits of decreasing barriers to people moving to where they can be most productive.
I agree with this statement. However, it's not clear to me 1) that there is evidence that when new people move specifically to high tax states they become more productive. Completely arbitrarily, a computer programmer in Mississippi (low SALT taxes per capita) can probably increase they productivity a lot more by moving to California (about average SALT taxes per capita) than to Connecticut (some of the highest SALT taxes per capita) and 2) that differences in state tax rates are a significant barrier to migration with or without the ability to deduct those taxes on your federal taxes.
f the rules change, people will make different decisions than they would have made under the status quo. I wonder, as one example, with the increasing ease of telecommuting, if a policy change that exacerbates the financial differences between locations will cause more people to opt out of being at headquarters, and whether that will suppress the benefits of network effects. Or will it put upward pressure on salaries in areas that are already HCOL, beyond the equilibrium that had existed between those places and the rest of the country?
Alternatively, if we see an increase in telecommuting across state lines it could allow people to earn the same salaries in lower cost of living locations giving them more disposable income and creating more economic activity than when they live in locations where more of their total income goes to rent. More people telecommuting would also put downward pressure on real estate prices and rents in high cost of living locations, which would again free up more disposable income which might be either saved (good for the individual) or spent on things which stimulate more economic activity (good for the economy as a whole).
As a rule of thumb (although there are plenty of exceptions), the fewer economic distortions you can introduce with a tax code that raises the same total amount of revenue, the better society and individuals end up being in the end.
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When it comes to both SALT tax deductions and interest charge deductions, the treatment should be the same for individuals and businesses, whether that is providing a deduction or not providing a deduction.
What is your argument for this? I can get arguing that businesses shouldn't get to deduct SALT just to completely separate federal and state taxing decisions. But I don't get why individual and business salt should be treated the same. There are lots of business expenses that individuals also pay that you are going to have to allow to be deducted for business but not individuals if you aren't going to move to a revenue based tax.
Because it removes the incentive to shift money between business income and personal income that you get if there are different rules for what is and isn't deductible depending on, for example, whether the money is salary your S corp pays you, or dividends your S corp pays you.
The argument for consistent treatment of interest changes is the same as above, plus unequal treatment either a distorting incentive for people to buy homes when it would otherwise make economic sense for them to rent, or a distorting advantage that gives professional landlords an unfair advantage relative to individual home buyers in home much they can afford to pay to buy the same homes.
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Any of you smart people know:
If I sell a home that I have lived in for at least 2 of the last 5 years, which is currently a rental home, can I still exclude the capital gains that occurred over the years it was my primary residence? Or does it now need to be my current primary residence when I sell it?
I'm not sure if this was changed in the tax bill that was passed, but under the old rules the home did not need to be your primary residence when sold. Any cumulative - not even required to be consective - 24 months as your primary residence in the past 5 years qualifies as long as you did not claim this on annother house in the lookback period.
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Looks like this made it in the final bill.
Jesus saves, bitches.
Please do not use that name disrespectfully.
And I would like religion to not influence law or politics, but we can't have everything we want.
I don't expect anything. I am bound to speak up for the One I love, who also loves me. So I did.
Thank you for this. Well put. God bless you brother.
Sigh, since this thread has turned towards religion in several ways...
As a fellow Christian, I have to speak out against this. You control your own behavior, you do not control the behavior of those around you. Christianity is supposed to be attractive (a "shining city on a hill"), not prescriptive ("do what I say regardless of your beliefs"). The people Jesus hated (if that's the right word) most in the world were the Pharisees who were shoving their religious laws down other people's throats. This behavior is not helpful, at best.
Now hopefully we can get back to the actual topic at hand.
What exactly are you against here? The brother who politely asked "Please do not use that name disrespectfully?" Or are you against my response saying "thank you?" I don't believe that either of those come close to shoving anything down anybody's throat.
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What exactly are you against here? The brother who politely asked
Even "politely asking" someone to censor their own free speech to respect a religion they do not share, especially when done in such a condescending self-aggrandizing manner, is usually considered rude. I certainly don't think it's very Christian, either, but then again I'm the wrong person to ask about that issue.
On this forum we generally encourage all viewpoints to partake in the discussion, especially ones we don't normally share. It's bad form to tell people to shut up.
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Looks like this made it in the final bill.
Jesus saves, bitches.
Please do not use that name disrespectfully.
And I would like religion to not influence law or politics, but we can't have everything we want.
I don't expect anything. I am bound to speak up for the One I love, who also loves me. So I did.
Thank you for this. Well put. God bless you brother.
Sigh, since this thread has turned towards religion in several ways...
As a fellow Christian, I have to speak out against this. You control your own behavior, you do not control the behavior of those around you. Christianity is supposed to be attractive (a "shining city on a hill"), not prescriptive ("do what I say regardless of your beliefs"). The people Jesus hated (if that's the right word) most in the world were the Pharisees who were shoving their religious laws down other people's throats. This behavior is not helpful, at best.
Now hopefully we can get back to the actual topic at hand.
What exactly are you against here? The brother who politely asked "Please do not use that name disrespectfully?" Or are you against my response saying "thank you?" I don't believe that either of those come close to shoving anything down anybody's throat.
Did Paul der Krake use the name of Jesus disrespectfully? 'Bitches' was the only offensive term he wrote, and it wasn't directed towards Jesus. In that context, responding "Please do not use that name disrespectfully" effectively is an attempt to control behavior. It's not really any different from getting upset about someone depicting of Muhammed in an attempt to prevent what you see as unorthodox use of 'your' religious icon.
I suspect that sherr is against extreme sensitivity regarding religion and the attempt to control the behaviour of others that this engenders.
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Looks like this made it in the final bill.
Jesus saves, bitches.
Please do not use that name disrespectfully.
And I would like religion to not influence law or politics, but we can't have everything we want.
I don't expect anything. I am bound to speak up for the One I love, who also loves me. So I did.
Thank you for this. Well put. God bless you brother.
Sigh, since this thread has turned towards religion in several ways...
As a fellow Christian, I have to speak out against this. You control your own behavior, you do not control the behavior of those around you. Christianity is supposed to be attractive (a "shining city on a hill"), not prescriptive ("do what I say regardless of your beliefs"). The people Jesus hated (if that's the right word) most in the world were the Pharisees who were shoving their religious laws down other people's throats. This behavior is not helpful, at best.
Now hopefully we can get back to the actual topic at hand.
What exactly are you against here? The brother who politely asked "Please do not use that name disrespectfully?" Or are you against my response saying "thank you?" I don't believe that either of those come close to shoving anything down anybody's throat.
I'm gonna have to side with Sherr here.... We cannot condemn the behaviors of non-Christians and cannot judge 'outsiders' and should judge ourselves.
I wrote to you in my letter not to associate with "sinners"— not at all meaning the "sinners" of this world, or the greedy and swindlers, or idolaters, since then you would need to go out of the world. But now I am writing to you not to associate with anyone who bears the name of brother if he is guilty of sexual immorality or greed, or is an idolater, reviler, drunkard, or swindler—not even to eat with such a one. For what have I to do with judging outsiders? Is it not those inside the church whom you are to judge? God judges those outside. “Purge the evil person from among you.”
-1 Corinthians 5:9-13
Please note, I have bolded the text relevant for what I believe is Sherr's view.
Also note, edits in italics are mine for common understanding. Don't whine to me about 'changing the text' cause I'll post the greek if you prefer.
Telling non-Christians "not to sin" doesn't help them in this context, and is detracting from the discussion, though I do respect your desire to not see God's name used in vain and winced when I read that post as well.
Edits for clarity
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According to the NYTimes estimator, 2018 will see me get an approximate $2790 tax cut. Not sure what that will look like 5 or 10 years out. Given that the tax bill impacts are also likely to be used as political leverage to slash medicare and social security, I'm not sure this is worth it in the long run. I am not going to spend more as a result of this cut and won't really help the economy as a whole much as a result.
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As a rule of thumb (although there are plenty of exceptions), the fewer economic distortions you can introduce with a tax code that raises the same total amount of revenue, the better society and individuals end up being in the end.
I think you are conflating fewer distortions with less distortion, and trying to apply a narrow economic argument to what is a broader political system without considering the bigger picture. I don't think eliminating the SALT deductions decreases distortion.
If we conducted an omnibus tax and spending reform, I wouldn't want to put forth anything like our present systems and would agree with much of what you've said. But we have a system of negotiated compromises, with many distortions all around, in both revenue and spending. While ever-shifting, they are some sort of balance. To pretend that eliminating one element from a system of competing distortions makes the overall system less distorted make no sense to me---it changes the shape of the distortion, but likely makes it more extreme. The irrefutable bigger-picture context is that as the current system of compromises evolved, those high-tax states' residents became (generally and collectively speaking here) net givers, while the lowest-tax states were (again, same qualifiers) net takers. Disregarding that, claiming that the elimination reduces distortion, pretending that it's something that can be evaluated in isolation and seen as other than a political move to further shift the burden onto residents of states that have supported the wrong political party---those are irrelevancies.
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@Undecided Over the course of this discussion, it seems like your justification for your position has shifted from one line of reasoning to another.
A) You started with a hypothetical which postulated that higher taxes directly result in more economic growth (post #1523 (https://forum.mrmoneymustache.com/welcome-to-the-forum/republican-tax-plan-2017/msg1818424/#msg1818424)). B) You then conceded that you were unaware of such a link (post #1539 (https://forum.mrmoneymustache.com/welcome-to-the-forum/republican-tax-plan-2017/msg1818600/#msg1818600)), but shifted to the argument that there were other non-financial benefits people in low tax states received as a result of people in high tax states decided in impose higher taxes (post #1544 (https://forum.mrmoneymustache.com/welcome-to-the-forum/republican-tax-plan-2017/msg1819333/#msg1819333)). C) You then switched to the argument that the inability to deduct high state taxes on federal returns would act as a barrier to people moving from states where they would be less economically productive to states where they might be more economically productive (post #1547 (https://forum.mrmoneymustache.com/welcome-to-the-forum/republican-tax-plan-2017/msg1819680/#msg1819680)). D) Then you switched to the argument that changes to the tax code will likely change people's behavior, and some of those changes will likely have negative consequences (which I agree with, I just don't think there is any reason to believe the negative changes will outweigh the positive) in post #1551 (https://forum.mrmoneymustache.com/welcome-to-the-forum/republican-tax-plan-2017/msg1819907/#msg1819907). E) Now in post #1566 (https://forum.mrmoneymustache.com/welcome-to-the-forum/republican-tax-plan-2017/msg1820152/#msg1820152) we've come full circle and you're back to the argument that high tax states are more economically productive than low tax states.
It's been my observation that when people keep switching arguments but continuously defend the same position, it's generally because they have some other motivation for that position. In your case, it sounds like your own taxes are likely to go up significantly, and you're also worried about what the changes in the tax code will mean for both your community and local real estate values. So I just wanted to say I'm sorry, and I realize that really sucks. Right now I think I'm only going to come out of this "tax reform" a thousand or two worse off than I was before, but for a while it looked like my tax bill at my day job was going to be closer to $10,000 higher (and I make five figures at that job, not six). It felt terrible to feel singled out what seemed like special punishment when I knew I was already doing my share if not more than my share to support the society we all live in.
So anyway, this is a long winded way of saying I'll drop the SALT stuff. And for what it's worth, this is a really REALLY crappy tax bill. I think we can all agree on that.
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@Undecided Over the course of this discussion, it seems like your justification for your position has shifted from one line of reasoning to another.
A) You started with a hypothetical which postulated that higher taxes directly result in more economic growth (post #1523 (https://forum.mrmoneymustache.com/welcome-to-the-forum/republican-tax-plan-2017/msg1818424/#msg1818424)). B) You then conceded that you were unaware of such a link (post #1539 (https://forum.mrmoneymustache.com/welcome-to-the-forum/republican-tax-plan-2017/msg1818600/#msg1818600)), but shifted to the argument that there were other non-financial benefits people in low tax states received as a result of people in high tax states decided in impose higher taxes (post #1544 (https://forum.mrmoneymustache.com/welcome-to-the-forum/republican-tax-plan-2017/msg1819333/#msg1819333)). C) You then switched to the argument that the inability to deduct high state taxes on federal returns would act as a barrier to people moving from states where they would be less economically productive to states where they might be more economically productive (post #1547 (https://forum.mrmoneymustache.com/welcome-to-the-forum/republican-tax-plan-2017/msg1819680/#msg1819680)). D) Then you switched to the argument that changes to the tax code will likely change people's behavior, and some of those changes will likely have negative consequences (which I agree with, I just don't think there is any reason to believe the negative changes will outweigh the positive) in post #1551 (https://forum.mrmoneymustache.com/welcome-to-the-forum/republican-tax-plan-2017/msg1819907/#msg1819907). E) Now in post #1566 (https://forum.mrmoneymustache.com/welcome-to-the-forum/republican-tax-plan-2017/msg1820152/#msg1820152) we've come full circle and you're back to the argument that high tax states are more economically productive than low tax states.
It's been my observation that when people keep switching arguments but continuously defend the same position, it's generally because they have some other motivation for that position. In your case, it sounds like your own taxes are likely to go up significantly, and you're also worried about what the changes in the tax code will mean for both your community and local real estate values. So I just wanted to say I'm sorry, and I realize that really sucks. Right now I think I'm only going to come out of this "tax reform" a thousand or two worse off than I was before, but for a while it looked like my tax bill at my day job was going to be closer to $10,000 higher (and I make five figures at that job, not six). It felt terrible to feel singled out what seemed like special punishment when I knew I was already doing my share if not more than my share to support the society we all live in.
So anyway, this is a long winded way of saying I'll drop the SALT stuff. And for what it's worth, this is a really REALLY crappy tax bill. I think we can all agree on that.
Well, no, my taxes are going down somewhere in the low five figures, but we agree that it's a crappy tax bill.
I just raised different alternative but consistent arguments as you raised new points, but, presuming that neither of us is going to get the magic power to singularly make US tax policy, I guess we don't need to convince the other!
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[Edited for brevity - secondcor521]
Similarly with the child tax credit, everyone is thrilled it is being "expanded" even though eligibility is being restricted so that fewer people will get it. How is it an expansion of benefits when the government is saving money on it? That's a tax increase, not a tax cut!
How did we let them get away with this?
How is eligibility for the child tax credit being restricted? Everything I've seen shows the amount that is refundable is going up and the income limits being raised. is it some interplay with the earned income tax credit or something?
He's likely talking about the $2000 Child Tax Credit ends at 17, so dependents that are college age (17-24) will only get $500 credit. Not a great deal if you have a couple kids in school at the same time (and compared to current $4050 exemptions).
The Child Tax Credit has always ended at 17; the new tax bill does nothing to change that.(*)
The new tax bill increases the Child Tax Credit from $1,000 to $2,000. The bill also raised - I believe quite significantly but I don't have the figures and don't feel like looking them up - the phaseout limits for the Child Tax Credit.
The new tax bill adds the new $500 dependent credit.
So the first sentence of sol's post that I left quoted above isn't accurate as far as I can tell in the sense that the Child Tax Credit itself has clearly been expanded under the new tax bill.
At the same time, it is also true that the new tax bill quite famously has eliminated all personal exemptions. For people with kids who qualify for it, the expansion in the Child Tax Credit makes up for the loss of the personal exemption for those with a (roughly) 25% tax bracket or lower. For those in a higher tax bracket, it may not make up for it; then again, those in a higher-than-25% tax bracket probably would not have been able to take the Child Tax Credit before (due to the current income phaseouts).
For parents of kids who are 17 and older who are still dependent, the new $500 credit makes up for the loss of the personal exemption for those with a (roughly) 12% tax bracket or lower. For those in a higher tax bracket, the new $500 credit is not as good as the personal exemption that they lose.
So in summary, the only people who lose are those with dependent kids who are 17 or older and who are in a higher than 12% tax bracket. Everyone else is the same or better off.
(*) There were discussions about changing the age limit, but those did not end up in the final bill. What sol in fact may be referring to is that there were discussions of raising it to 18, but then they decided to stick with 17, which is lower than what they discussed but, as noted, is exactly equal to the status quo.
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I feel similarly about funding abortion as Sol does about funding churches. A parallel to Sol's position on churches would be to exclude medical expenses related to abortion from being tax deductible. While I do not support tax funding of abortion and feel that consumers should have the option to choose medical plans that do not fund abortion, I think those that choose plans that support abortion should still get the full benefit of medical tax deductions for those plans and services. The parallel is allowing education based tax breaks to be used with schools that include religious education as we do now.
And I’m against funding the military. I’d prefer miniature American flags for all.
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I feel similarly about funding abortion as Sol does about funding churches. A parallel to Sol's position on churches would be to exclude medical expenses related to abortion from being tax deductible. While I do not support tax funding of abortion and feel that consumers should have the option to choose medical plans that do not fund abortion, I think those that choose plans that support abortion should still get the full benefit of medical tax deductions for those plans and services. The parallel is allowing education based tax breaks to be used with schools that include religious education as we do now.
And I’m against funding the military. I’d prefer miniature American flags for all.
Yes, while we're at it, here are some things I don't want my tax dollars used for:
-drone strikes on targets full of women and children
-killing prisoners
-tax breaks for billionaires with private jets
-the President's constant golfing
-the FLOTUS' New York penthouse so she doesn't have to live with her repulsive husband
-subsidies for farmers who raise animals in appalling conditions and then murder them by the millions
...but that's not how a pluralistic society works. We all have to make compromises because we are never going to agree on everything.
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Legit question here: if you have both a 403(b) and a 457, can you still contribute the max (18.5) to both under the new tax law?
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Given that the tax bill impacts are also likely to be used as political leverage to slash medicare and social security, I'm not sure this is worth it in the long run. I am not going to spend more as a result of this cut and won't really help the economy as a whole much as a result.
This. I've looked at a number of the proposals already floating around to cut Medicare (phrased as increasing "choice" and "freedom"), and people, our parents and grandparents, are going to be hurt. Literally.
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I feel similarly about funding abortion as Sol does about funding churches. A parallel to Sol's position on churches would be to exclude medical expenses related to abortion from being tax deductible. While I do not support tax funding of abortion and feel that consumers should have the option to choose medical plans that do not fund abortion, I think those that choose plans that support abortion should still get the full benefit of medical tax deductions for those plans and services. The parallel is allowing education based tax breaks to be used with schools that include religious education as we do now.
And I’m against funding the military. I’d prefer miniature American flags for all.
Yes, while we're at it, here are some things I don't want my tax dollars used for:
-drone strikes on targets full of women and children
-killing prisoners
-tax breaks for billionaires with private jets
-the President's constant golfing
-the FLOTUS' New York penthouse so she doesn't have to live with her repulsive husband
-subsidies for farmers who raise animals in appalling conditions and then murder them by the millions
...but that's not how a pluralistic society works. We all have to make compromises because we are never going to agree on everything.
I don't like spending on most of these things too. I'm not against all military spending, but it is probably 2-3 times as much as we need to protect our boarders and contribute our part to protecting international trade. Of this list only the tax breaks for billionaires is of the same nature as Sol's opposition to 529 funds being used for religious schools - a reduction in taxes based on a particular behavior rather than a spending of government funds.
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Yup, that change was taken out in conference.
Really? Nice! I have been looking all over for this information and couldn't find it before this thread. Spouse has access to a 457 & 403b. I only have a 403b plus a state pension contribution of 10%.
So, it looks like our pre-tax retirement withholdings will still remain:
$18.5 403b spouse
$18.5 457 spouse
$18.5 403b me
$6,400 pension contribution me (max allowed)
Am I correct in this thinking?
Any info if they kept the $5k childcare & 2,550 medical flex spending allowances in the new tax law?
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Any info if they kept the $5k childcare & 2,550 medical flex spending allowances in the new tax law?
This is my burning question as well. Looks like the $5K dependent care FSA survived:
http://www.coredocuments.com/gop-tax-plan-eliminates-tax-savings-on-dependent-care-tuition-adoption/
I don't know that the $2550 medical FSA was ever threatened. Please correct me if I'm wrong, or if someone has a better reference.
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Yup, that change was taken out in conference.
Really? Nice! I have been looking all over for this information and couldn't find it before this thread. Spouse has access to a 457 & 403b. I only have a 403b plus a state pension contribution of 10%.
There was much more discussion/commiseration on the 403/457 issue with regards to the republican tax plan over on this thread (although the title only mentioned 401ks).
https://forum.mrmoneymustache.com/taxes/senate-sneaks-401(k)-contribution-limits-into-tax-cuts-bill/50/
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Yup, that change was taken out in conference.
Really? Nice! I have been looking all over for this information and couldn't find it before this thread. Spouse has access to a 457 & 403b. I only have a 403b plus a state pension contribution of 10%.
So, it looks like our pre-tax retirement withholdings will still remain:
F
$18.5 403b spouse
$18.5 457 spouse
$18.5 403b me
$6,400 pension contribution me (max allowed)
Am I correct in this thinking?
Any info if they kept the $5k childcare & 2,550 medical flex spending allowances in the new tax law?
Don't forget IRA !!
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If corporations pay less taxes then what they don't pay they get to keep as profit. Since profit will increase it would in effect lower PE ratios. Increased profit should end up in higher stock prices and all of us reaching FIRE sooner.
Some may say this tax cut is already priced into the current gains we saw this year. I think that may be partially true. I don't think the market as a whole really knew what to expect regarding the tax code other then a likely tax reduction on corporations. I believe and hope there are still significant gains to be had in 2018.
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I believe and hope there are still significant gains to be had in 2018.
You can hope all you want. The key is to stay invested, whether the market goes up or down.
We're riding the waves here, while waiting for the tide. Playing the long game, betting on the success of the world economy, not trying to profit from changing whims of the stock market.
The key to financial independence is easy: devote all of your spare income to acquiring revenue-generating assets, until they generate more revenue than you spend in expenses. Notice that the current status of the stock market does not appear in any part of that strategy. Ignore it. Just buy assets whenever you can, every day, until you've paid for your lifestyle.
But I can't sell a weekly investment newsletter that just says "This week, I recommend buying shares of profit-generating corporations, with a smaller allocation to intermediate term bonds" because it would get really boring printing that same sentence, week after week, year after year, through bulls and bears. That's the real advice for everyone, of course, but real advice doesn't sell so nobody else repeats it.
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I believe and hope there are still significant gains to be had in 2018.
You can hope all you want. The key is to stay invested, whether the market goes up or down.
We're riding the waves here, while waiting for the tide. Playing the long game, betting on the success of the world economy, not trying to profit from changing whims of the stock market.
The key to financial independence is easy: devote all of your spare income to acquiring revenue-generating assets, until they generate more revenue than you spend in expenses. Notice that the current status of the stock market does not appear in any part of that strategy. Ignore it. Just buy assets whenever you can, every day, until you've paid for your lifestyle.
But I can't sell a weekly investment newsletter that just says "This week, I recommend buying shares of profit-generating corporations, with a smaller allocation to intermediate term bonds" because it would get really boring printing that same sentence, week after week, year after year, through bulls and bears. That's the real advice for everyone, of course, but real advice doesn't sell so nobody else repeats it.
Great advice Sol. Everyone should stick to their asset allocation. I have been 70/30 for many years now. With every dollar gained 30% is being siphoned off into bonds. Being 70/30 seams like the right place for me. When the market corrects itself I will use those bonds to rebalance back into equities. And, everyone knows at some point there will likely be a correction. No one knows when or by how much, but it is inevitable.
With the above disclaimer, this thread is here to discuss the Republican Tax plan and I would like to discuss how it may affect corporations. If all else stays the same next year other than taxes then corporations should have increased profit due to lower tax expenses. If that is indeed the case then current PE ratios will in affect be lower if stock prices stay the same. I find this very interesting because current valuations are considered high by most experts including Jack Bogle (inventor of index funds and Vanguard). Lowering taxes should correct that unless equity prices rise equivalently or profits decrease through lower sales or through increased expenditures.
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GAAP profits will likely be lower than normal next year, actually. Many companies have very large “deferred tax” assets on their books and the value of those deferred taxes dropped by at least a third the moment the president signed the tax bill. These corporations will be recognizing an accounting adjustment to those assets this next quarter which will affect quarterly reported earnings.
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A 2018 version of the case study spreadsheet (http://forum.mrmoneymustache.com/forum-information-faqs/case-study-spreadsheet-updates/) is available.
Does not do pass-through calculations, but does address many common credits and situations.
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A 2018 version of the case study spreadsheet (http://forum.mrmoneymustache.com/forum-information-faqs/case-study-spreadsheet-updates/) is available.
Does not do pass-through calculations, but does address many common credits and situations.
Many thanks, MDM!
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GAAP profits will likely be lower than normal next year, actually. Many companies have very large “deferred tax” assets on their books and the value of those deferred taxes dropped by at least a third the moment the president signed the tax bill. These corporations will be recognizing an accounting adjustment to those assets this next quarter which will affect quarterly reported earnings.
Thanks for the comment and interesting analysis. Why do you think many companies have overpaid their taxes and have a large deferred tax sitting on the books? You may be right, I just don't know where or how to find that information. Also if you are correct then those companies will reap the benefits of the new tax plan in 2019 instead of 2018.
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GAAP profits will likely be lower than normal next year, actually. Many companies have very large “deferred tax” assets on their books and the value of those deferred taxes dropped by at least a third the moment the president signed the tax bill. These corporations will be recognizing an accounting adjustment to those assets this next quarter which will affect quarterly reported earnings.
Thanks for the comment and interesting analysis. Why do you think many companies have overpaid their taxes and have a large deferred tax sitting on the books? You may be right, I just don't know where or how to find that information. Also if you are correct then those companies will reap the benefits of the new tax plan in 2019 instead of 2018.
(Disclaimer: not a tax or accounting expert at all, this is just from what I’ve read online) Companies have deferred tax assets for lots of reasons but usually it boils down to a timing difference between when revenue and things like warranties are recognized. Apparently this also hits banks but I’m not sure why. There are also deferred tax liabilities (taxes that haven’t been paid yet). BRK takes huge advantage of these and will see quite a bit slashed from their taxes due, which will raise their book value.
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GAAP profits will likely be lower than normal next year, actually. Many companies have very large “deferred tax” assets on their books and the value of those deferred taxes dropped by at least a third the moment the president signed the tax bill. These corporations will be recognizing an accounting adjustment to those assets this next quarter which will affect quarterly reported earnings.
Thanks for the comment and interesting analysis. Why do you think many companies have overpaid their taxes and have a large deferred tax sitting on the books? You may be right, I just don't know where or how to find that information. Also if you are correct then those companies will reap the benefits of the new tax plan in 2019 instead of 2018.
Many companies also have deferred tax assets due to prior net operating losses.
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It's nuts how many people are flipping out over here in California and saying they won't be able to afford their houses anymore. I went through the calculations for the following assumptions to compare the federal taxes from 2017 vs 2018:
$300,000 to 800,000 income
Married filing jointly
4 exemptions
8% state tax deducted
max out two 401k
mortgage interest and property tax deductions of $50k
Comparing that to the maxing out two 401ks and taking the standard $24k deduction with loss of exemptions, the overall tax increase is never more than 1.5% (and less than 1% for those over $400k). Annoying, but won't break the bank. People with lower incomes are less likely to have an itemized deduction that would be higher than the new standard deduction, so even though I didn't calculate those, by default their taxes should be lower.
I'll post the spreadsheet to Google drive once I figure out how to import it from excel.
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I'll post the spreadsheet to Google drive once I figure out how to import it from excel.
If you open up your Google Drive page in your browser, and the folder containing the file in Windows Explorer or equivalent, you should be able to drag and drop. You could also click the "New" button, bringing up the drop-down menu, and select upload file from there (see attached).
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It's nuts how many people are flipping out over here in California and saying they won't be able to afford their houses anymore. I went through the calculations for the following assumptions to compare the federal taxes from 2017 vs 2018:
$300,000 to 800,000 income
Married filing jointly
4 exemptions
8% state tax deducted
max out two 401k
mortgage interest and property tax deductions of $50k
Comparing that to the maxing out two 401ks and taking the standard $24k deduction with loss of exemptions, the overall tax increase is never more than 1.5% (and less than 1% for those over $400k). Annoying, but won't break the bank. People with lower incomes are less likely to have an itemized deduction that would be higher than the new standard deduction, so even though I didn't calculate those, by default their taxes should be lower.
I'll post the spreadsheet to Google drive once I figure out how to import it from excel.
Might even be $20K less in 2018 for $400K gross income, due to no AMT adder (for the situation described) in 2018...?
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Deferred tax assets arise in part, from accounting for discretionary bonuses. You will note Goldman Sachs is going to take a whack on this one.
Discretionary bonus payments are not deductible for tax purposes until they are paid. So while an employee may earn a bonus for their performance in the 2017 year, and the company will accrue an expense for it for accounting, the company will not recognise the tax deduction until the following year.
Consequently the company has higher taxable income in the current year, and a deferred tax asset (representing future deductions) on its balance sheet.
The value of those future deductions has been slashed, because your tax benefit has gone from 35%(?) to 21%(?).
The last time this happened in Australia was in the late 90's when the rate went from 36 to 30% (It's 27.5% now for small businesses).
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GAAP profits will likely be lower than normal next year, actually. Many companies have very large “deferred tax” assets on their books and the value of those deferred taxes dropped by at least a third the moment the president signed the tax bill. These corporations will be recognizing an accounting adjustment to those assets this next quarter which will affect quarterly reported earnings.
Thanks for the comment and interesting analysis. Why do you think many companies have overpaid their taxes and have a large deferred tax sitting on the books? You may be right, I just don't know where or how to find that information. Also if you are correct then those companies will reap the benefits of the new tax plan in 2019 instead of 2018.
Many companies also have deferred tax assets due to prior net operating losses.
The company I work for paid -35% in taxes last year (negative 35%) because of accounting shenanigans. We've bought a number of companies, using loans in the US (we have the money offshore but don't want to bring it back here). I don't know how the accounting goes, we've been profitable every quarter for over 25 years. I have no idea if we're bringing money back here with the new tax bill or not.
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Well I guess some companies are passing their tax savings on to employees, after all. Got a nice surprise this morning when I opened my email and found an announcement that all employees (~15,000) are getting a $1000 bonus this month as a direct result of the corporate tax cuts. (In addition to our annual raise and bonus, which happens in March.) It's chump change for the company, but I appreciate the sentiment.
Question: Do corporations still get tax benefits from donations?
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It's nuts how many people are flipping out over here in California and saying they won't be able to afford their houses anymore. I went through the calculations for the following assumptions to compare the federal taxes from 2017 vs 2018:
$300,000 to 800,000 income
Married filing jointly
4 exemptions
8% state tax deducted
max out two 401k
mortgage interest and property tax deductions of $50k
Comparing that to the maxing out two 401ks and taking the standard $24k deduction with loss of exemptions, the overall tax increase is never more than 1.5% (and less than 1% for those over $400k). Annoying, but won't break the bank. People with lower incomes are less likely to have an itemized deduction that would be higher than the new standard deduction, so even though I didn't calculate those, by default their taxes should be lower.
I'll post the spreadsheet to Google drive once I figure out how to import it from excel.
Might even be $20K less in 2018 for $400K gross income, due to no AMT adder (for the situation described) in 2018...?
You're right, there's probably a benefit to the higher AMT exclusion threshold in 2018. I didn't include it because it's so complicated to calculate. In that case, it may end up being a wash vs. lower rates in 2018 for all income groups.
Regarding the mess that'll happen when the tax brackets are supposed to revert back: my guess is neither political party will allow that to happen to avoid looking like the "pro-taxing" party. I think we can safely assume these bracket changes are permanent.
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It's nuts how many people are flipping out over here in California and saying they won't be able to afford their houses anymore. I went through the calculations for the following assumptions to compare the federal taxes from 2017 vs 2018:
$300,000 to 800,000 income
Married filing jointly
4 exemptions
8% state tax deducted
max out two 401k
mortgage interest and property tax deductions of $50k
Comparing that to the maxing out two 401ks and taking the standard $24k deduction with loss of exemptions, the overall tax increase is never more than 1.5% (and less than 1% for those over $400k). Annoying, but won't break the bank. People with lower incomes are less likely to have an itemized deduction that would be higher than the new standard deduction, so even though I didn't calculate those, by default their taxes should be lower.
I'll post the spreadsheet to Google drive once I figure out how to import it from excel.
I understand the flipping out because you need to run the numbers to see that most of the changes are mitgagted by the bracket cuts...
If you were no imitizing you are getting a cut. If you were barely itimizing you will probably still get a cut. Those with very expensive homes as you note may see a slight tax hike.
Buy certainly not enough for anyone to move if they own a home... People citing young people and high earners leaving cali, that is still because people can't afford homes. Which these tax changes only harm marginally.
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I also think people believe that their tax bill will go up by the amount of local tax they pay, rather than 25-33% (or whatever) of their local tax.