Republican Tax Plan 2017

[MDM]

Vast majority of people would actually be better off in Roth accounts, so it actually encourages the wrong behavior.

Well that's a pretty bold sourceless assumption. How do you figure?

...

It's not that simple because many things in retirement are based on taxable income. The lower your taxable income the more benefit you can take advantage of.

For the 1% of people like us yes the Trad might make more sense as we plan to retire early then convert the trad to Roth in a low tax bracket but we are NOT typical.

Still no numbers or sources I see. Okay.

I don't disagree that that's a consideration, but a 5% (for 15%-bracketers) discount on your entire retirement income is a pretty big difference to overcome. Never mind the 15% discount for 25%-bracketers. And that's even with me generously assuming that retirees will be "earning" the median US household income; most won't, expenses tend to be less in retirement (the biggie is that a lot of retirees have a paid-for house and / or retire to lower cost-of-living areas when they're not shackled to their job locations anymore). The less they "earn" the more imbalanced it is in favor of Traditional accounts.

And again, having the choice of which account you want to put money into based on your own plans / assumptions is obviously better than having that choice removed. You'd have to do an awful lot of mental gymnastics to explain how a force-everyone-to-use-Roth plan would be "better for the vast majority of people".

Despite the fact that marginal vs. marginal is the correct math, I vote with sherr on the "if one had to guess what is best for a random person" issue here.

One really needs to look at one's specific situation (e.g., ACA or not; low income credits or not; pension or not; how much SS benefit; etc.) because the rules of thumb in the traditional vs. Roth arena have many exceptions.

[jean]

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.

[teen persuasion]

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.

[dragoncar]

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.

[RangerOne]

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.

[ixtap]

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.

[RangerOne]

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.

[RangerOne]

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.

[inline five]

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.

[dragoncar]

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.

[inline five]

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

[radram]

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.

[fuzzy math]

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.

[RangerOne]

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.

[jean]

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.

[Jantoven]

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.

[Livewell]

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. 

[RangerOne]

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.

[Jantoven]

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.

[starguru]

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

[Jantoven]

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. 

[Bucksandreds]

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?

[sol]

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.

[Peter Parker]

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....

[sol]

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.

[RhodyUNC]

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. 

[SwordGuy]

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.

[sol]

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.

[cairnstone]

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).

[Jantoven]

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.

[RhodyUNC]

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

[Debts_of_Despair]

I wonder what the sentiment will be when most people find that their first paycheck in the new year is a little fatter.

[MMMarbleheader]

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

[Jantoven]

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. 

[sol]

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.

[Kenbo]

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.

[sol]

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.

[Mr Mark]

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?

[Jantoven]

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...

[dragoncar]

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

[FIREchiefsr]

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.

[teen persuasion]

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.

[DarkandStormy]

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.

[Malloy]

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.

[Livewell]

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.

[Scortius]

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).

[boarder42]

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?

[SaucyAussie]

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...

[teen persuasion]

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.

[RangerOne]

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.