Republican Tax Plan 2017

[sherr]

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.

[Paul der Krake]

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.

[inline five]

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.

[sherr]

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.

[inline five]

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.

[inline five]

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.

[CCCA]

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.

[inline five]

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.

[FIREchiefsr]

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.

[Undecided]

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.

[inline five]

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.

[Dancin'Dog]

Is the 1031 exchange staying? 

[Debts_of_Despair]

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?

[JLee]

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?

[FIREchiefsr]

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.

[Debts_of_Despair]

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.

[FIREchiefsr]

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.

[sokoloff]

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.

[mousebandit]

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. 

[dragoncar]

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.

[inline five]

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.

[surfhb]

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. 

[inline five]

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.

[dragoncar]

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

[sokoloff]

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.

[simonsez]

Maybe you're rich if $200/month is something to scoff at?

Wait, sorry! Wrong thread!

[mustache you a question]

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.

[DarkandStormy]

http://www.newsweek.com/republican-tax-bill-gives-private-plane-owners-tax-break-714381





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.

[starguru]

http://www.newsweek.com/republican-tax-bill-gives-private-plane-owners-tax-break-714381





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. 

[sol]

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?

[Clean Shaven]

  Whatever happened to draining the swamp?

It was bullshit from day one. Unfortunately not everyone saw that last November, and many still believe it.

[talltexan]

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.

[sherr]

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.

[Boll weevil]

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.

[inline five]

http://www.newsweek.com/republican-tax-bill-gives-private-plane-owners-tax-break-714381





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.

[inline five]

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.

[DarkandStormy]

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.

[secondcor521]

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.

[sherr]

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".

[OurTown]

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!

[caffeine]

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.

[inline five]

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.

[caffeine]

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.

[inline five]

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.

[MDM]

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.

[Scortius]

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.

[inline five]

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.

[sherr]

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).

[sherr]

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.

[djadziadax]

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.