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New Tax Policy

lovedogs

Super_Ideal_Rock
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This plan is a freaking disaster for anyone who isn't incredibly rich, or a corporation. It will balloon the deficit, and the "tax breaks" will be more than un-done by the fact that you won't be able to itemize crap anymore.

I hope it fails spectacularly, along with his joke of a health care bill.
 

redwood66

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Dee - Thanks. I am going to put some thoughts down and we can discuss later. Have a safe trip.
 

Dancing Fire

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My husband said he doesn't think it will get approved. It's forecasted to cause a 2+ trillion $ deficit.
No big deal...Obama caused Americans way more than $2 trill. If Trump's plan can grow our economy then I'm all for it.
 

MollyMalone

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[The standard deduction] really should be tripled. Raising the standard deductions is the best thing that can be done for lower income people while helping everyone.
Just as a fyi, Karl: here's what The Tax Foundation, which is far from being a "googly-eyed liberal" think tank, said about that back in 2011 because it was one of the components of Senators Whyden's and Coates' Bi-Partisan Tax Fairness & Simplification Act":
"Already, some 52 million tax filers – 36 percent of all filers – pay no income taxes because of the generosity of the current credits and deductions. Increasing the percentage of Americans with no skin in the game will only make the tax system less stable and further disconnect taxpayers from the true cost of government. This provision needs to be reconsidered." [emphasis added]​
 

redwood66

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How about reducing the cost of government instead of always increasing it?
 
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Karl_K

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How about reducing the cost of government instead of always increasing it?
yep that is the biggest thing needed.
Reduce and make more efficient what is left.
A full audit of all agencies would be a start.

What is sickening is the billions of dollars spent on software upgrades that failed but they keep going back to the same crooks. I think they should do an x-prize contest for software upgrades.
 
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Karl_K

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Just as a fyi, Karl: here's what The Tax Foundation, which is far from being a "googly-eyed liberal" think tank, said about that back in 2011 because it was one of the components of Senators Whyden's and Coates' Bi-Partisan Tax Fairness & Simplification Act":
"Already, some 52 million tax filers – 36 percent of all filers – pay no income taxes because of the generosity of the current credits and deductions. Increasing the percentage of Americans with no skin in the game will only make the tax system less stable and further disconnect taxpayers from the true cost of government. This provision needs to be reconsidered." [emphasis added]​
While there is something to that I think the trade off is worth it.
A min tax of .1% would solve it and not create a huge burden.
 

siamese3

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I can't get riled up about this tax "plan" announcement yet because if history has told us anything about the Trump administration, whatever is in it today, won't mean much tomorrow, when everything swings back the other way. I think that this was pretty much a marketing stunt to just be able to say they are working on tax reform before this 100 day mark. The first 100 days that do matter according to Trump or do not matter according to Trump. Just depends on the day.
 

LLJsmom

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Dear middle class, here is my middle finger. Do you see it? No? Ok. I'll put it in writing. It's called the proposed tax plan...

I can't get riled up about this tax "plan" announcement yet because if history has told us anything about the Trump administration, whatever is in it today, won't mean much tomorrow, when everything swings back the other way. I think that this was pretty much a marketing stunt to just be able to say they are working on tax reform before this 100 day mark. The first 100 days that do matter according to Trump or do not matter according to Trump. Just depends on the day.
But the cynic in me tends to agree with siamese3. There are some issues that are so huge here that people will shed blood in Congress before some of these provisions get passed. And in the details of the calculations, if they pass, and if they get ironed out, will get completely neutralized.
 

t-c

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I can't get riled up about this tax "plan" announcement yet because if history has told us anything about the Trump administration, whatever is in it today, won't mean much tomorrow, when everything swings back the other way. I think that this was pretty much a marketing stunt to just be able to say they are working on tax reform before this 100 day mark. The first 100 days that do matter according to Trump or do not matter according to Trump. Just depends on the day.

It never hurts to be prepared, so DH and I are looking into ways we can restructure our income to take advantage of the proposed changes.

It's actually pretty sly how this "proposal" seriously targets the high-income high COL blue states.
 

redwood66

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I don't think its the job of the federal government to subsidize those who live in locations with high state taxes. And that is what being able to deduct your state taxes is - a subsidy from the federal government. If you live in a state with high taxes you also enjoy all the lovely programs that pays for. If you want lower state taxes then do away with things that cause them to be higher.
 

t-c

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I don't think its the job of the federal government to subsidize those who live in locations with high state taxes. And that is what being able to deduct your state taxes is - a subsidy from the federal government. If you live in a state with high taxes you also enjoy all the lovely programs that pays for. If you want lower state taxes then do away with things that cause them to be higher.

The federal government isn't subsidizing those high state taxes. Those states are mostly donor states (i.e. the taxes they give to the federal government is more than what they get from the federal government) -- even when residents took the state and local tax deductions.

So those folks are paying for the services that they're enjoying and paying for the services people from other states are enjoying.

Here's a link for you: https://wallethub.com/edu/states-most-least-dependent-on-the-federal-government/2700/
 

redwood66

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Donor and donee numbers are highly complicated and subject to massaging based on the outcome you desire. Especially when federal $ for military bases and transportation are removed.

Individual taxpayers is what we are talking about.

Edit - The federal government should live within its means and decreasing its spending would help more than anything.
 
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azstonie

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Flat tax. Its the only fair way. You live here, you have your business here (if you're a corporation), YOU PAY for that privilege just like I do. Flat tax=no need for large IRS and tax lawyers.
 

madelise

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Thanks ya'll.
Sigh.

I hope this doesn't pass....
 

Dancing Fire

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This plan is a freaking disaster for anyone who isn't incredibly rich, or a corporation. It will balloon the deficit, and the "tax breaks" will be more than un-done by the fact that you won't be able to itemize crap anymore.

I hope it fails spectacularly, along with his joke of a health care bill.
There goes my food stamps...:(
 

LLJsmom

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I don't think its the job of the federal government to subsidize those who live in locations with high state taxes. And that is what being able to deduct your state taxes is - a subsidy from the federal government. If you live in a state with high taxes you also enjoy all the lovely programs that pays for. If you want lower state taxes then do away with things that cause them to be higher.

Your comment made me wonder redwood. I know that CA pays in more than it gets back, but I also wondered by how much.

http://www.politifact.com/california/article/2017/feb/14/does-california-give-more-it-gets-dc/
California’s give and take

In January 2017, the California Legislative Analyst’s Office said by several measures California is, indeed, a donor state, but just barely. It receives $0.99 in federal expenditures per dollar of taxes paid, which is below the national average return for states of $1.22 per dollar paid, according to its review of a 2015 New York Comptroller study.

That study ranked California 42nd among the fifty states and the District of Columbia for the amount of federal per capita expenditure ($9,172).

LAO%20donor%20state.JPG


SOURCE: California Legislative Analyst's Office, January 2017

The LAO also cites figures from a March 2016 report by the Pew Charitable Trusts. It found the federal government spent nearly $356 billion in California in fiscal year 2014, for salaries and wages, grants, contracts, retirement benefits and other benefits. That same year, California paid about $369 billion in total federal tax -- or about $13 billion more than it received -- according to the Internal Revenue Service Data Book, 2014.
 

redwood66

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I read that article and it is what I was talking about. Thanks. .99 cents for every dollar is not much of a donor.
 

LLJsmom

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I read that article and it is what I was talking about. Thanks. .99 cents for every dollar is not much of a donor.

True. $.01. Doesn't seem like much. But, if you add up all those pennies...
That same year, California paid about $369 billion in total federal tax -- or about $13 billion more than it received -- according to the Internal Revenue Service Data Book, 2014.



 
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t-c

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An article on where and how much federal money goes to CA.

http://www.latimes.com/politics/la-pol-sac-california-federal-government-money-20170205-story.html

The state taxes in CA are not high because California has to pay so much to the federal government. They are high because of state and local government spending.

No one is arguing that. What's at issue is your statement that the federal government is subsidizing "those who live in locations with high state taxes. And that is what being able to deduct your state taxes is - a subsidy from the federal government."

The fact is the high tax states actually give more to the federal government than they take in -- even after they've deducted state/local taxes from taxable income.

California paid $405,851,295,000 to the federal government in 2015. For reference, Texas, the next state highest, paid $279,904,425,000. In fact, according to the reference @LLJsmom cited, California paid $13B more to the federal government than it took in. Might suit California to just keep that $13B and fund their high-speed rail -- that would be in keeping with your philosophy of no subsidies.

Unless what you want is for the high-tax states to not be "subsidized" but still continue to subsidize others.
 

redwood66

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I don't want any subsidy of taxes by the fed for any state. Mine included. If CA wants high speed light rail they can pay for it. But the whole donor donee thing is much more complicated than that.
 

LLJsmom

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No one is arguing that. What's at issue is your statement that the federal government is subsidizing "those who live in locations with high state taxes. And that is what being able to deduct your state taxes is - a subsidy from the federal government."

The fact is the high tax states actually give more to the federal government than they take in -- even after they've deducted state/local taxes from taxable income.

California paid $405,851,295,000 to the federal government in 2015. For reference, Texas, the next state highest, paid $279,904,425,000. In fact, according to the reference @LLJsmom cited, California paid $13B more to the federal government than it took in. Might suit California to just keep that $13B and fund their high-speed rail -- that would be in keeping with your philosophy of no subsidies.

Unless what you want is for the high-tax states to not be "subsidized" but still continue to subsidize others.

Thank you for understanding t-c. I tried...
 

redwood66

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Thank you for understanding t-c. I tried...

Tried to what? Explain something to me that you think I do not understand but in reality just do not agree with?
 

AGBF

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Thank you for understanding t-c. I tried...

Hi, LLJsmom! I wanted to invoke your name in the thread where Anna asked if I was a CPA!

Deb :wavey:
 

redwood66

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Here is an article on the SALT deduction.

http://www.taxpolicycenter.org/briefing-book/how-does-deduction-state-and-local-taxes-work

Excerpt:
EFFECTS OF THE DEDUCTION
The SALT deduction provides an indirect federal subsidy to state and local governments by decreasing the net cost of nonfederal taxes to those who pay them. For example, if state income taxes increase by $100 for families claiming the SALT deduction on their federal returns who are in the 35 percent federal income tax bracket, the net cost to them is $65; that is, state taxes go up by $100, but federal taxes go down by $35. This federal tax expenditure encourages state and local governments to levy higher taxes (and, presumably, provide more services) than they otherwise would. It also encourages those entities to use deductible taxes in place of nondeductible taxes (such as selective sales taxes on alcohol, tobacco, and gasoline), fees, and other charges.

Critics of the deduction argue that state and local taxes simply reflect payments for services provided by those jurisdictions and, as such, should be treated no differently than other forms of spending. They also point to the uneven distribution of benefits across income groups and states.

Proponents of the deduction counter that the portion of an individual’s income claimed by state and local taxes is not really disposable income, and that taxing it at the federal level is double taxation. Moreover, they argue that federal subsidies are warranted because a significant portion of state and local government spending is for education, health, public welfare, and transportation, all of which have important spillovers that benefit the population in other jurisdictions as well. A counterargument, however, is that while federal support may be warranted, the substantial revenues gained by eliminating or limiting the deduction could be used to provide direct support through federal grants and loans.
 

redwood66

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I just hope whatever ends up passing stimulates the economy.
 

t-c

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Here is an article on the SALT deduction.

http://www.taxpolicycenter.org/briefing-book/how-does-deduction-state-and-local-taxes-work

Excerpt:
EFFECTS OF THE DEDUCTION
The SALT deduction provides an indirect federal subsidy to state and local governments by decreasing the net cost of nonfederal taxes to those who pay them. For example, if state income taxes increase by $100 for families claiming the SALT deduction on their federal returns who are in the 35 percent federal income tax bracket, the net cost to them is $65; that is, state taxes go up by $100, but federal taxes go down by $35. This federal tax expenditure encourages state and local governments to levy higher taxes (and, presumably, provide more services) than they otherwise would. It also encourages those entities to use deductible taxes in place of nondeductible taxes (such as selective sales taxes on alcohol, tobacco, and gasoline), fees, and other charges.

Okay, I get your point. My point is that implicit in your "state taxes should not be subsidized" is the suggestion that these high-state/local tax states do not pay their fair share -- that somehow, they're being carried (i.e. subsidized) by the federal government. But the fact is they are paying for their share of the federal pie and more. It should be noted that a good part of the money the federal government gives out with (uneven) largesse comes from the people in these high tax states.

That you are against this "subsidy" but are evasive about these states subsidizing other states ("the whole donor donee thing is complicated") suggests you're only selectively against subsidies. Your position is that California and other high-tax states residents should continue subsidizing, and in fact increase those subsidies to the other states, but at the same time these same residents should live with cuts in services because the federal government should not be subsidizing their state taxes. So what governs which subsidies you are for and against?
 

redwood66

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I never suggested that high tax states do not pay their fair share and do not accuse me of being evasive. This thread is about the proposed tax cuts not about distribution of federal funds. My opinion is also that the SALT deduction is removed for all states so that can hardly be deemed selective. The distribution of federal funds is a completely different topic and is very complicated when you take into consideration the widely varied income levels, widely uneven existence of federally funded facilities such as military bases and colleges throughout the states plus state and local tax structure that exists in a particular state. As a rule I am against all unnecessary federal subsidies including agriculture and energy.

The article I posted was quite clear conveying what I believe regarding the SALT deduction.
 

MollyMalone

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* * * The article I posted was quite clear conveying what I believe regarding the SALT deduction.
Well, the article, at least as the excerpt appeared in your post, is a point-counterpoint kind of one; it doesn't advocate for any particular position. So I'd be interested in hearing more, particularly your comments on the text to which I added the blue here, e.g., would you be in favor of eliminating the deduction for state-local taxes while also providing direct support through federal grants and loans to states and localities?
Here is an article on the SALT deduction.
http://www.taxpolicycenter.org/briefing-book/how-does-deduction-state-and-local-taxes-work
Excerpt:
* * *
Proponents of the deduction counter that the portion of an individual’s income claimed by state and local taxes is not really disposable income, and that taxing it at the federal level is double taxation. Moreover, they argue that federal subsidies are warranted because a significant portion of state and local government spending is for education, health, public welfare, and transportation, all of which have important spillovers that benefit the population in other jurisdictions as well. A counterargument, however, is that while federal support may be warranted, the substantial revenues gained by eliminating or limiting the deduction could be used to provide direct support through federal grants and loans. (blue added by MM)

As a general fyi for anyone who's interested, here's a page from the same Tax Policy Center summarizing the largest Federal tax expenditures, sometimes called tax subsidies:
http://www.taxpolicycenter.org/briefing-book/what-are-largest-tax-expenditures
 
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