New Tax Policy

[madelise]

https://www.google.com/amp/heavy.co...ase-decrease-under-new-donald-trump-plan/amp/

I'm not sure what to think of this.. I'm fine with my own taxes going up, but I'm upset to know corporations will be paying less taxes.........

Someone who knows more about taxes and money please explain this like I'm 5 to me..

 

[redwood66]

Hmmm. It will benefit DH and I greatly. But we only have our home as a write-off now. It seems that you would get no benefit for college savings accounts then? I am not an economic guru.

 

[soxfan]

it benefits corporations and business owners. NO low to middle income families will benefit

 

[soxfan]

Thanks Cheeto *******!!!

 

[redwood66]

What I am hearing is the first $24K of earnings is not taxed so if you make $23k then you owe no tax. How does this not benefit poor families? I cannot find that in writing anywhere yet.

 

[soxfan]

Middle class taxes are being raised.

 

[redwood66]

Middle class taxes are being raised.

Depends on what you call middle class. It seems you think its $112K+ for a single person.

 

[soxfan]

Depends on what you call middle class. It seems you think its $112K+.

Here you go...MIDDLE CLASS

http://www.cnbc.com/2017/03/13/heres-how-much-you-have-to-earn-to-be-considered-middle-class.html

 

[redwood66]

Well then I am a poor sot. But so is everyone else I know who lives plenty fine.

Those numbers don't jive with what you have said then.

From your link:

Middle Class

Household of one: $24,042 to $72,126

Household of two: $34,000 to $102,001

Household of three: $41,641 to $124,925

Household of four: $48,083 to $144,251

Household of five: $53,759 to $161,277



Tax plan from the original link:

Single Filer
$0 – $37,500 10%
$37,500 – $112,500 25%
$112,500 + 35%


Joint Filer Rate
$0 – $75,000 10%
$75,000 – $225,000 25%
$225,000 + 35%

 

[soxfan]

My husband said he doesn't think it will get approved. It's forecasted to cause a 2+ trillion $ deficit.

 

[Slickk]

Depends on what you call middle class. It seems you think its $112K+ for a single person.

Is this income for a married couple or a single person? Because if it is combined adjusted gross income this will hurt the middle class where I live.

ETA thanks Red for clarifying single versus joint filer!

 

[Slickk]

Double post. Sorry...

 

[redwood66]

And the standard deduction is being doubled.

 

[MollyMalone]

Impressive, huh? Any one of us could have produced this cartoon-y document last night by going to Trump's 2016 campaign site & pulling out some sentences, then frame each with a bullet point (actually, his campaign site had more, and weightier, specifics & justifications than this 1-pager, but the broad proposals aren't exactly the same in both).

I realize that today was not intended to be a comprehensive presentation on a draft legislative bill. But we deserved to receive something better today than this so-called "plan" with such airy-fairy phrases as "Eliminate the tax on special interests" & "Eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers", which are even shorter than the tweets from our President, who didn't care enough to show up and make the introduction:

 

[redwood66]

IMO it should be simple. No reason to be complicated unless you want to support CPAs and lawyers. And that is no reason to make it difficult.

Edit - Sorry Dee. No offense intended. You are a CPA correct?

 

[Dee*Jay]

There is FAR more that goes into an analysis like this than simple income X rate calculations. Throwing out just one additional component: Deductions are critical too. For instance, if you lose your ability to deduct state taxes paid from your income (which is one of the things I've read as being on the table) that INCREASES your taxable income. Any limit on the amount of mortgage interest that can be deducted also INCREASES your taxable income. Right now you can deduct interest on up to $1,000,000 on indebtedness (and I'm vastly oversimplifying here) but I have seen discussion of reducing the amount of interest deductability down to $100,000 from $1,000,000. I'm sure in some areas you can buy a perfectly acceptable house for $100,000, but in plenty of others you can't buy an outhouse for that amount. And for anyone who wants to get their panties in a bunch about $100,000, remember we're talking generally about the "middle class" here (defined however you see fit) and I am very confident (as both a realtor and a person with enough common sense to understand the variability of housing prices across this vast nation) that A LOT of "middle class" people live in houses with a supportable indebtedness of more than $100,000. And if I'm understanding this correctly (assuming I've read whatever the latest version of this fairy tale is) the ability to deduct property taxes also goes away. So sure, the standard deduction goes up. That, frankly, helps the poor(er) population, and I'm of course all for that. But removing or reducing a whole bunch of very basic deductions has huge impact on the middle class, and that is the group that this Grimmm's fairy tale is allegedly designed to benefit. Grim is right.

What I just wrote is from memory based on what I've read. I don't have the ability to refer back to things right now because I'm sitting in a funeral home in the middle of nowhere Illinois (don't ask) so my reference capacity is pretty limited and I'm typing on my phone. Sorry for not giving a more thorough response.

 

[MollyMalone]

IMO it should be simple. No reason to be complicated unless you want to support CPAs and lawyers. And that is no reason to make it difficult.

I don't think simplicity means we should have to guess what "Eliminate the tax on special interests" & "Eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers" mean

 

[Dee*Jay]

IMO it should be simple. No reason to be complicated unless you want to support CPAs and lawyers. And that is no reason to make it difficult.

Edit - Sorry Dee. No offense intended. You are a CPA correct?

Red, LOL, I was typing my post at the same time. Absolutely no offense, and there is NOTHING simple about taxes *in their current format*! I am indeed a CPA and I don't even do MY OWN taxes. One reason is because I have a corporate entity that has a level of complexity that I don't want to deal with, and the other is frankly because I want that additional layer between me and the IRS. My guy (Larry -- LUV YA LARRY! ) worked for the IRS for 29 years before opening his own practice and if there is ever a question about anything on my returns I want Uncle Sam to have a conversation with Larry and NOT with Dee!!!

 

[redwood66]

I live in a house with much more than $100K indebtedness but with the interest rate as it is now the actual amount that is deducted is less than a doubled standard deduction.

 

[redwood66]

I don't think simplicity means we should have to guess what "Eliminate the tax on special interests" & "Eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers" mean

And I am sure that they will have more information forthcoming.

 

[Karl_K]

And the standard deduction is being doubled.

It really should be tripled. Raising the standard deductions is the best thing that can be done for lower income people while helping everyone.

 

[MollyMalone]

And I am sure that they will have more information forthcoming.

Is there any good reason to put out a half-assed document?

I'm actually not opposed to some of the stuff, insofar as I can tell at this juncture. But I'm thinking that in 8th grade, you would have turned in something better than this piece of paper!

 

[Karl_K]

Here is my tax plan to replace the entire tax code.
Married: Single would 1/2
35000 standard deduction increases with col
5000 per person increases with col
First 150000 after deductions are subtracted 20%
after the first 150000 35%
The 150000 would increase with col also
No deductions other than the standard deductions.

Business
15% flat tax on profits over $100000.
Only deductions allowed are r&d in the US and depreciation of capital expenses and cost of material/utilities/marketing/interest/dividends and labor.

 

[Dee*Jay]

I live in a house with much more than $100K indebtedness but with the interest rate as it is now the actual amount that is deducted is less than a doubled standard deduction.

Red, that is just one item that goes into itemization. But also consider state and local taxes and other things that can be itemized. Also, I have not seen any discussion of what may happen to the personal exemption, which was just over $4,000 last year. (I think $4,050 off the top of my head.) So if that stays, great, but if it goes away...

Now - Single person
$4,050 personal exemption
$6,300 standard deduction
$10,350 total

Now - Married
$20,700

Under Chumps plan (and without the personal exemption)
Single $12,000
Married $24,000
(I think these are the right numbers - ???)

So yes, there is an increase, but for many people it would not be offset by the things that can no longer be deducted -- things that many "middle class" people deduct. (Again, this point does not address treatment of the personal exemption, which I don't recall seeing discussion on yet.)

 

[Dee*Jay]

Is there any good reason to put out a half-assed document?

I'm actually not opposed to some of the stuff, insofar as I can tell at this juncture. But I'm thinking that in 8th grade, you would have turned in something better than this piece of paper!

Why not, since it worked out so well with the health care plan?!

 

[redwood66]

But Dee why should all of those deductions exist just to keep from paying taxes? If you make a high income you should pay more. That is what I am hearing from everyone here on PS they would be glad to pay more taxes for things like universal healthcare. Put your (collective) money where your (collective) mouth is and pay up if you make it. Big government is wonderful I hear.

All of this is said with my smart aleck sense of humor of course.

 

[t-c]

From the NY Times (link is the title).

Winners and Losers in the Trump Tax Plan

The tax plan the Trump administration released Wednesday consists (so far) of a single page of bullet points.

If this were a more rounded plan, we could wait for the tax wonks at various think tanks to run it through their models and tell with some precision how it would affect people at different income levels and who would benefit from different deductions.

Lacking that level of detail, we can know only in broad-brush strokes which Americans would win and which would lose. In a homage to the Trump plan itself, here are those winners and losers in bulleted form.

Winners
■ Businesses with high tax rates. The plan would cut the 35 percent corporate income tax to 15 percent. While few businesses pay the full 35 percent rate, those that pay something close to it are in line for a huge tax cut.

■ High-income earners. The plan would reduce the top rate on individual income tax — now 39.6 percent for income over around $470,000 for a married couple — to 35 percent. But that’s only part of the gain for high-income earners. It also would eliminate a 3.8 percent tax, used to help fund Obamacare, that applies to investment income over $250,000 for a couple.

■ People with creative accountants. The 15 percent business tax rate could open a huge loophole for people to receive business income through a limited liability company or other pass-through entity instead of as wages. Depending on how the law is drafted, that could enable some people to pay that low 15 percent rate on their earnings instead of an individual income rate up to 35 percent. People who already receive their income through investment vehicles wouldn’t have to change anything for a windfall.

■ Multimillionaires who want to pass money to their heirs tax-free. The plan would eliminate the estate tax, which currently applies to individuals with estates of $5.5 million or couples with estates worth $11 million.

■ People who still fill out their tax returns by hand. Administration officials said the plan would simplify paying taxes, particularly emphasizing plans to eliminate the alternative minimum tax. The A.M.T. can definitely be annoying, and costly, but if you use an online tax preparation service, the software does most of the work.

■ Retailers and other companies that feared a “border adjustment tax.” The Trump administration did not embrace House Republicans’ big strategy to pay for the tax cut, which was strongly opposed by the retail industry and others that thought they would be losers.

■ Donald J. Trump. It is striking how many of the categories listed above affect the president and his family. He is a high-income earner. He receives income from 564 business entities, according to his financial disclosure form, and could take advantage of the low rate on “pass-through” companies. According to his leaked 2005 tax return, he paid an extra $31 million because of the alternative minimum tax that he seeks to eliminate. And his heirs could eventually enjoy his enormous assets tax-free.

Losers
■ Upper-middle-income people in blue states. The plan would eliminate the federal tax deduction for state and local income tax. If you are in a place where such taxes are high, like New York or California, you would lose a valuable deduction.

■ Deficit hawks. The Trump plan doesn’t come with any estimates of its impact on the federal deficit. But his campaign plan, to which the new document is distinctly similar, was estimated by the analysts at the Tax Policy Center to reduce federal revenue by $6.2 trillion over a decade. That implies either a very large increase in the national debt or huge reductions in federal spending.

■ People who want Congress to pass something. While the Trump plan solves some of the policy contradictions of his earlier promises with a “candy for everyone” approach to cutting taxes, that leaves it with even bigger political contradictions. The plan’s tilt toward businesses and the affluent means that Democratic support will be scarce to nonexistent. A law passed via the Senate’s budget reconciliation process — preventing a filibuster by Democrats and allowing a narrow majority of Republicans to prevail — is not permitted to increase the deficit beyond a 10-year window. That means the major provisions would probably have to be temporary. Even if adjusted to be temporary, the presence of deficit hawks among Republicans would make the Trump plan no slam dunk to pass.​

 

[redwood66]

I have a question for you Dee. I am reading that RE experts are saying that it will cause people not to buy homes. This does not make sense to me. We did not buy any of our homes just for an interest deduction. Sure it was an added benefit but it is not the reason. I have heard of people who have not wanted the headache of home ownership so they rent. But most renters I know would love to own a home.

 

[Dee*Jay]

But Dee why should all of those deductions exist just to keep from paying taxes? If you make a high income you should pay more. That is what I am hearing from everyone here on PS they would be glad to pay more taxes for things like universal healthcare. Put your (collective) money where your (collective) mouth is and pay up if you make it. Big government is wonderful I hear.

All of this is said with my smart aleck sense of humor of course.

Red, I think many deductions have a basis other than just tax avoidance though. For instance, if you pay a certain % of income (which now varies based on age) in medical expenses you can deduct that. The origin (as I recall from when I was studying for the CPA exam) was because people in that situation presumably had a heavy burden anyway. (I humanized that explanation a little, I'm sure, but you get the gist.) And home ownership has always been touted as one of those "American things" and was rewarded, for lack of a better term, with deductability for mortgage interest and property taxes. Just two examples.

If I disappear from this thread and you don't hear from me again tonight BTW it's not because I don't want to play any more but I'm about to embark on a long ride home in the rain. There's NOTHING I love to discuss as much as taxes! (I keed, I keed... well, kind of! Dee finds taxes fascinating!)

 

[Dee*Jay]

I have a question for you Dee. I am reading that RE experts are saying that it will cause people not to buy homes. This does not make sense to me. We did not buy any of our homes just for an interest deduction. Sure it was an added benefit but it is not the reason. I have heard of people who have not wanted the headache of home ownership so they rent.

OK, I'll reply to this before I head out.

I absolutely agree it will impact people buying homes. Perhaps not so much married couples who have (or want to have children) because it probably makes sense to live in a house anyway, but I'll give perspective from what I see every day as a realtor. I can't tell you how many times I've done the math for a single person, which is a huge demographic of first time home buyer in urban areas. For instance:

$2,000 in monthly rent, none of it is deductable

OR

$2,200 monthly mortgage payment, $200 principal and $2,000 interest
$400 monthly property taxes
$2,600 total payment

BUT... assume the person is in the 25% bracket:

Then $2,400 of that $2,600 payment becomes deductible, giving a $700 benefit

So the total payment is then $1,900, which is less than the $2,000 rent payment, and the person is building equity.

Note I didn't address assessments (or maintenance, as it's commonly called in some areas of the country), and most condos or town homes have that monthly fee too, but those fees are not deductible for a property you live in (although they are if the property is a rental). The key there is to understand what is being paid for in those assessments. E.g., a lot of assessments pay for things you would pay for anyway, like water, scavenger (i.e., garbage pick-up), landscaping and other exterior maintenance, snow removal, etc. So break it out and understand what you're paying for in a monthly assessment vs. what you would pay for out of pocket anyway.

ETA: I got sidetracked and didn't finish my thought related to your point about not buying solely for economic reasons. I do get that, but for many people getting an economic benefit does play into their decision -- very much so. Also, to your point about not wanting the headaches of ownership, in urban environments that is somewhat alleviated by condo/townhouse ownership. Sure, if something breaks in your unit you deal with it, but *generally* associations have it set up so someone shovels the snow, cleans the gutters, etc. That way, you get home ownership economic benefits (and some mental ones too -- people feel good and are proud of owning their property) but you don't have to be 100% hands on with maintenance, etc.

We also haven't discussed the fact that property values can go down, but that is a topic for another post - perhaps another thread entirely, LOL.