Proposed Tax Plan

[Dee*Jay]

This may be a little premature given that there's not much real info available at this point about the proposed tax plan, but tax geek that I am (sad... but true... ) I am following all this with extreme interest and figured we might as well have a thread for it rather than entangle the discussion with other things going on in other threads.

So far what I've gleaned is:

- three proposed tax rates (but with support for a fourth at 39.6 for the "wealthy" -- although I haven't seen that number defined anywhere) at 12, 25 and 35% (also haven't seen the brackets for those %s anywhere) instead of the current seven brackets

- potential elimination of SALT (state and local tax) deductions, which will impact people in states in NY, NJ, CA more than others due to both high property taxes and high income taxes

- increasing the standard deduction from $6,000 to $12,000 per person -- which seems to be a YUGE thing that hats are being rested upon, but I'm also seeing elimination of the personal exemption ($4,050 in 2016) so really the only difference is $1,950

- decreased mortgage interest deduction from $1M to $500K of indebtedness (haven't seen if HELOCs will lose their advantage in this plan or not)

- increased child care credit (amount yet unspecified) and new potential credits for elderly/disabled care

- corporate tax rate deduction now at 20% (not the 15% that was originally floated)

- lower pass through tax rate for small business owners/sole proprietors

- ETA: also elimination of the AMT

There are more things out there, but these are the ones I can quickly name off the top of my head.

What do you think? Will be interesting to see where this all ends up...

 

[redwood66]

Hmmm. Thanks @Dee*Jay. We did discuss the SALT awhile back didn't we? For us, since we refinanced at a significantly lower rate, the doubling of the standard deduction will make itemizing unnecessary I think. I do like that they are increasing for child care which should help working families. I know that is not necessarily a conservative view but people need the help. I am not surprised at the corporate rate and think it might even be higher when all is said and done. I hope it will have the effect that the proponents have described but I am no economist.

What do you think of it?

 

[Dee*Jay]

Yes, Red, we talked about this a bit back in April or so. It was all very nebulous then (not that we've got a plethora of exact information now, LOL) so I figured I would revive the topic so we could discuss it as it unfolds.

To answer your question, I think there are a lot of unknowns (obviously!). Just based on what I'm reading to this point I would probably be worse off due to certain deductions going away. But I'm willing to be hit in the pocketbook a bit if it means a better overall scenario, especially for the working class who can really benefit from a lower rate and a higher deduction.

Of course who knows how all this will turn out, but I will be watching with fascination!

 

[Dee*Jay]

One important thing I left out of the list at the begging of this thread is talk of potentially eliminating or limiting the deductibility of pre-tax retirement plan contributions. THAT I DO object to. I think people should be encouraged to save for retirement and reducing the benefit they get for doing that will almost certainly lower the amount people save.

 

[Karl_K]

I think its the beginning of a good plan.
Higher deductions is a great thing. More than anything else that can be done.
The lower rates at the top end will be offset by fewer deductions by the looks of it.
Tax advantages for a small business are a good thing.
The business tax reduction is a good thing as long as steps are made to make companies actually pay it. Big business pays less than that today due to all the loop holes.
AMT was badly implemented, not sure if it should be kept or not.
Need more info if it actually worked or not.

Throw out the entire tax code and replace it with no more 2 single spaced pages for personal. And maybe 10 pages for business.

 

[redwood66]

I wonder if the loss of the SALT will cause people in high tax states to question if they are getting their money's worth when the actual cost of living there is plain to see?

 

[Dee*Jay]

I wonder if the loss of the SALT will cause people in high tax states to question if they are getting their money's worth when the actual cost of living there is plain to see?

LOL Red, I live in a high SALT state (Illinois -- BTW, our income tax rate just went up mid-year from 3.75% to 4.95% and our property taxes are outrageous... and rising) and I question every day *even with the deduction* if I'm getting my money's worth. This state if fvcked up. I am going to talk to my accountant when I get my taxes done in February if I should move my legal residence to my place in Michigan. Honestly, the taxes there aren't much better but I think I would MENTALLY feel better, even if my pocketbook showed no improvement, ha ha.

 

[Dee*Jay]

I think its the beginning of a good plan.
Higher deductions is a great thing. More than anything else that can be done.
The lower rates at the top end will be offset by fewer deductions by the looks of it.
Tax advantages for a small business are a good thing.
The business tax reduction is a good thing as long as steps are made to make companies actually pay it. Big business pays less than that today due to all the loop holes.
AMT was badly implemented, not sure if it should be kept or not.
Need more info if it actually worked or not.

Throw out the entire tax code and replace it with no more 2 single spaced pages for personal. And maybe 10 pages for business.

Stormy, I've heard things like this before many times, but I honestly don't know how it could possibly be simplified to this degree and still be effective. "Effective" in that there are exceptions to rules and minutia and real If A, Then B, But Not C, and I know that's exactly what's being argued AGAINST with a "two pager," but -- even with an in-depth knowledge into our tax system -- I can't figure out how it would WORK. Not if YOU can my friend, write it up! I'll lead your campaign!!!

 

[redwood66]

LOL Red, I live in a high SALT state (Illinois -- BTW, our income tax rate just went up mid-year from 3.75% to 4.95% and our property taxes are outrageous... and rising) and I question every day *even with the deduction* if I'm getting my money's worth. This state if fvcked up. I am going to talk to my accountant when I get my taxes done in February if I should move my legal residence to my place in Michigan. Honestly, the taxes there aren't much better but I think I would MENTALLY feel better, even if my pocketbook showed no improvement, ha ha.

Oh my gosh Dee I have no idea how you can stand it. I mostly watch my property taxes very closely and definitely head on down to the county meetings if they are discussing ridiculous measures. But I live in a pretty conservative area and everyone is on top of them all the time.

I have to add that school issues and those needful kinds of things are pretty well taken care of here. But the flowery fanciful art things and special projects people know not to ask the taxpayers but to get the local businesses involved instead.

 

[t-c]

No one mentioning what all these tax cuts will cost? WaPo estimates a $2,200,000,000,000 ($2.2T) deficit over ten years. ($5.8 trillion dollars in lost revenue - $3.6 trillion in new revenues IF they actually eliminate the tax breaks that they said they will). I think all this extra debt, specially if a lot of the cuts go to businesses that are already cash-rich (if they’re not spending/investing the cash they have, what makes you think they’ll spend the cash they’ll get from the tax cuts), will hamper economic growth.

This tax plan punishes the states that didn’t vote for Trump (the tyranny of the minority). Ironically, they’re already donor states, but more taxes will be taken from them to be redistributed to the Trump states. Hmmm...isn’t redistribution against Republican principles? But then so we’re deficits — but that’s only when there is a Democrat in the White House.

 

[Dee*Jay]

Oh my gosh Dee I have no idea how you can stand it. I mostly watch my property taxes very closely and definitely head on down to the county meetings if they are discussing ridiculous measures. But I live in a pretty conservative area and everyone is on top of them all the time.

I have to add that school issues and those needful kinds of things are pretty well taken care of here. But the flowery fanciful art things and special projects people know not to ask the taxpayers but to get the local businesses involved instead.

Red, I wrote a contract on my current place in November of 2013. It is in an old warehouse district part of the city, which I chose on purpose because I wanted cool space and lots of it and I enjoy a funky little neighborhood. I've also been a realtor since 2004 so I saw the sign of "up and coming" in big neon letters. Little did I know! Google announced the location of their new Midwest headquarters -- three blocks from my place -- days after my deal was sealed. My area had been largely ignored from a tax perspective for many years prior to that, but no more! In 2015 alone taxes went up 81%. Eighty One Percent. Really. Of course an appeal was promptly filed and the result was that they graced me with a 3% reduction -- so a 78% increase. A second level appeal was launched and ultimately got the increase to "only" 51%. The bulk of that tax money goes to schools (I have no children, but have absolutely no objections to paying for education as the kids are indeed the future). Our public schools however... well... let's just say I could send The Demon and his crazy brother Oscar and they would come out as well educated as the children that are being pumped out of there. I understand we're in for some more increases as the every hungry and woefully underfunded pensions are in need of more shoring up. Of course we'll call it something different to make it sound better than yet more pension salvage... Not a day goes buy I don't seriously consider my options in terms of where to live!

 

[Dee*Jay]

No one mentioning what all these tax cuts will cost? WaPo estimates a $2,200,000,000,000 ($2.2T) deficit over ten years. ($5.8 trillion dollars in lost revenue - $3.6 trillion in new revenues IF they actually eliminate the tax breaks that they said they will). I think all this extra debt, specially if a lot of the cuts go to businesses that are already cash-rich (if they’re not spending/investing the cash they have, what makes you think they’ll spend the cash they’ll get from the tax cuts), will hamper economic growth.

This tax plan punishes the states that didn’t vote for Trump (the tyranny of the minority). Ironically, they’re already donor states, but more taxes will be taken from them to be redistributed to the Trump states. Hmmm...isn’t redistribution against Republican principles? But then so we’re deficits — but that’s only when there is a Democrat in the White House.

For shame T-C! Using LOGIC and actual MATH in this analysis!

(Where did the emojis go? I want to add some sort of crazy face here but I can't find them... T-C, just pretend you see the eye rolling and laughing emojis here, ha ha!)

 

[redwood66]

Red, I wrote a contract on my current place in November of 2013. It is in an old warehouse district part of the city, which I chose on purpose because I wanted cool space and lots of it and I enjoy a funky little neighborhood. I've also been a realtor since 2004 so I saw the sign of "up and coming" in big neon letters. Little did I know! Google announced the location of their new Midwest headquarters -- three blocks from my place -- days after my deal was sealed. My area had been largely ignored from a tax perspective for many years prior to that, but no more! In 2015 alone taxes went up 81%. Eighty One Percent. Really. Of course an appeal was promptly filed and the result was that they graced me with a 3% reduction -- so a 78% increase. A second level appeal was launched and ultimately got the increase to "only" 51%. The bulk of that tax money goes to schools (I have no children, but have absolutely no objections to paying for education as the kids are indeed the future). Our public schools however... well... let's just say I could send The Demon and his crazy brother Oscar and they would come out as well educated as the children that are being pumped out of there. I understand we're in for some more increases as the every hungry and woefully underfunded pensions are in need of more shoring up. Of course we'll call it something different to make it sound better than yet more pension salvage... Not a day goes buy I don't seriously consider my options in terms of where to live!

I don't even have any words for you other than I am so sorry.

 

[Dee*Jay]

I don't even have any words for you other than I am so sorry.

It's OK Red... I've made this bed here in Illinois and now I need to figure out if I want to continue to lie in it...

I appreciate that though! Got a spare room?!

( --> hey! I see the emojis now!)

 

[MollyMalone]

Here's a link to the PDF of the "Unified Framework" document released today:
https://www.treasury.gov/press-center/press-releases/Documents/Tax-Framework.pdf

 

[Tekate]

I can't find anywhere that he says how he's going to pay for this. Except growth and we've been shown before that supply side econ doesn't work. Did anyone read anything else?

 

[redwood66]

I can't find anywhere that he says how he's going to pay for this. Except growth and we've been shown before that supply side econ doesn't work. Did anyone read anything else?

Hmmm. I asked the same thing about Obamacare and any other entitlement increases, plus military increases, and on and on.

 

[Dee*Jay]

Here's a link to the PDF of the "Unified Framework" document released today:
https://www.treasury.gov/press-center/press-releases/Documents/Tax-Framework.pdf

Thanks for that link Molly.

Unless I'm missing it, this document is still a bunch of platitudes though and no specifics. E.g., the tax brackets are mentioned but not the income levels they apply to; the incentive for mortgage interest (which I presume is still going to be an actual deduction, unless they mean something else by the word "incentive") is preserved, although it's unknown to what degree; retirement plan participation is mentioned at a high level but no specifics on whether qualified contributions will still remain so. I guess time will tell!

I do have to comment on the title though: Unified Framework for Fixing Our Broken Tax Code... sounds like the title of a paper written by a sixth grader in Civics class.

 

[redwood66]

I do have to comment on the title though: Unified Framework for Fixing Our Broken Tax Code... sounds like the title of a paper written by a sixth grader in Civics class.

I tend to wonder if part of the reason for simpler verbiage (in many other docs also with regard to this Admin.) is to engage those citizens who would just seize up and toss out any attempt to become involved in the process were the language more legalese? At least that is my hope. There is quite a swath of America that are not scholars but are also not illiterate.

 

[Karl_K]

While it will never happen less than 1 page personal income tax law:
Deduction = $?????? Adjusted for inflation every 2 years.
# of people x deduction = td
income from all sources - td = taxable income or ti
Tax rate:
from 1 to 50000 15%
from 50000 to 200000 25%
over 200000 35%
Adjust for inflation every 2 years rounded to nearest thousand.

take the amount of TI over $200000 x .35
take the amount of TI over $50000 and less than $200000 x .25
take the amount more than $1 and less than $50000 x .15
Add those 3 amounts and its your total tax owed.

Done.

 

[Dee*Jay]

While it will never happen less than 1 page personal income tax law:
Deduction = $?????? Adjusted for inflation every 2 years.
# of people x deduction = td
income from all sources - td = taxable income or ti
Tax rate:
from 1 to 50000 15%
from 50000 to 200000 25%
over 200000 35%
Adjust for inflation every 2 years rounded to nearest thousand.

take the amount of TI over $200000 x .35
take the amount of TI over $50000 and less than $200000 x .25
take the amount more than $1 and less than $50000 x .15
Add those 3 amounts and its your total tax owed.

Done.

OK, I'm going to play devil's advocate on some points:

Why ANY deduction? Just start taxing at a higher base number.

A family has a catastrophic medical cost -- no deduction for them? (Note this is NOT a question about whether they have healthcare or anything along those lines, just saying they had to pay out of pocket a proportionate very high amount of income in that year due to medical expenses.)

The American dream, currently encouraged by the mortgage deduction for mortgage interest and property taxes -- right down the drain! What's next, a tax on baseball and apple pie?!

The auto plant you work for closes and you have to move across the country to a job that will keep you and your spouse and children from starving to death... That's all on your dime with no deduction? Hell, you can't even put food in Jennie and Johnny's bellies, let alone pay for the U-Haul to take your meager possessions across the nation for a fresh start.

Obviously I'm being facetious, but you can see the type of resistance a cut and dried plan will get from real people with real lives.

I'm a numbers person, I get where you're coming from, but the majority of people will say "Hell ya!" to your plan, until they realize how it suddenly applies to them and their particular circumstances in a very (as they will perceive it) cold and unfair way.

C'mon Stormy, keep working on this plan. I'm willing to lead your campaign, but you got to give me something with even a remote change of getting through!

ETA - Stormy, you know I'm not being rude or hassling you, right? I'm just talking different points through because I enjoy an intelligent discourse on things that matter. Sorry if I came off as snide or snippy in my post.

 

[Dee*Jay]

I can't find anywhere that he says how he's going to pay for this. Except growth and we've been shown before that supply side econ doesn't work. Did anyone read anything else?

Tekate, I actually HAVEN'T read anything that will answer that question. Would love to see it though. As for supply side economics not working this time (even though it's never worked before) -- geez Tecate, have you no Faith in The Great Donald?! He's Making America Great Again!

 

[Karl_K]

C'mon Stormy, keep working on this plan. I'm willing to lead your campaign, but you got to give me something with even a remote change of getting through!

ETA - Stormy, you know I'm not being rude or hassling you, right? I'm just talking different points through because I enjoy an intelligent discourse on things that matter. Sorry if I came off as snide or snippy in my post.

Its kewl :}
I was chuckling reading your post.
That was really my point something fair, simple and workable has 0 chance of passing.
The tax system had been used for social engineering and butt kissing for so many years now that it is ingrained into the system.

 

[Tekate]

Well, Obamacare was to be paid for by the mandate Red. Entitlements? and military increases and so on? by raising taxes on those who can pay more, although not as simple as that. It's on the web!

Hmmm. I asked the same thing about Obamacare and any other entitlement increases, plus military increases, and on and on.

 

[redwood66]

It's OK Red... I've made this bed here in Illinois and now I need to figure out if I want to continue to lie in it...

I appreciate that though! Got a spare room?!

( --> hey! I see the emojis now!)

I had to check and our tax rate for state income taxes and it runs right around 6%.

 

[Matata]

Soooo, won't cuts affect national debt and govt's ability to provide services? National debt was close to $19 trillion Jan. 2016. We have billions in aid and rebuilding that needs to occur in TX, FL, PR and we aren't done with hurricane season yet, our infrastructure is in disrepair and we are building the Great Wall of Cheeto. How does that pencil out?

 

[Dancing Fire]

I can't find anywhere that he says how he's going to pay for this. Except growth and we've been shown before that supply side econ doesn't work. Did anyone read anything else?

Really ?...how many jobs did Reagan created? how many jobs did Obama created?. let's not count welfare as a job creation...

 

[redwood66]

IMO this will only work with spending cuts as well. But I think that should be happening anyway. The federal government spends like drunken sailors.

 

[Tekate]

Who raised taxes more Reagan google is thy friend.

Really ?...how many jobs did Reagan created? how many jobs did Obama created?. let's not count welfare as a job creation...

 

[Tekate]

Where to cut is the question. No one wants to cut the military (I would !) cuts to assistance hurts people (altho there are many who could care less).

Here's a plan that is so unbelievably harsh it's hard to fathom.

https://www.downsizinggovernment.org/plan-to-cut-federal-spending

Nowhere is the military cut. Cut help to kindergartners! That groups exist that are so callous and so selfish bogges my mind. No cuts to generals. No cuts to congress. Harsh and evil.

But something like the above would never fly. Although privatizing Air traffic controllers might not be a bad idea.. look at TSA.. we're doomed.

IMO this will only work with spending cuts as well. But I think that should be happening anyway. The federal government spends like drunken sailors.