Why cut taxes?

[Uncle Ted]

According to a calculator I just ran, my taxes go up $10K. Thanks for nothing.

What is the biggest contributor to it going up $10k?


Edit: Now you are sounding like a self-righteous libertarian (complaining about taxes). My work here is almost complete.

[creekster]

According to a calculator I just ran, my taxes go up $10K. Thanks for nothing.

DO you have a link? Based on my own calculations I think I am going to pay 5-10k more too. Where is your calculator?

[Uncle Ted]

DO you have a link? Based on my own calculations I think I am going to pay 5-10k more too. Where is your calculator?

Maybe this one: https://www.marketwatch.com/story/th...owe-2017-10-26

[Omaha 680]

DO you have a link? Based on my own calculations I think I am going to pay 5-10k more too. Where is your calculator?

Anyone making a decent living in California or NY is going to get hammered. Doubly hammered if you own your home. I understand the Democrats crying foul that the proposal seems to be funded by targeting deductions most used in deep blue states. But there is also an argument to be made as to whether it's time to stop making ridiculously high state tax rates more possible through the federal tax code.

I don't want the state/local deduction to go away for selfish reasons, though.

[Moliere]

If you say so, Marie.

Sent from my iPhone using Tapatalk

[Jeff Lebowski]

Maybe this one: https://www.marketwatch.com/story/th...owe-2017-10-26

That’s the one!

[Uncle Ted]

Anyone making a decent living in California or NY is going to get hammered. Doubly hammered if you own your home. I understand the Democrats crying foul that the proposal seems to be funded by targeting deductions most used in deep blue states. But there is also an argument to be made as to whether it's time to stop making ridiculously high state tax rates more possible through the federal tax code.

I don't want the state/local deduction to go away for selfish reasons, though.

There is still a mortgage deduction on homes $500K or less. Property tax of $10K or less. What will $500K buy in NYC?

[Goatnapper'96]

According to a calculator I just ran, my taxes go up $10K. Thanks for nothing.

But your company should be better off so you can accumulate more wealth - so quitchyer bitchin!

[Jeff Lebowski]

What is the biggest contributor to it going up $10k?

My itemized deductions are above the standard deduction, but they are going down due to loss of state tax deduction. Combine that with the loss of personal exemptions and boom... $10k.

But this is just a calculator and I may have missed something. And I had some unusual things in 2016 (my basis of comparison), so time will tell.

[creekster]

Anyone making a decent living in California or NY is going to get hammered. Doubly hammered if you own your home. I understand the Democrats crying foul that the proposal seems to be funded by targeting deductions most used in deep blue states. But there is also an argument to be made as to whether it's time to stop making ridiculously high state tax rates more possible through the federal tax code.

I don't want the state/local deduction to go away for selfish reasons, though.

Pretty much. Thats what the calculator showed me.

[cowboy]

Help us understand how this is done. And why we shouldn't be closing the loopholes that allow this to happen.

Sure it is a small number of people. As of 2014, the wealthiest 160,000 families owned as much money as the poorest 145 million in America.

Most of the ultra-wealthy that you describe (net worth in excess of $20million) have portfolio's held in trust, and their heirs receive income from the trust as compensation from sitting on the board or managing it. I don't know how you close a loophole like that without substantial adverse consequences to entities that aren't/shouldn't be targeted. You're talking about old money, and I don't see it ever going away through tax law.

You sound like a British aristocrat. I am going to side with Thomas Jefferson and Alexis de Tocqueville and agree to disagree here. One of the better arguments against people decrying the huge and ever-increasing imbalance in the ownership of wealth in our country is that there is a reset provided by estate tax.

If you're going to drive the hyperbole train, you sound like Karl Marx. Since when is opposition to the idea of income or wealth redistribution an un-American, aristocratic notion? First, the estate tax doesn't provide a reset; it provides a hardship on middle to upper-middle class business owners who have worked and taken risks to provide a future for their families. We need to get away from this notion that the super wealthy would be affected by this, since old money and big money have already created entities that will ensure their wealth remains intact. Second, wealth is not land; it's not this scarce commodity that has a defined limit. The wealth held by the super rich has little impact on the ability of you or me to acquire wealth for ourselves.

This brings us to the pertinent question: Why should we try to inhibit wealth transfer between generations? Land ownership is possible for virtually everyone - we are far from the circumstances of France when Jefferson suggested taxing rich landowners as a way to make property available to the poor. More importantly, the standard of living of our poor is better than virtually any other country.

Based on the increase in the standard of living of our poorest quintile between 1960 and now, I'll argue that carrying forward generational wealth does not adversely affect us economically. I further submit that the massive amount of wealth held by the .1% turns over more and is better allocated through investment than it would be if half of it were taken by the government. The government doesn't re-allocate efficiently by any measure. Even if estate taxes were taken directly from wealthiest families and doled out evenly among the poorest, the wealth chasm would return within a generation.

So that's where I am: estate taxes will not, and I believe cannot, redistribute the wealth of the families you want to target, the create substantial costs for small business owners, and taking wealth that has been earned (at least somewhere down the line) away from people will have very little impact on the opportunities available to others for creating wealth of their own.

Also, what about unrealized capital gains that pass to the next generation? Doesn't that eliminate the tax for the wealthy heirs?

If you want to move toward a land-holding aristocracy, this will do it. Eliminating stepped-up basis encourages people to hold assets like land, when they would otherwise liquidate and re-allocate the capital. Again, since this has a relatively small effect on total tax receipts, and it's not a zero-sum game, this creates incentive to turn land and other hard assets over more often as more attractive investments arise. In turn, this creates more opportunity for people to purchase fixed assets like land that are finite in supply.

And if you know any farms lost to estate tax, you need to contact this economist (and the Farm Bureau)...

Well, if it was worth my time I would. The estate tax environment for the last 20 years has allowed farmers to manage their liability, but not without substantial expense. Before that time, it was not as easy. In 1995, my father was turned down by a bank because they thought my grandfather's estate, which was less than $1 million, would trigger a large enough tax to sink his operation at my grandfather's death.

The current law is manageable for most farms if they plan. I've worked on dozens of ranch estate plans and workouts, and I can think of four or five relatively small ranches that were on the verge of bankruptcy because of debt incurred to pay estate taxes. Sure, farms aren't selling because of their estate tax burden, but the financial hardship resulting from borrowing to pay estate taxes has been a contributing factor to a lot of family farms selling out. Even so, I think that problem has largely been fixed with the $5 million exemption, and my big opposition to the estate tax is about incentive and efficient allocation of capital.

Side Note: A $5 million exemption seems like a lot, but it's not in the ag world. A $5 million ranch in Eastern Montana (the less pretty part), would run approximately 400 cows, which is just enough to make a living on if you don't owe any money against it. If a rancher retired, the ranch could be rented for $120K, and would net around $90K. Land values are way over-priced for just ag use, and reflect pressure and influence from the upper middle class bidding up property because they want a pretty place to put a summer home. I'm not complaining, because I'm a capitalist and that's the way markets work, but the only way a rancher gets any of the $5 million he is worth is to sell it.

[Uncle Ted]

My itemized deductions are above the standard deduction, but they are going down due to loss of state tax deduction. Combine that with the loss of personal exemptions and boom... $10k.

But this is just a calculator and I may have missed something. And I had some unusual things in 2016 (my basis of comparison), so time will tell.

Yeah, it may suck for me too... The loss of the state tax deduction is not a big hit for me. Although I have used that to deduct sales tax on some big ticket items now and then. But I can live without it. Loss of personal exemptions... that hurts too. Of course, most the kids have moved out. But the cap on the property tax deduction at $10k?!?


And with the loss of the state income tax deduction I suspect lots of people will want to move to my state. This will drive up our house prices and compound the problem.

[BlueK]

I don't think giving the upper middle class a tax hike is going to be viable politically. If all of us are just noticing this, there will be dozens of articles about it in the coming days.

[Jarid in Cedar]

One comment about the calculator, it looks like the child tax credit doesn't phase out. Does anybody know if this is accurate? If so, that would be a big deal for me. Currently I receive no child tax credit because it faces out completely at my income level.

[Moliere]

I took my 2016 return and recalculated it based on the new proposal. My federal tax will go up $5800.00 to $9300.00, depending what actually happens with charitable donations(what is counted and what isn't).

Yeah, I am a big fan

My itemized deductions are above the standard deduction, but they are going down due to loss of state tax deduction. Combine that with the loss of personal exemptions and boom... $10k.

But this is just a calculator and I may have missed something. And I had some unusual things in 2016 (my basis of comparison), so time will tell.

That moment when you realize you are going to be the ones that actually pay for all the crap the government buys. Yes, the uber wealthy cannot pay for this government's spending...it will have to come from the middle class at some point in some form or fashion.