Why cut taxes?

[Topper]

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.

Hmmm.

So it pays to have grown children and small abodes. It doesn't seem to affect me. I'm good, I got mine. My suspicion is that this plan is dead unless significant revisions are made.

[Uncle Ted]

Hmmm.

So it pays to have grown children and small abodes. It doesn't seem to affect me. I'm good, I got mine. My suspicion is that this plan is dead unless significant revisions are made.

Yeah, I don't think the tax proposal will affect me much either... I was just trying to make JL feel better.

[Omaha 680]

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

There's this one bedroom, 5th floor walkup beauty near Central Park West for $400k. Maybe we could squeeze into it: https://www.trulia.com/property/5029...-York-NY-10025

The catch: income restriction is $53,000/year.

[Topper]

Yeah, I don't think the tax proposal will affect me much either... I was just trying to make JL feel better.

Good on you. This should make Frank happy. Anything that increases taxes on BYU fans should please him.

[Uncle Ted]

There's this one bedroom, 5th floor walkup beauty near Central Park West for $400k. Maybe we could squeeze into it: https://www.trulia.com/property/5029...-York-NY-10025

The catch: income restriction is $53,000/year.

LOL... how can someone with an income of $53K/year get a $400K mortgage?

[Topper]

There's this one bedroom, 5th floor walkup beauty near Central Park West for $400k. Maybe we could squeeze into it: https://www.trulia.com/property/5029...-York-NY-10025

The catch: income restriction is $53,000/year.

Dude, the mortgage deduction. With your 20 or 30 percent down you size all the way up to 600 or 650K. Go for it!

[Topper]

LOL... how can someone with an income of $53K/year get a $400K mortgage?

Apparently in Texas pre-Recession it was easy. Remember the Big Short where a Texas waitress had a 350,000 mortgage on income of $23000?

[Uncle Ted]

Apparently in Texas pre-Recession it was easy. Remember the Big Short where a Texas waitress had a 350,000 mortgage on income of $23000?

Ah yeah, the good ole Bush Jr years.

[Moliere]

Looks like my taxes would have been about $4,000 less last year under the proposed bill, mostly driven by lower tax rates and the brackets changing. However, that changes quite a bit this year and next year.

[Jarid in Cedar]

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.

No it's more like when you confirmed your fear that you already knew who was going to fund the 60% reduction in corporate tax rate.

[Topper]

No it's more like when you realize your fear that you already knew who was going to find the 60% reduction in corporate tax rate.

I already found the funding source, but then again ....

[Topper]

One the assumptions that to secure jobs here, and because this change will not be permanent, the corporate rate being reduced doesn't seem tied to corporations actually re-investing in the US or hiring added personnel. If there is no direct tie-in, I don't believe the rates should be reduced.

[Jeff Lebowski]

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.

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.

Uh... since the founding fathers.

https://www.economist.com/blogs/lexi...unding_fathers

With Thomas Jefferson taking the lead in the Virginia legislature in 1777, every Revolutionary state government abolished the laws of primogeniture and entail that had served to perpetuate the concentration of inherited property. Jefferson cited Adam Smith, the hero of free market capitalists everywhere, as the source of his conviction that (as Smith wrote, and Jefferson closely echoed in his own words), "A power to dispose of estates for ever is manifestly absurd. The earth and the fulness of it belongs to every generation, and the preceding one can have no right to bind it up from posterity. Such extension of property is quite unnatural." Smith said: "There is no point more difficult to account for than the right we conceive men to have to dispose of their goods after death.

I have news for you: when someone dies, there is automatically a wealth redistribution. So you are for a wealth redistribution, but solely to family heirs, regardless of the size of the estate. Sure they should get a nice chunk (and 100% in most cases), but they did not earn that wealth any more than you or me.

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.

Sorry, those are not compelling arguments to me. Nobody is arguing it will eliminate wealth gaps entirely. Fewer poor today doesn't mean we shouldn't have an estate tax.

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.

OK, raise the exemption. But don't make it limitless.

A farm/ranch is still a business and should be treated the same as other family businesses.

[Moliere]

No it's more like when you confirmed your fear that you already knew who was going to find the 60% reduction in corporate tax rate.

Ha! Liberals complain that corporations don't pay any taxes (seriously, I've been in shareholder meetings where protesters show up and say this). Then they complain when corporate tax rates are reduced. Wouldn't reducing tax rates on corporations have no impact if they already don't pay any taxes?

I'm not saying that's you JiC but your post reminding of this thought I had earlier in the week.

[Topper]

I would like to see an experiment of elimination of the income tax and a 100% estate and gift tax. Implementation during transition for cash flow would be difficult, but it would incentivize spending, earning but not accumulating and might encourage the continuous circulation of money.