Why cut taxes?

[chrisrenrut]

Will pushing more people out of itemizing deductions dis-incentivize charitable contributions?

[BlueK]

I'm not an accountant, but it looks like for those families (married filing jointly) with taxable income below 260,000 the answer is no. Those between 260,000 and 500,000 will get bumped to a higher bracket. But this is if all else is equal, and as Moliere pointed out, it isn't. A lot of people will see their taxable income go up even if they didn't earn significantly more.

Just the FSA childcare elimination adds $5000 to my family's taxable income. So unless that gets made up a different way my income tax is going up, and it already seems very high as it is. Taking out the 401k benefit would have been a lot worse. I don't have state income tax, but those states get to deduct sales tax, so I'm assuming that goes away also.

[Omaha 680]

Does fewer tax brackets mean some people might get pushed up into a higher one?

I'm not an accountant, but it looks like for those families (married filing jointly) with taxable income below 260,000 the answer is no. Those between 260,000 and 500,000 will get bumped to a higher bracket. But this is if all else is equal, and as Moliere pointed out, it isn't. A lot of people will see their taxable income go up even if they didn't earn significantly more.

[BlueK]

Thanks for the detailed breakdown, Moli. I was just looking at the proposed brackets yesterday and thinking "well I don't like tax cuts in our current long term fiscal crisis, but at least I'll be getting something out of it." Now I'm not sure. I don't own any property, so the elimination of the state and local tax deduction will affect me. That combined with eliminating exemptions will raise my taxable income. The child tax credit increase means nothing to me as I assume I still don't qualify given my fake New York salary.

Does fewer tax brackets mean some people might get pushed up into a higher one?

[Omaha 680]

Thanks for the detailed breakdown, Moli. I was just looking at the proposed brackets yesterday and thinking "well I don't like tax cuts in our current long term fiscal crisis, but at least I'll be getting something out of it." Now I'm not sure. I don't own any property, so the elimination of the state and local tax deduction will affect me. That combined with eliminating exemptions will raise my taxable income. The child tax credit increase means nothing to me as I assume I still don't qualify given my fake New York salary.

[BlueK]

My take:

Reduces income tax brackets: Overall it's a reduction across the board, which is fine with me. Tax brackets need to either grow with inflation or be adjusted every once in a while and this is one way to do it. It does impact me and reduces my tax bill, so I guess I'm happy.

Nearly doubles the standard deduction: I haven't used the SD in a long, long time so personally I don't care. I do think it's a good thing for many people that have lower incomes. Most people that itemize are in larger income tax brackets so this is a benefit for the lower income earners. Is it a good thing overall? I'm a proponent of everyone paying something, or most people paying something so I'm not a huge fan. I'd prefer a lower tax rate (maybe 2-5%) for those poeple over a higher SD, but whatever.

Eliminates personal exemptions: Not a fan personally or in general. While I don't think taxes should incentivize people to have kids, you also shouldn't be hurt for having a larger family and this one hurts larger families. It might be a wash for me with the lower tax rates, but I like the personal exemptions applied per person/child. I'm sure older people will like this one as will most Americans with 2 or fewer kids.

Expands child tax credit: This is good and so is the increase in the phase out level, which levels should be adjusted every year based on inflation. I also like that the increase is not refundable. A refundable child tax credit is dumb, IMO. This makes up a bit for the loss of the personal exemptions

Eliminates tax exclusion for dependent care assistance accounts: Honestly have no idea on this one. Most publications say this is used mainly by higher income families, so I'm fine with it going away. I like tax-exclusions for things like HSAs or Child Care (not a huge fan of this but I see the benefits), but I think it's been taken a bit overboard and this pull back is a good thing.

Repeals state and local tax deductions, but preserves property tax break: I'm sure my state lobbied hard for the property tax break to stay in. I pay over $10K/year in property taxes so the elimination of that deduction would have hurt me, but it would have really hurt Texas real estate. However, it makes no sense to eliminate state/local tax deductions but keep the property tax deduction. This may continue to draw more people to states that have higher property taxes to make up for the no income tax. So while this helps me, I'm overall not a fan and think the palying field should be evened out among state/local taxes.

Limits deductible mortgage interest: I think I'm with Wuap on this one. I don't mind the full repeal of this deduction. I have a mortgage and find myself disincetntized to pay it down/off due in part to this deduction. I'd rather stick my money in the market and ride that wave because while I pay a bit in mortgage interest, the deduction reduces my effective interest rate on my mortgage. I saw one publication say this would reduce people taking the deduciton to 4% of total filers, mainly due to the increase in the standard deduction but also because the cap would be lwoered to mortgages under $500K. Crazy, but if people aren't really using it, get rid of it. I got a feeling the realtor coalition is going to be ticked abou

Repeals many other deductions: I support this one. Too many random deductions and the thresholds are too high (7.5% of AGI, really?).

401ks not touched: It's crazy this was even considered. This is a huge savings vehicle for middle income families and taking it away would be ludicrous. People move jobs all the time now and having a 401k with a decent limit ($18K in 2017) is a great way to save without the access to pension plans or other outdated retirement type plans.

Repeals the Alternative Minimum Tax: Support. AMT is dumb and needs to go away. If you simplify the deductions, AMT is no longer needed.

Repeals the estate tax: Don't support. I'm a big supporter of the estate tax and think it should be expanded to trust funds and other vehicles used by the rich to stow away money. Generational wealth is one of the problems in the US and inhibits some class mobility. I actually support lowering the threshold to lower than $5mm but finding a way so that small/family businesses aren't impacted (such as family farms/ranches).

Other stuff I wish was in there: I'd prefer to eliminate the automatic withholding by employers and require people to pay taxes by themselves. That would change a lot of the perception of how much is paid. I also support raising the SS tax ceiling, however the ceiling shouldn't be elminated. SS was never meant to provide a luxurious retirement so I wish all thse old people would stop complaining about barely surviing on SS. Um, that's the point of it, to keep you alive. If you want to go on cruises and travel then you should have saved your own money to do that.

In other words, the upper middle class is about to get socked.

Let me amend that: the upper middle class with young kids where both parents work is going to lose with many or most of these changes.

[Shaka]

IPU/hallelujah vs. Duderino/BlueK/FrankRyan would've made some enjoyable battles to read. RIP fallen comrades.

What did Frank go the way of IPU and commit hari-kari?

[Uncle Ted]

Totally not condescending as I'll admit that this is a more macroeconomic argument and I'm not really qualified to give an informed opinion on it. I'm just not a big fan of trust fund babies, which is why I'd like the tax expanded in some way to hit them. Not as punishment, but to equalize the playing field a bit. We do differ on this and I respect that.

Yes, you should be ashamed that your ancestors and the founding fathers were slave owners and Indian killers!

To (help) make it right you need to give all the land back to the children of my ancestors (the American Indian)! That will equalize the playing field.

[Uncle Ted]

Overall, I don't have much problem with your opinions with the exception of the following two items:

Keeping in mind that I see taxes as a way to give incentive for people to act a certain way, the mortgage interest deduction is very important in encouraging home ownership in the long run. Home ownership is important both as a psychological boost in providing a sense of security and seeing the American Dream as attainable, and as an economic boost because people will spend more on their own home than on a home they intend to rent. Interest rates will eventually rise, and when they do this deduction will become crucial in making homes affordable to middle class folks.

Yeah, I kind of like the idea of lowering the cap on this to $500K. $500K or less seems like a good middle class home price, except for the folks in parts of California but who cares about them and their overly inflated home prices? Screw them.

We've had this discussion before, and I guess we agree to disagree, but there is no quantitative evidence that generational wealth inhibits class mobility. The idea that wealth needs to be taken away from people when they die just so their kids don't get a windfall is ludicrous. More importantly, the big, old money families don't pay estate taxes because they've worked the system enough at this point to avoid it. Estate taxes are a drain on the economy as people spend tens of thousands of dollars to try to avoid paying them, and the people who are hit the hardest are the small to mid-sized family businesses. If you think you're going to tap into Kennedy money by eliminating the estate tax exemption you're crazy.

Yeah, estate taxes are stupid. Only about 1 of every 500 people that die (0.2%) pay it but that number should be closer to 1% given the net worth of american households. (How did the other 0.8% avoid it?) It just gets the rich to do all kinds of complicated things like creating irrevocable life insurance trusts, charitable remainder trusts, qualified personal residence trust, family limited partnerships, etc. My plan is much simpler... Step 1. Convert your money to Bitcoin. Step 2. Email to yourself out of the country. Then when the IRS asks where your money went you can simply answer, "I invested in that crazy, anonymous, decentralized Bitcoin stuff but then lost it all when my computer crashed and the house burnt down. Sorry guys."

Of course, this may put some estate planning attorneys out of business... F*ck them. I am on Cowboy's team.

[Moliere]

One thing that I'll add is that it's very clear these changes won't be permanent since the GOP will have to use the reconciliation trick to get this bill passed (that is, if the Senate is even interested in working with the House). I wish some of this was made permanent and maybe the Dems will step up and participate and vote for it, but given the state of politics today I doubt it gets any bipartisan support. The last thing a Dem Rep needs is to be labeled as helping to give Trump a big political "win", especially right before the election season heats up. I haven't seen much in the way of Democratic reaction to the bill other than the Cali and NY people throwing fits, which I guess they should do since their consituents will lose with this bill.

[Moliere]

Overall, I don't have much problem with your opinions with the exception of the following two items:

Keeping in mind that I see taxes as a way to give incentive for people to act a certain way, the mortgage interest deduction is very important in encouraging home ownership in the long run. Home ownership is important both as a psychological boost in providing a sense of security and seeing the American Dream as attainable, and as an economic boost because people will spend more on their own home than on a home they intend to rent. Interest rates will eventually rise, and when they do this deduction will become crucial in making homes affordable to middle class folks.

Understood. I'm just skeptical that it has that much of an influence on home ownership. A lot of people don't even use the deduction because they don't itemize. It is a great benefit for pepole like me but I'd own a home regardless of the deduction. I'd probably just pay off my home faster. But I definitely see where you are coming from.

We've had this discussion before, and I guess we agree to disagree, but there is no quantitative evidence that generational wealth inhibits class mobility. The idea that wealth needs to be taken away from people when they die just so their kids don't get a windfall is ludicrous. More importantly, the big, old money families don't pay estate taxes because they've worked the system enough at this point to avoid it. Estate taxes are a drain on the economy as people spend tens of thousands of dollars to try to avoid paying them, and the people who are hit the hardest are the small to mid-sized family businesses. If you think you're going to tap into Kennedy money by eliminating the estate tax exemption you're crazy.

Sorry if that comes off condescending. It's late, I'm grumpy, and I should have gone to bed instead of posting this, but I'm posting it anyway.

Totally not condescending as I'll admit that this is a more macroeconomic argument and I'm not really qualified to give an informed opinion on it. I'm just not a big fan of trust fund babies, which is why I'd like the tax expanded in some way to hit them. Not as punishment, but to equalize the playing field a bit. We do differ on this and I respect that.

[happyone]

My take:

Reduces income tax brackets: Overall it's a reduction across the board, which is fine with me. Tax brackets need to either grow with inflation or be adjusted every once in a while and this is one way to do it. It does impact me and reduces my tax bill, so I guess I'm happy.

Nearly doubles the standard deduction: I haven't used the SD in a long, long time so personally I don't care. I do think it's a good thing for many people that have lower incomes. Most people that itemize are in larger income tax brackets so this is a benefit for the lower income earners. Is it a good thing overall? I'm a proponent of everyone paying something, or most people paying something so I'm not a huge fan. I'd prefer a lower tax rate (maybe 2-5%) for those poeple over a higher SD, but whatever.

Eliminates personal exemptions: Not a fan personally or in general. While I don't think taxes should incentivize people to have kids, you also shouldn't be hurt for having a larger family and this one hurts larger families. It might be a wash for me with the lower tax rates, but I like the personal exemptions applied per person/child. I'm sure older people will like this one as will most Americans with 2 or fewer kids.

Expands child tax credit: This is good and so is the increase in the phase out level, which levels should be adjusted every year based on inflation. I also like that the increase is not refundable. A refundable child tax credit is dumb, IMO. This makes up a bit for the loss of the personal exemptions

Eliminates tax exclusion for dependent care assistance accounts: Honestly have no idea on this one. Most publications say this is used mainly by higher income families, so I'm fine with it going away. I like tax-exclusions for things like HSAs or Child Care (not a huge fan of this but I see the benefits), but I think it's been taken a bit overboard and this pull back is a good thing.

Repeals state and local tax deductions, but preserves property tax break: I'm sure my state lobbied hard for the property tax break to stay in. I pay over $10K/year in property taxes so the elimination of that deduction would have hurt me, but it would have really hurt Texas real estate. However, it makes no sense to eliminate state/local tax deductions but keep the property tax deduction. This may continue to draw more people to states that have higher property taxes to make up for the no income tax. So while this helps me, I'm overall not a fan and think the palying field should be evened out among state/local taxes.

Limits deductible mortgage interest: I think I'm with Wuap on this one. I don't mind the full repeal of this deduction. I have a mortgage and find myself disincetntized to pay it down/off due in part to this deduction. I'd rather stick my money in the market and ride that wave because while I pay a bit in mortgage interest, the deduction reduces my effective interest rate on my mortgage. I saw one publication say this would reduce people taking the deduciton to 4% of total filers, mainly due to the increase in the standard deduction but also because the cap would be lwoered to mortgages under $500K. Crazy, but if people aren't really using it, get rid of it. I got a feeling the realtor coalition is going to be ticked abou

Repeals many other deductions: I support this one. Too many random deductions and the thresholds are too high (7.5% of AGI, really?).

401ks not touched: It's crazy this was even considered. This is a huge savings vehicle for middle income families and taking it away would be ludicrous. People move jobs all the time now and having a 401k with a decent limit ($18K in 2017) is a great way to save without the access to pension plans or other outdated retirement type plans.

Repeals the Alternative Minimum Tax: Support. AMT is dumb and needs to go away. If you simplify the deductions, AMT is no longer needed.

Repeals the estate tax: Don't support. I'm a big supporter of the estate tax and think it should be expanded to trust funds and other vehicles used by the rich to stow away money. Generational wealth is one of the problems in the US and inhibits some class mobility. I actually support lowering the threshold to lower than $5mm but finding a way so that small/family businesses aren't impacted (such as family farms/ranches).

Other stuff I wish was in there: I'd prefer to eliminate the automatic withholding by employers and require people to pay taxes by themselves. That would change a lot of the perception of how much is paid. I also support raising the SS tax ceiling, however the ceiling shouldn't be elminated. SS was never meant to provide a luxurious retirement so I wish all thse old people would stop complaining about barely surviing on SS. Um, that's the point of it, to keep you alive. If you want to go on cruises and travel then you should have saved your own money to do that.

Great thoughts Moliere

With the exception on the estate taxes, I really don't have any problems with your reactions. Most of the changes won't affect me anyway - my home is paid off and I only have one kid left that I can take. She will graduate next year, so that will go away also

It might move me into taking the standard deduction though.

[Jeff Lebowski]

My take:

Reduces income tax brackets: Overall it's a reduction across the board, which is fine with me. Tax brackets need to either grow with inflation or be adjusted every once in a while and this is one way to do it. It does impact me and reduces my tax bill, so I guess I'm happy.

Nearly doubles the standard deduction: I haven't used the SD in a long, long time so personally I don't care. I do think it's a good thing for many people that have lower incomes. Most people that itemize are in larger income tax brackets so this is a benefit for the lower income earners. Is it a good thing overall? I'm a proponent of everyone paying something, or most people paying something so I'm not a huge fan. I'd prefer a lower tax rate (maybe 2-5%) for those poeple over a higher SD, but whatever.

Eliminates personal exemptions: Not a fan personally or in general. While I don't think taxes should incentivize people to have kids, you also shouldn't be hurt for having a larger family and this one hurts larger families. It might be a wash for me with the lower tax rates, but I like the personal exemptions applied per person/child. I'm sure older people will like this one as will most Americans with 2 or fewer kids.

Expands child tax credit: This is good and so is the increase in the phase out level, which levels should be adjusted every year based on inflation. I also like that the increase is not refundable. A refundable child tax credit is dumb, IMO. This makes up a bit for the loss of the personal exemptions

Eliminates tax exclusion for dependent care assistance accounts: Honestly have no idea on this one. Most publications say this is used mainly by higher income families, so I'm fine with it going away. I like tax-exclusions for things like HSAs or Child Care (not a huge fan of this but I see the benefits), but I think it's been taken a bit overboard and this pull back is a good thing.

Repeals state and local tax deductions, but preserves property tax break: I'm sure my state lobbied hard for the property tax break to stay in. I pay over $10K/year in property taxes so the elimination of that deduction would have hurt me, but it would have really hurt Texas real estate. However, it makes no sense to eliminate state/local tax deductions but keep the property tax deduction. This may continue to draw more people to states that have higher property taxes to make up for the no income tax. So while this helps me, I'm overall not a fan and think the palying field should be evened out among state/local taxes.

Limits deductible mortgage interest: I think I'm with Wuap on this one. I don't mind the full repeal of this deduction. I have a mortgage and find myself disincetntized to pay it down/off due in part to this deduction. I'd rather stick my money in the market and ride that wave because while I pay a bit in mortgage interest, the deduction reduces my effective interest rate on my mortgage. I saw one publication say this would reduce people taking the deduciton to 4% of total filers, mainly due to the increase in the standard deduction but also because the cap would be lwoered to mortgages under $500K. Crazy, but if people aren't really using it, get rid of it. I got a feeling the realtor coalition is going to be ticked abou

Repeals many other deductions: I support this one. Too many random deductions and the thresholds are too high (7.5% of AGI, really?).

401ks not touched: It's crazy this was even considered. This is a huge savings vehicle for middle income families and taking it away would be ludicrous. People move jobs all the time now and having a 401k with a decent limit ($18K in 2017) is a great way to save without the access to pension plans or other outdated retirement type plans.

Repeals the Alternative Minimum Tax: Support. AMT is dumb and needs to go away. If you simplify the deductions, AMT is no longer needed.

Repeals the estate tax: Don't support. I'm a big supporter of the estate tax and think it should be expanded to trust funds and other vehicles used by the rich to stow away money. Generational wealth is one of the problems in the US and inhibits some class mobility. I actually support lowering the threshold to lower than $5mm but finding a way so that small/family businesses aren't impacted (such as family farms/ranches).

Other stuff I wish was in there: I'd prefer to eliminate the automatic withholding by employers and require people to pay taxes by themselves. That would change a lot of the perception of how much is paid. I also support raising the SS tax ceiling, however the ceiling shouldn't be elminated. SS was never meant to provide a luxurious retirement so I wish all thse old people would stop complaining about barely surviing on SS. Um, that's the point of it, to keep you alive. If you want to go on cruises and travel then you should have saved your own money to do that.

I agree with all of this.

[cowboy]

Overall, I don't have much problem with your opinions with the exception of the following two items:

Limits deductible mortgage interest: I think I'm with Wuap on this one....

Keeping in mind that I see taxes as a way to give incentive for people to act a certain way, the mortgage interest deduction is very important in encouraging home ownership in the long run. Home ownership is important both as a psychological boost in providing a sense of security and seeing the American Dream as attainable, and as an economic boost because people will spend more on their own home than on a home they intend to rent. Interest rates will eventually rise, and when they do this deduction will become crucial in making homes affordable to middle class folks.

Repeals the estate tax: Don't support. I'm a big supporter of the estate tax and think it should be expanded to trust funds and other vehicles used by the rich to stow away money. Generational wealth is one of the problems in the US and inhibits some class mobility. I actually support lowering the threshold to lower than $5mm but finding a way so that small/family businesses aren't impacted (such as family farms/ranches).

We've had this discussion before, and I guess we agree to disagree, but there is no quantitative evidence that generational wealth inhibits class mobility. The idea that wealth needs to be taken away from people when they die just so their kids don't get a windfall is ludicrous. More importantly, the big, old money families don't pay estate taxes because they've worked the system enough at this point to avoid it. Estate taxes are a drain on the economy as people spend tens of thousands of dollars to try to avoid paying them, and the people who are hit the hardest are the small to mid-sized family businesses. If you think you're going to tap into Kennedy money by eliminating the estate tax exemption you're crazy.

Sorry if that comes off condescending. It's late, I'm grumpy, and I should have gone to bed instead of posting this, but I'm posting it anyway.

[Uncle Ted]

Repeals state and local tax deductions, but preserves property tax break: I'm sure my state lobbied hard for the property tax break to stay in. I pay over $10K/year in property taxes so the elimination of that deduction would have hurt me, but it would have really hurt Texas real estate. However, it makes no sense to eliminate state/local tax deductions but keep the property tax deduction. This may continue to draw more people to states that have higher property taxes to make up for the no income tax. So while this helps me, I'm overall not a fan and think the palying field should be evened out among state/local taxes.

I am bummed they are eliminating the sales tax deduction! I used that once or twice when I bought a car or some large ticket item.

Payback is a bitch... I guess this is what the Californians get for voting for Hillary:

GOP House tax bill would deliver blow to California homeowners

House Republicans released a sweeping tax overhaul Thursday that would limit or end many of the most popular tools used to minimize how much Americans owe— particularly in high-cost areas like California -- including lowering the cap on mortgage interest deductions and eliminating write-offs of state income taxes.


The much-anticipated rollout launches a grueling legislative process that will test GOP unity in the coming weeks as the party struggles to deliver one of President’s Trump’s top priorities.


The plan would immediately slash the corporate tax rate to 20% from 35% and streamline individual rates from seven brackets into four.


In addition to ending write-offs of state and local income taxes, mortgage interest deductions would be limited to new loans of no more than $500,000, down from the current $1 million. Deductions for second homes would no longer be allowed. Property tax deductions would be capped at $10,000.
[...]

http://www.latimes.com/politics/la-n...htmlstory.html

Of course, if you ask OG Californians love taxes.