Tax Plan Is a Cut for Everyone

Whenever I'm asked if the Trump tax cut is for the rich, I say yes. It is a tax cut for the rich. It is a tax cut for the middle class. It is a tax cut for small businesses. It is a tax cut for the Fortune 100. If you pay federal income taxes, you will, in almost all cases, be getting more take-home pay come Jan. 1.

One of the ironies of the left's "these are tax cuts for the rich" mantra is that many upper-income people I know in states such as California, New Jersey, and New York complain to me they are getting a sizable tax increase. The lower income-tax rates don't compensate for the loss of the state and local tax deductions.

Well, yes, under the Trump tax plan we are no longer going to subsidize big government in blue states. Now those who choose to live in blue states are going to have to join with their neighbors, collect their pitchforks and demand tax and spending cuts from city hall and the state capital.

Here's some advice to blue state pols: Pare the hyper-extravagant pensions, and stop paying your government employees 30 percent more than comparable private-sector workers get.

Liberals from blue states argue that red states tend to get more money from the feds and pay less in taxes. But here again, blue state voters are the ones responsible for these inequities. Blue staters tend to send liberal politicians to office, who then vote for bigger federal spending -- even though a greater share of the money goes to the red states. Maybe somebody needs to write a book called: "What's the Matter With Massachusetts."

What is not true is that the rich get all the benefits of the tax cut and middle-income families pay more.

CATO scholar Chris Edwards recently put the lie to that claim. He examined the impact of the tax bill on the average tax filer in every income group with an income above $40,000. He didn't include people who make less than that because very few in that income range have any income tax liability -- and you can't cut taxes on people who don't pay taxes.

Edwards' remarkable analysis showed that as family income levels go up, the percentage reduction in tax burden goes down: Lower-middle-class people -- who make between $40,000 and $50,000 a year -- will see a 46 percent reduction in taxes paid; people who make more than $1 million will see roughly a seven percent reduction in taxes (again, the exact rate depends on what state they live in).

By the way, the left also leaves out another impact of the tax cut that helps the middle class: a higher stock market. Some 54 million Americans have 401(k) plans. At least another 40 million have IRAs or pension plans. Where do you think that money is invested? Americans should look at their 401(k) accounts right now. They are surging in value in anticipation of the tax cut.

This has contributed to a surge of economic optimism and Christmas shopping and spending. You want to kill the economy -- and Christmas? Follow Chuck Schumer and Nancy Pelosi's advice and kill the tax cut.

That's not likely to happen. There is a high likelihood this tax cut will be enacted before Christmas. My friend Arthur Laffer says that he hopes taxes go up for everyone next year -- because Americans are going to be making a lot more money as prosperity spreads to every state. Talk about a happy New Year.

” Just to be clear, you can still deduct medical expenses (I think it is being discussed as anything over 7.5% of AGI (current it’s anything over 10% of AGI).”

NO, the current deductible medical expense amount is anything over 10% of the AGI, but 7.5% if you are over 65/70? i think the proposed senate tax bill keeps the medical expense deduction, but the house bill eliminates it.

“The problem is most retirees are not going to hit the standard deduction at $24K, so those excess medical expenses are effectively not a write-off any more. “

NOT QUITE SO.
the standard deduction is being not quite doubled [for individuals, it would go from $6,350 to $12,000, and for married joint filers, it raises that deduction from $12,700 to $24,000], but then they are eliminating the individual personal exemptions [of $4,050 per person] for yourself, your spouse and your dependents; thereby, reducing the doubled standard deductions real net worth to $7,950 for singles [a real net increase of $1,600 from existing std deduction] and to $15,900 for joint filers [a real net increase of $3,900 from the current std deduction]. A couple with 2 children will have their $24,000 doubled standard deduction reduced by $16,200 for a real net reduction of $7,800. so they give with one hand but take away with the other. in addition, they are eliminating the extra deduction for those over 65 or blind.

also, don’t forget that if you take the standard deduction, you cannot then itemize; therefore, giving up the normal deductions for medical expenses, long term care insurance expenses, state and local taxes, property taxes [under the senate bill], mortgage interest deduction limits, student loan interest deductions, moving expenses, alimony, dependent care assistance accounts, casualty and theft losses, unreimbursed job expenses and tax preparation fees.

more details:

further details about this “wonderful” tax grab:
Exclusions and exemptions. The measure would repeal personal and dependency exemptions (which is $4,050 per individual in 2017), exclusions for employee achievement awards, employer education assistance, qualified tuition programs, dependent care assistance, qualified moving reimbursements, and adoption assistance. Contribution to Coverdell education savings accounts would be barred, but funds in existing accounts could be rolled over to 529 plans.

Deductions.
Certain deductions from gross income as well as itemized deductions would be eliminated. Deductions from gross income set to be axed include the alimony deduction (for divorce or separation agreements entered into after Dec. 31, 2017, student loan interest (although the Senate version would retain this deduction), interest on U.S. savings bonds redeemed for higher education, the moving expense deduction, the deduction for contributions to Archer medical savings accounts, out-of-pocket educator expenses, and expenses of performing artists and certain government officials.

Itemized deductions on the chopping block include the medical expense deduction, state and local income or sales taxes, the casualty and theft loss deduction (except for casualty losses in federally-declared disaster areas), and miscellaneous itemized deductions for tax return preparation and unreimbursed employee business expenses.

Tax credits.
The bill would repeal the credit for the elderly and permanently disabled, the credit for mortgage certificates, and the credit for plug-in electric vehicles. The bill would eliminate the lifetime learning credit by consolidating it into the American opportunity credit. The credit would be available for five years of higher education (instead of four years), but the amount in the fifth year would half the usual maximum (including the amount eligible for the 40 percent refundable portion of the credit).

Now look at its impact on the economic strata of taxpayers to see who benefits the most:

“...the highest-income taxpayers (0.1 percent of the population, or those with incomes over $3.7 million in 2016 dollars) would experience an average tax cut of nearly $1.1 million, over 14 percent of after-tax income. Households in the middle fifth of the income distribution would receive an average tax cut of $ 1,010, or 1.8 percent of after-tax income, while the poorest fifth of households would see their taxes go down an average of $110, or 0.8 percent of their after-tax income.”

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