Posted on 10/22/2017 11:44:11 AM PDT by newberger
Tax reform is now the order of the day. Congressional Republicans have been eager all year to rewrite the tax code. Slashing and simplifying taxes is, they believe, the straw that stirs our economic drink. Get this right, they say, and America will enter a new golden age of fast growth.
This might well be true. But the details of their tax proposal will pose many political problems for the GOP. Too many provisions give the impression that the party cares more about helping the well-off than about aiding average Americans and their families.
This is because the plan’s immediate benefits heavily tilt toward corporations and the rich. Large corporations would get more than a 40 percent cut in their tax rates, from 35 percent to 20 percent. Smaller, privately held businesses would see a similar decline, from as high as 39.6 percent to 25 percent. Economists argue about the effect of these changes on the national economy, but the political import is clear: Combined with a proposed cut in the top rate on labor income from 39.6 percent to 35 percent, liberals will enjoy saying that the well-to-do will fare well under the GOP plan.
Whether or not these tax reductions would lead to more jobs, the immediate effect is that the average worker would not fare so well. The plan raises the lowest rate of tax from 10 to 12 percent, meaning some working-class workers will see a slight raise in their tax rates. Middle-income workers will at best see a modest drop in the tax rate they pay, from 15 to 12 percent. Compared with what the wealthy get right away, that’s small beer.
The plan’s authors point to a near doubling of the standard deduction most taxpayers take. However, the plan also eliminates the personal exemption all taxpayers currently take for each member of their household. If you have two or more children, the increase in the standard deduction is smaller than the amount of the exemptions you will lose. Taxes for big families may go up.
Plan authors say they will take care of this by increasing the amount of the child tax credit, but have not provided any guess as to how much that increase will be. That leaves average people wondering whether they will get the tax cut they expect.
Furthermore, the plan does away with the mortgage interest deduction for most taxpayers by eliminating the deduction for state and local taxes. That’s because families only deduct their interest if the total amount of their itemized deductions, including deductions for mortgage interest and state and local taxes, exceeds the amount of the standard deduction. Under the Republican plan, only families paying more than $24,000 a year in mortgage interest and charitable donations, combined, will be able to deduct those expenses from their income taxes. Since most people don’t spend that much on those items, they will have lost their most valuable deduction.
The result: Upper-middle-income families will see their taxes go up. Most people making less than $50,000 a year will see little or no change. The people in the middle don’t have enough information to know if they are winners or losers. That’s not good politics.
Republicans have always suffered from the perception that they care more about the rich than the common man. Their tax plan might help the common man in the long run by increasing investment and business activity. But the current plan looks like a much better deal for the rich than for the average people who put Donald Trump in the White House.
In politics, perception can quickly become reality. Republicans should deal with this problem before it’s too late.
You forget that this also ends the $4050 per person personal exemption. So your standard deduction goes up $12000 and your personal exemptions go down $8100. Add a kid and suddenly you have less in the way of exemptions than you had before.
The World News Group is FAR from being the left :-)
Do you know what your house payments would have to be at 5% interest, to reach $24k in interest payments each year?
$480,000.00 a year. That would be $40,000 a month. I doubt many FReepers will be paying those kind of house payments.
Keep in mind, I used a relatively high (today) rate of interest too. Today’s mortgage interest rates are in the 3% range.
If a person is making $4 thousand a month house payments, that would work out to $48k per year, and $2,400 dollars a year in interest mortgage interest paid.
$24,000 - $2,400 leaves $21,600 surplus in the personal deductions for two people.
I’m not sure how folks are going to get killed here, with higher taxes.
They’re left-wing when they start with such a left-wing style sensational title as “Cadillac-friendly’.
Gee, where have we heard “Cadillac” before?
Oh, that’s right, the extreme left-wingers like Obama claiming good health plans were “Cadillac” plans.
We note the increase in standard deductions and also note the loss of deductions for state and local taxes and the loss of the $4050 personal exemption and the capping of 401k contributions at $2400 and we see that in many cases the net result is an increase in taxable income. As for the lower tax rates, the lowest rate increases from 10% to 12%. So the ultimate impact of this tax scheme will depend on where the other tax brackets kick in and so far nobody is talking about those. So it's hard to just sit back and automatically assume that everyone's taxes are going down.
If you claim a higher number of kids for a deduction, isn’t it the same thing?
I already work at a decent-paying job. If my taxes go up for my current job then they'll also be higher at any other job I get at another company.
When businesses grow - and when they are not chased overseas by high taxes - everyone is better off.
So people keep saying. I don't see where this will discourage companies from moving every job they can overseas. Not as long as the cost of their resources are lower.
Being able to switch jobs if you wish because there are plenty of jobs out there is more valuable, long term, than $500 in taxes.
Correct me if I'm wrong but isn't the President talking about how we currently have the lowest unemployment rate in years? Wouldn't that be an indicator that there already plenty of jobs out there?
The question is, why does the Republican Party have to raise ANYONE’s taxes? Government is too big and spends to much. If they have to “pay for” cuts in business taxes, why not CUT GOVERNMENT instead of raising my taxes?
Cutting business taxes ought to help the economy and provide more jobs. But “paying for them” by raising middle class taxes (through eliminating middle class deductions)? That’s Democrat thinking. The GOP should be cutting EVERYONEs taxes - and paying for it by CUTTING SPENDING!!!!
I will keep my powder dry and wait for the hearings.
Why isn’t the GOP cutting spending to cover the cost of business-tax cuts? Instead, they’re eliminating deductions for the middle class
“the capping of 401k contributions at $2400 “- a rumor started by the investment industry and lobbyists according to the WSJ article cited for that “info”.
There’s so much garbage out on the tax changes. And there is no bill.
Don’t blame people for looking out for themselves but there’s nothing to go on but rumor and innuendo.
And on taxes in general there’s the bizarre, yet prevalent, belief that corporate taxes are not paid by consumers.
Such hidden taxes are bad policy- though great politics: no one complains about taxes they don’t know they’re paying.
When are they going to hold hearing on cutting federal spending? If they did that, they would have to talk about eliminating middle class deductions to pay for business tax cuts
Not much, no. I'm losing deductions for state and local income taxes, property taxes, the $4050 personal deduction, and probably the deduction for any contribution I make to my 401k over $2400. In return I get $6350 increase in the standard deductions. The deductions I lose are far greater than $6500. My taxable income goes up.
Does that make sense to you?
Nope. A deduction reduces your tax burden on your income. A child tax credit sends money above what you might owe in taxes.
The case that I read about didn’t go into too much detail.
The scam part, the assumption was the kids living in Mexico were anchor babies. Possible they were nonexistent.
Has anyone denied that it's under consideration? Trump? Ryan? McConnell? Anyone?
There’s so much garbage out on the tax changes. And there is no bill. Don’t blame people for looking out for themselves but there’s nothing to go on but rumor and innuendo
No there is no bill. But that doesn't stop everyone from claiming that it's going to be a big tax cut for people like me. All I can go on is what is known and what is being considered. And so far it's not looking good.
And on taxes in general there’s the bizarre, yet prevalent, belief that corporate taxes are not paid by consumers.
There also seems to be a bizarre, yet prevalent, belief that if you cut corporate taxes then those savings will be passed along to consumers. Cut corporate taxes and we will pay the same as we're paying now.
No
And there isn’t even an actual bill yet.
Hang in there.
Because screwing the middle-class is easier than cutting spending.
Thanks for the mention/correction.
So far, all this sounds like a scam by the media.
None of this is in a bill yet.
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