Posted on 01/07/2018 6:04:57 AM PST by Kaslin
Debating public policy is fair game. Whether or not we should build a wall on our Southern border will have diverse perspectives and warrants discussion. In the new tax bill whether Congress should have eliminated the provision for carried interest is a reasonable discussion. Demagoguing the issue and outright lying to the American people about the bill that is now law is plainly contemptible.
Demagoguing may be a means to score political points, but punishment should be meted out by the voters. Minority Leader Nancy Pelosi (D-CA) has made many negative comments, calling the bill “monumental, brazen theft from the American middle class.” She goes on to state the bill “raises taxes on 86 million middle-class households.” Yes, that is correct when (and if) some of the provisions phase out eight years from now – two presidential elections and four Congresses from now when most likely Ms. Pelosi will be retired as an 85-year-old.
In the meantime, even the left of center Brookings Institute’s Tax Policy Center states 80% of Americans will receive a significant tax cut.
How that will happen pops right out if you look at the tax bill. For most Americans, because Congress raised the standard deduction significantly, they will also be the ones for which the words “tax simplification” will have real meaning. How this will happen:
Let’s say you are truly a middle-class American. You will no longer have personal exemptions, but the standard deduction you will have is now $3,200 more than the prior standard deduction and personal exemption for you and your spouse combined. Combine that with reduced tax rates and you are a tax winner.
Let’s say you have taxable income of $70,000. On about $50,000, the tax rate was reduced by 3%.That means a $1,500 tax reduction. Then because your standard deduction reduced your income by $3,200, you save another $96 bringing you to a savings of $1,596.
Let’s say you are the model American family and have two kids, aged 10 and 14. You would lose the personal exemptions for them costing you $1,215. But now your child tax credit goes from $1,000 to $2,000 per kid. That means an extra $785 in your pocket added to the $1,596, which means a tax savings of about $2,381. And if your tax is wiped out by the tax credits, it is fully refundable (the government writes you a check) for up to $1,400 per child.
So, let’s review. You live in Kansas and both you and your spouse work. You bring in about $95,000 from your two incomes and you have two kids. You will have about $2,400 less to pay in taxes in 2018, not to mention a much simpler tax return to file saving you hours of time and a fee from H & R Block to file it.
That seems like middle class tax relief to me. Why would Senator Bernie Sanders (Socialist-VT) describe it as “a disaster,” “one of the great robberies” and a “massive attack on the middle-class”? It will be a rare example of a middle-class person with or without children not having a tax savings from this bill. I cannot figure one. As for it being “one of the great robberies” – that can only be that Senator Sanders thinks all your earnings belong to the government and the tax system only allows you to keep some of that money through the goodness of our elected officials. I have not found what specifically Mr. Sanders would want to do to improve the bill for the middle-class. He just attacks the plan without explanation of how he would enhance the plan.
As for higher-earners, the ones in no- or low-tax states will do well under this bill, but most live in high-tax states. Part of the reason they earn more is to offset the high cost of living in places like San Francisco, New York and Chicago which includes the very high taxes in the states where they live that are virtually no longer deductible.
My colleagues and I have begun to work through our high-earner clients and the various scenarios they live under. Tax-wise they are screwed and tattooed. There are some provisions in the law that will possibly help them, but not many.
If you work for Disney and make a $1,000,000 salary you are going to pay more. Your mortgage interest will be potentially reduced, your excessive property and state taxes will be limited to $10,000 and your employee business expenses will no longer be deductible. Your tickets for Lakers or Dodgers games will no longer be deductible. Your $5,000 contribution to USC for those choice football game tickets (no longer deductible) will no longer be treated as a charitable contribution. Their top tax rate goes down 2.6%, but that does not nearly offset all the new taxable income.
Tell me how people like this make off like bandits?
If this tax plan works, this is what will happen:
1. Because we now have competitive corporate tax rates with the rest of the world, many positive changes will occur. Our companies will stop moving to Ireland with their 12.5% tax rate. They will bring billions back into the United States remembering we are the center of the capitalist world and have the best workers in the world. Companies in England, France or Kuwait will open or expand operations in the U.S. creating more jobs here because we will no longer have the highest corporate tax rates in the world.
2. More Americans will be working and making more money and thus paying more taxes. Remember these are tax rate reductions; not tax reductions. If the government collects more money, then taxes have gone up. After the tax rate cuts of 2002, in 2006 the federal government was collecting $700 billion more per year.
3. Because the economy is doing better more people will be working and less will be on our various welfare programs helping reduce government outlays at all levels.
4. The highly-successful people will more than offset the increased taxes they will pay because they will make lots more money and pay even more taxes.
I suggest we all take a deep breath and stop the fighting. This negativism coming from the Democrats needs to stop. The bill is passed and the only way they can win this argument is by making the points outlined above not come to fruition. That will hurt every American, including the middle class they state they have such high concern for protecting.
We should all be cheering for Americans to succeed, not telling them they are going to fail. Two years from now you can tell me I was wrong, if I am, but don’t try to make me wrong. That is just unacceptable demagoguery.
Many of us feel the same way. Some posters around here have been relentless for months now about this subject. Their goal is to badger, bully, and pummel anyone who dares to state that not all is chocolate rainbows and magic unicorns with this tax law.
So two things:
1. No, you are not crazy
2. You are not alone in your conclusions
NO ONE should be getting an increase.
Somehow the Bannon-style populist drivel caught on and became popular.
I think a 25% corporate tax rate with everyone getting a tax cut would have been acceptable. When did Republicans become Democrats in wanting to stick it to the top 20% of earners?
Wow, what a lot of drama to respond to.
No, YOU are whining on thread after thread, posting the same thing over and over.
I, on the other hand, accept reality gracefully. And can look at the big picture, not just how it affects me personally. Admit it - if this didn’t affect you, would couldn’t care less about those ‘millions and millions’.
It’s not double-taxation. It’s like with property taxes - there is a percentage for schools, a percentage for fire, etc. After the percentage for schools is calculated, the base amount or principle, isn’t reduced to calculate the fire tax. The state income tax is in addition to the fed tax.
Why are you retired and living in NY? The NY state, local and real estate taxes were a huge deduction. Those days are gone. Democrats hardest hit.
IMO you should consider moving to a no-income tax state like FL, TX or WA and use the standard deduction. You’ll probably still pay more than you did with the NY state tax deductions but the savings in state taxes should make up for it.
The SALT deduction was a huge sweetheart deal for Blue states to offset their high state taxes with reduced federal taxes. Those state politicians’ greed and disregard for the citizens will be exposed.
I am a resident of Connecticut. If you imagine I can be driven out of the state where my family has lived since the 17th century by a bunch of liberal Democrats, you are greatly mistaken.
And the Dems aren’t so liberal any more, after receiving their latest property tax bill. I suspect the government here will be singing a different tune in the future.
DEFINITION: “Double taxation is a taxation principle referring to income taxes paid twice on the same source of earned income.”
And so you have told me there is new standard in your book: we are not allowed to speak out about issues that affect us personally.
So people in border states that are affected by illegal immigration and how it is destroying their emergency rooms and hospitals cannot longer speak out about it. People that have sky high premiums because of Obamacare can no longer speak out about it because it affects them personally. People who are affected by high crime cannot speak out about it because it affects them personally.
Sorry, I reject that.
state income tax is not the same as federal, it is meant for entirely different purposes and collected and administered by entirely different agencies
like the property tax example i already gave.
income is taxed federally, locally, and FICA tax. i don’t see you complaining that the FICA tax is a double tax. it’s no different than a state tax.
i didn’t say you couldn’t speak of anything. i said you are so involved in this because you will pay more in taxes. you wouldn’t say anything if that wasn’t true. it is clouding your judgement. the big picture is that companies will return, the economy will grow, most will benefit in ways not related to their taxes.
in order to pass this with a simple majority, the deficit had to be less than $1.5 trillion. I gather that is why there were tax increases in some areas. Perhaps if you try to look at this from a logical rational perspective looking at the big picture, you’ll get some peace. it is done. you can’t change it.
you can move to a better state though. i did, took off without a job to a place where i knew not a soul. and escaping Mexifornia was the best decision of my life (after getting my dog).
Fair enough post. We can agree to disagree.
Trump declared swamp draining over? I missed that, if true that is disheartening brews.
ok, handshake then ((()))
I really do hope it works out well for you. That maybe you get some income gain because of investments or something else that will offset the extra taxes. Or better yet you get to move to a conservative state! I think California is toast and I would like All the conservatives to get out of there, and that includes my son.
A couple of years ago Congress changed the law such that money taken from your IRA but paid directly to a charity from your IRA as a charitable donation does not count as taxable income. This had an effect similar to itemizing your charitable donations (but not your state taxes) without forfeiting your access to the standard deduction.Is that provision unchanged? The increase in the standard deduction makes exploitation of that provision more certain to be valuable - if it is still available in 2018.
Many thanks CottonBall.
I don’t know but I think charitable donations are still deductible in a standard return. I use TaxAct Online and I recall their Q&A has the charitable contributions deduction.
Now, just how do you ‘exploit’ the charitable contributions deduction?
Well, it’s funny to able to take the standard deduction and “deduct" your charitable donations. Which not having to declare as income money donated from an IRA effectively allows you to do.Seeing that that is the law, I have made use of it to minimize my tax liability for the past year and will this year (2017 tax year). And if that provision is unaltered, I’ll do it in the 2018 tax year as well. If it has been rescinded, the tax cut law will be a little less helpful to me personally than otherwise. That’s all. I suppose the option of donating stock to avoid capital gains taxation would still be an option . . .
He didn't say that. Newt Gingrich said that for some reason, but President Trump stated that that was wrong.
I’m sure you could do both an IRA and a stock charitable donation. I just don’t see how it would save money since you’re losing all the principle of the donations.
I.e., if you donated 20K to a charity to reduce income by 20K you may have lower taxes but you’ve lost the 20K which is much more than the tax you would have paid on that 20K.
Now, setting up your wife or a public trust as a charity -that might work. But I’d guess there are rules about that and getting around it all would be complicated.
There are tons of Capital Advisers on the radio here in Tampa. The competition is stiff so I assume they are the very good at what they do. Graham Capital Advisers and Walser Wealth are prominent. Graham does 30 second wealth management segments on the radio which are very insightful.
http://grahamcapitaladvisors.com
You are looking at it as if I were thinking to profit by contributing. No.The only issue is, given that I’m going to give, how much tax will I pay?
The new increased Standard Deduction is calculated to prevent people from itemizing. The higher the Standard Deduction, the fewer people will find it useful to itemize. The very word “itemize” implies that the “standard” deduction is a proxy for listing out the things which you should not be taxed for.
The recent provision for making it unnecesary to declare as income charitable contributions from an IRA - money which was never taxed as income, when earned - is in that sense a loophole. It gives the same benefit as itemizing those contributions, but still allows you to use the standard deduction as well.
The upshot is that raising the Standard Deduction helps everyone - but it would have been logical when doing so to have eliminated my “loophole” in the same law. I won’t protest if that was done - but the fact is that it would “gore my ox” a little.
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