[RD] Getting SALTy

[BvBPL]

With Republicans and Democrats racing to destroy the middle class, the GOP has unleashed a new weapon that could spell the end of the age-long conflict. The current tax plan would eliminate the federal income tax deduction for state and local taxes paid. That plan is backed by all senate Republicans who say they need to eliminate the deduction (ie raise taxes) to generate enough income to lower taxes. Those lower taxes will predominately benefit the wealthy whereas the SALT (state and local taxes) deduction benefits primarily the middle class (the wealthy don’t get the SALT deduction because of the alternative minimum and the poor pay way less in state taxes).

Contrast the SALT deduction with the property tax deduction, which is going to stay. The rich are the most likely to benefit from the property tax deduction, and, as home owner falls, the middle class is less able to benefit from that deduction.

Removing the SALT deduction is literally robbing middle class Peter to pay rich Paul.

Republicans will tell you that the SALT deduction unfairly benefits parties living in high-tax states like New York and California. They aren’t totally wrong, 20% of the SALT deduction goes to New York and California. However, they rarely point out that New York and California make up 22% of the national GDP and both give more in taxes to the federal government than receive in disbursements.

Not since Clinton told us that ending welfare as we know it and establishing mandatory minimums were the ways to help the poor has such a ridiculous assault been placed upon a class of Americans.

 

[Perfection]

First destabilizing the individual insurance market now this. Trump seems determinined to try to screw me over.

Get impeached already.

 

[JollyRoger]

Property tax is a state and local tax. It is more Red Statety than Blue Statety, thus why the Republicans have put it back in (they were going to eliminate it).

Claiming that middle class taxpayers won't get hurt because of the doubling of the standard deduction ignores the elimination of the personal exemptions (which essentially wipes out the doubling of the standard deduction for a couple with one child and is worse for a couple with two children). Plus, the lowest bracket has been raised. The real test of how much the middle class is going to have their taxes raised is when the brackets are finally released. I have a feeling the 25% bracket is going to start at a low enough amount of income to raise the taxes on a significant portion of the population.

 

[civvver]

Property tax is a state and local tax. It is more Red Statety than Blue Statety, thus why the Republicans have put it back in (they were going to eliminate it).

Claiming that middle class taxpayers won't get hurt because of the doubling of the standard deduction ignores the elimination of the personal exemptions (which essentially wipes out the doubling of the standard deduction for a couple with one child and is worse for a couple with two children). Plus, the lowest bracket has been raised. The real test of how much the middle class is going to have their taxes raised is when the brackets are finally released. I have a feeling the 25% bracket is going to start at a low enough amount of income to raise the taxes on a significant portion of the population.

Yes unfortunately there's too many unknowns to make any realistic assessment. Personal exemptions are a huge deduction for anyone with kids, but they're also talking about increasing the child tax credit which could offset it, just like increasing the standard deduction increases could offset the loss of state and property tax deductions.

https://www.vox.com/identities/2017/10/3/16381234/republican-tax-plan-child-tax-credit

My guess is neither one will, but it's impossible to say without numbers.

 

[rah]

It will be interesting to see the actual specifics when they finally come out. Especially if when applied will lower the President's tax liability. While the middle class's liability is raised.
That will be a hard one to spin. I'm sure most state's Senators will be in a similar boat, and someone will be more than happy to run the numbers, especially where candidates supplied their returns.

 

[JollyRoger]

Yes unfortunately there's too many unknowns to make any realistic assessment. Personal exemptions are a huge deduction for anyone with kids, but they're also talking about increasing the child tax credit which could offset it, just like increasing the standard deduction increases could offset the loss of state and property tax deductions.

https://www.vox.com/identities/2017/10/3/16381234/republican-tax-plan-child-tax-credit

My guess is neither one will, but it's impossible to say without numbers.

I can't believe they will increase the tax credit enough from where it is to offset the loss of exemptions. It's all snake oil. They can thing they can say "we are doubling your standard deduction and increasing your child tax credit by $1,000 bucks" and the general public will ignore everything they are losing.

Ivanka rolled out that the compressing of the brackets makes a tax return easier to do, so is good for the middle class. It does not really simplify the return as the tables are simple enough no matter how many brackets you have. They are relying on people buying their spin and believing the number crunchers with legitimate calculations to be fake news.

 

[rah]

This is not like the ACA were only a small percentage of people are impacted. This is almost everyone. It will be harder to spin.
But yeah, many are just plain stupid.

 

[BvBPL]

Not only will this affect everyone, but it will affect them in a very different way from most tax adjustments. Raising or lowering one's taxes that are deducted from one's paycheck has a marginal day-to-day effect upon people because the taxes are deducted prior to receipt of the paycheck. However, playing with end of year deductions means people actually do notice it when they are doing their taxes annually.

 

[civvver]

I can't believe they will increase the tax credit enough from where it is to offset the loss of exemptions. It's all snake oil. They can thing they can say "we are doubling your standard deduction and increasing your child tax credit by $1,000 bucks" and the general public will ignore everything they are losing.

Ivanka rolled out that the compressing of the brackets makes a tax return easier to do, so is good for the middle class. It does not really simplify the return as the tables are simple enough no matter how many brackets you have. They are relying on people buying their spin and believing the number crunchers with legitimate calculations to be fake news.

Yes it probably won't. I'm in the 25% bracket so two kids is worth about 2k in refunds. My guess is most people fall somewhere similar. But again it's hard to say without the brackets.

Saying oh we're simplifying the tax returns as the reason for the brackets is just stupid. Everyone has software now to do it for you. The brackets literally do not matter in terms of complexity. Deductions are what's complex for most people. So I guess making everyone take the standard does simplify things a lot, but still it only takes me around 2-3 hours total to do my taxes, 1-2 to gather the forms I need and 1-2 to enter it into turbo tax. It's well worth getting an extra thousand bucks or so from itemizing.

If they want to simplify taxes they need to flat tax rich people's investments. All that carried over interest, wash sales, etc that's what takes time.

 

[BvBPL]

If they actually wanted to simplify things for the tax payers then the IRS would take all wage and 1099 information submitted to it for each payee, determine the taxability or credit for each tax payer, and then bill or refund the tax payer as required. That’d be the actual way to simplify taxes for the tax payer. Never mind doing taxes on a postcard, that way one wouldn’t have to do it at all.

But no one in Washington wants that because it would be a huge drain of funds. Every year, millions of people do not claim the refund to which they are fully entitled; those unclaimed credits are retained by the federal coffers. a system where a competent tax authority issued proactive refunds would be paying out gads more than it currently does.

 

[civvver]

If they actually wanted to simplify things for the tax payers then the IRS would take all wage and 1099 information submitted to it for each payee, determine the taxability or credit for each tax payer, and then bill or refund the tax payer as required. That’d be the actual way to simplify taxes for the tax payer. Never mind doing taxes on a postcard, that way one wouldn’t have to do it at all.

But no one in Washington wants that because it would be a huge drain of funds. Every year, millions of people do not claim the refund to which they are fully entitled; those unclaimed credits are retained by the federal coffers. a system where a competent tax authority issued proactive refunds would be paying out gads more than it currently does.

I have heard something like a billion dollars goes unclaimed every year. Still a billion in the grand scheme of a 4.1 trillion dollar budget seems pretty small. So that may be a reason, but I doubt it's the primary concern.

Does the IRS have all of your taxable information? Not everything is reported on a 1099, like small charitable contributions. I know for stock sales they used to as recently as a few years ago only report the sales, not the cost basis, so if you didn't manually report your cost basis it looked like your stock sales were 100% gains.

Likely they don't want to do the work involved. It's probably easier to just audit a few returns than file everyone's.

 

[BvBPL]

Does the IRS have all of your taxable information? Not everything is reported on a 1099, like small charitable contributions. I know for stock sales they used to as recently as a few years ago only report the sales, not the cost basis, so if you didn't manually report your cost basis it looked like your stock sales were 100% gains.

You’re right that the IRS does not receive all of a taxpayer’s necessary information through mandated information reporting. However, the IRS gets a very, very large portion of the information that would be necessary to perform the tax calculation on its side. Information returns could easily be amended to include things like cost-basis reporting, thereby closing gaps. Furthermore, taxpayers could be required to issue something like information returns for taxpayer-specific deduction or credit items (like charitable deductions) and/or the scope of information returns could be broadened.

In case of IRS error, a taxpayer could submit an appeal or counter-return of some type.

That wouldn’t necessarily be a 100% perfect system, but the present one is certainly far from perfect itself.

The point being that if Washington DC actually wanted to make the tax system simple for the tax payer, simple in absolute terms, it could do so.

Likely they don't want to do the work involved. It's probably easier to just audit a few returns than file everyone's.

Of course it is easier for the IRS this way, but the IRS doesn't have any say over it. To change the tax system to something like what I described above would take an act of Congress. The ease for the IRS is largely irrelevant. Congress just isn't interested in it.

 

[civvver]

I don't think it's solely cus of money though cus it's a drop in the bucket. It probably has to do with lobbyists and their clients wanting to cheat on their returns or something.

 

[BvBPL]

There’s a bunch of reason it hasn’t happened. I’m less concerned about why it hasn’t happened and more using it as a point to illustrate the doublespeak in the GOP tax plan.

 

[JollyRoger]

Trump wants to name the bill the Cut Cut Cut Act

I guess that stands for cut his income taxes, cut his estate taxes, and cut his business taxes.

Or cut exemptions, cut deductions, and cut credits for everyone else.

 

[civvver]

The brackets are out, it looks like it is a modest cut across the board. The 12% bracket is huge. For married filers it's 0-90k.

http://www.businessinsider.com/trump-gop-tax-reform-plan-bill-text-details-rate-2017-10

They aren't allowing state income taxes to be deducted but are allowing property taxes up to 10k and interest on mortgages under 500k mortgage value. But the standard deduction is so much larger now it will be pretty hard to claim those.

Personal exemptions are gone but the child credit is increased from 1k to 1600 per child.

Assume a married couple with 2 kids taking standard deductions who makes 100k. Old rules they would deduct 28900 in exemptions to get to 71,100. Taxes paid would be 9732 but they would get a credit of 2k and pay 7732.

New rules, 24k deduction to get to 76000. Taxes would be 9120 but credit of 3200 to get to 5920. That's 1812 less, a pretty big break of about 23% on their taxes paid.

For families at the lower end it's much less dramatic because they pay very little in taxes to begin with. Same family at 50k income- old plan taxes 21,100 income for 2232 in taxes, minus 2k in child credits = 232 taxes paid. New plan is 26k in taxable income, 3120 in taxes paid, minus 3200 in child credits = negative 80 dollars which will get paid as a credit because it's a credit not a deduction. So the difference is over 100% but only ~300 swing in real dollars.

So it looks like they kept their word after all. I'll have to run my 2016 taxes through because I itemized but I remember I barely itemize, I think I have like 14k in itemized deductions vs a ~12k standard.

I'm really not sure who in the middle to upper middle is hurt by this unless you have a ton of itemized deductions.

 

[metalhead]

They want to scrap the Alternative Minimum Tax and the Estate Tax, so that Trump can pay millions less in taxes every year, and give his company to his kids tax-free. To give some middle-class taxpayers a whopping $1,000 back on their taxes, and raise taxes on millions of people above the median income - who already struggle in high tax, high cost of living areas. I mean, good luck selling that I guess?

Oh, and they want to do away with deductions for health care expenses. Think the AARP is going to be supportive of that?

Anybody know if the Democrats are ever going to come up with a plan? Preferably one that includes a modest UBI which gives $5,000 or more back to working families? The bottom 40% pay no income taxes, so without refundable tax credits that essentially give back their payroll taxes, they get nothing from this.

The point being that if Washington DC actually wanted to make the tax system simple for the tax payer, simple in absolute terms, it could do so.

They already did that. A majority of taxpayers take the standard deduction. If you rent, you can do so pretty much without even thinking about it as the standard deduction is hard to exceed without having both mortgage interest and property taxes to deduct. If you do have to think about it, you have to do the terribly long step of adding up your mortgage interest and property taxes and seeing if it gets you in the ballpark of the standard deduction.

Half the country needs to spend about 10 minutes on their tax returns.

 

[Lexicus]

They want to scrap the Alternative Minimum Tax and the Estate Tax, so that Trump can pay millions less in taxes every year, and give his company to his kids tax-free. To give some middle-class taxpayers a whopping $1,000 back on their taxes, and raise taxes on millions of people above the median income - who already struggle in high tax, high cost of living areas. I mean, good luck selling that I guess?

Anybody know if the Democrats are ever going to come up with a plan? Preferably one that includes a modest UBI which gives $5,000 or more back to working families? The bottom 40% pay no income taxes, so without refundable tax credits that essentially give back their payroll taxes, they get essentially nothing from this.



They already did that. A majority of taxpayers take the standard deduction. If you rent, you can do so pretty much without even thinking about it as the standard deduction is hard to exceed without having both mortgage interest and property taxes to deduct. Half the country needs to spend about 10 minutes on their tax returns.

All I know is I'm not going to be able to pay rent if they keep taking more money out of my check. It pisses me off because they could take a third of Bill Gates' wealth instead of a third of the income of thousands of people like me.

 

[BvBPL]

The harm is in the relative burden of the taxation falling more upon the middle and lower class than upon the wealthy. When things like the property tax and mortgage interest rate deductions remain, that is only to the benefit of homeowners who are, generally, more wealthy than non-homeowners. Similarly, reducing the SALT deduction is largely to the benefit of the middle and lower class because the wealthy are substantially more likely to have to pay the alternative minimum which doesn’t permit a SALT deduction.

Never you mind just how the deductions that remained and those that were done away with were targeted towards specific demographics.

They already did that. A majority of taxpayers take the standard deduction. If you rent, you can do so pretty much without even thinking about it as the standard deduction is hard to exceed without having both mortgage interest and property taxes to deduct. If you do have to think about it, you have to do the terribly long step of adding up your mortgage interest and property taxes and seeing if it gets you in the ballpark of the standard deduction.

Half the country needs to spend about 10 minutes on their tax returns.

Well, yeah. The nonsense about the GOP simplifying the experiencing of doing one's taxes is just that, nonsense.

 

[civvver]

They want to scrap the Alternative Minimum Tax and the Estate Tax, so that Trump can pay millions less in taxes every year, and give his company to his kids tax-free. To give some middle-class taxpayers a whopping $1,000 back on their taxes, and raise taxes on millions of people above the median income - who already struggle in high tax, high cost of living areas. I mean, good luck selling that I guess?

Oh, and they want to do away with deductions for health care expenses. Think the AARP is going to be supportive of that?

Anybody know if the Democrats are ever going to come up with a plan? Preferably one that includes a modest UBI which gives $5,000 or more back to working families? The bottom 40% pay no income taxes, so without refundable tax credits that essentially give back their payroll taxes, they get nothing from this.

The people saying that it benefits trump so much are cherry picking a couple very specific tax returns where he wrote off a ton of losses. And idk why anyone cares about the estate tax. Your income and investments are already taxed as you build your estate, it's just a wealth tax that kicks in only when you die. But many support wealth taxes so I suppose that answers my own question.

Also no, this doesn't raise taxes on millions struggling in high tax areas. It might raise taxes a little on san francisians who live in million dollar houses in the most expensive area in the country. But do you know why they live there? Cus they have extremely high paying tech jobs.

I mean just do a little math and it's not that much of an increase. Say you make 300k as a married couple, no kids, million dollar home with an 800k, 30yr, 4% mortgage, the first year your interest is 32k, property tax is probably around 15k, state income tax in CA is high probably like 20k there. With personal exemptions and those items you are taxing 225k. Old brackets you pay around 50k in federal taxes. Taking standard deduction with new brackets you pay 59k. But that's only the first year of the loan when interest is highest. It drops every year and your deductions drop every year as well. If you want to argue we should keep subsidizing home owners in nyc and San Francisco fine but I'd much rather give 48 other states and many times the people a refund.

All I know is I'm not going to be able to pay rent if they keep taking more money out of my check. It pisses me off because they could take a third of Bill Gates' wealth instead of a third of the income of thousands of people like me.

I don't know how much you make but if you rent there's no way your taxes are going up unless you have like massive charitable contributions or something. If anything they should go down a bit.