Tax Rates

[Firethorn]

On first pass this may drop me into the 25% bracket.
Maybe not so great for me.

Uh, Remember that tax rates are marginal.  You pay the lower interest rates on the lower portions of income.

You wouldn't pay 25% on everything if you enter that bracket.

Doubling the standard deduction and eliminating a few tax deductions will mean vast swaths of people will take the deduction rather than itemize, a net savings for everybody because it's drastically less paper.

I like the idea of capping the home mortgage deduction, should actually put some downward pressure on home prices to be $500k or less.  

[zahc]

The mortgage deduction is a blatant handout, not so much to We the People as to the banks. It amounts to an interest rate subsidy. I think it needs to go, but I will be surprised if it does. The banks are very powerful.

[Ben]

Well they have restored the adoption tax credit, but still nothing on health care deductions. Dammit. Like Scout, I want medical expenses deductible from the first dollar.

https://twitchy.com/samj-3930/2017/11/09/yes-gop-changes-tax-reform-bill-to-include-restoration-of-adoption-tax-credit/

[charby]

Well they have restored the adoption tax credit, but still nothing on health care deductions. Dammit. Like Scout, I want medical expenses deductible from the first dollar.

https://twitchy.com/samj-3930/2017/11/09/yes-gop-changes-tax-reform-bill-to-include-restoration-of-adoption-tax-credit/

Also apparently graduate students on assistantships with tuition wavers are pitching a fit too.

[Angel Eyes]

[MillCreek]

https://www.washingtonpost.com/business/economy/i-dont-feel-wealthy-the-upper-middle-class-is-worried-about-paying-for-the-tax-overhaul/2017/11/09/a5cf1acc-c55e-11e7-aae0-cb18a8c29c65_story.html?utm_term=.48b39b3f9681

I guess that we are in the upper middle class bracket, so I will be interested to see the impact on us.

[RevDisk]

That's not new. Dems have fought to make sure folks under X pay next to nothing in income taxes (or make money off income tax return) and Dems/Repubs have fought to make sure plenty of tax loopholes exist if you make a couple mill. If you make more than $50k, but less than a million or whatnot, you're the one shouldering the load.

[charby]

Sounds like this isn't going to happen, Senate and House are having different ideas.

[RocketMan]

Sounds like this isn't going to happen, Senate and House are having different ideas.

Agreed.  The Senate version is significantly different than that of the House.  I think that was done so the two can't possibly be reconciled, and the "Never Trump!" Republicans can score another win.

[charby]

Agreed.  The Senate version is significantly different than that of the House.  I think that was done so the two can't possibly be reconciled, and the "Never Trump!" Republicans can score another win.

Both have a lot of issues and there is a push back from a big enough portion of the public (that may vote)

[grampster]

I think a fair plan would be to tax every person 10% of all of their income minus a personal exemption of $12,000.  You could do that on a post card.

[RocketMan]

Both have a lot of issues and there is a push back from a big enough portion of the public (that may vote)

Also true, and likely done for the same reasons.  Both are crappy bills.

[RocketMan]

I think a fair plan would be to tax every person 10% of all of their income minus a personal exemption of $12,000.  You could do that on a post card.

Not a bad idea, grampster.  But the tax code is not, and never will be, about "fair".  It will always be about controlling of those that pay taxes.

[charby]

Not a bad idea, grampster.  But the tax code is not, and never will be, about "fair".  It will always be about controlling of those that pay taxes.

I wonder if that would even cover a lean federal budget? Some federal budget action/items go back to 1789.

[slingshot]

Under the House plan, Dems are claiming that the poor will pay more tax....  I didn't think they paid any income tax now and got a handout every year which is why they race to the mail box or online to get their tax return in.  Not right.  It is just another subsidy.

I would like the corporate tax rate to go down a lot and cut out a lot of the loopholes that I don't even know exist.  Make capital expense (equipment and so forth) completely deductible as an expense in one year if the business wants it that way or spread it out over a couple years.  This would encourage a lot of investment.

I'd like the rate to be such that all the money by US companies from overseas comes flooding in.  They have to do something with it.

The people in NJ, NY, and CA are kicking over the cap on state tax deduction.  The deduction artificially inflates the rates. Things need to be simple simple that even Trump can't get around.

Should be keep depreciation of assets in the system?  Don't know.  It's pretty ingrained into the business tax system.  If that was dumped... it would completely change the playing field.  Maybe for example apartment complex owners won't sell after they depreciate the asset and then it starts all over again with a new owner.  I want stability and common sense to rule the day.

[Ben]

The people in NJ, NY, and CA are kicking over the cap on state tax deduction.  The deduction artificially inflates the rates. Things need to be simple simple that even Trump can't get around.

Something they shouldn't be kicking over. Both them and the pols (on both sides of the aisle). My understanding is that you can still deduct up to $10K SALT under both house and senate plans. Same with property tax. That's clearly a middle class tax cut. Barring very expensive urban centers, you've got to be making a good chunk of money, or have a very expensive house to top that $10K.

I think too often people (not people on APS, but the sheep population) look at these deductions as money that's being taken away from them, versus money that just changes their AGI from $100K to $90K. That certainly can change their tax bracket if they are near a line*, but it's more like maybe $1K extra taxes to pay, which may or may not be balanced out by other stuff in the final plan.

*Another reason I wish we could go to a flat tax, which would truly be "progressive". It always bugs me that a $1000 change in income can make a significant change in the taxes you pay if it throws you into one tax bracket or another if you are on the line. Paying 10% flat on both $90K and $100K smooths that out.

[Nick1911]

*Another reason I wish we could go to a flat tax, which would truly be "progressive". It always bugs me that a $1000 change in income can make a significant change in the taxes you pay if it throws you into one tax bracket or another if you are on the line.

I don't think that works the way you think it works.

https://www.thesimpledollar.com/dont-fear-the-higher-tax-bracket-or-why-a-reader-needs-more-cowbell/

[Firethorn]

Something they shouldn't be kicking over. Both them and the pols (on both sides of the aisle). My understanding is that you can still deduct up to $10K SALT under both house and senate plans. Same with property tax. That's clearly a middle class tax cut. Barring very expensive urban centers, you've got to be making a good chunk of money, or have a very expensive house to top that $10K.

If they double the standard deduction, it makes almost any deduction for the rich, because they'll be the only ones with enough deductible expenses to beat it.  The current home deduction, for example, ends up being a giant giveaway for the rich.  It is a major reason why anybody with a mansion will always keep it mortgaged to the hilt, because why not?  Free money.  A loan at, oh, 3% or so ends up being closer to 2% after you hit the 33% tax bracket at about $200k.  2% is lower than inflation most of the time, which makes it literally free money.  Advantages only increase as you get into the 39.6% rate.

I think too often people (not people on APS, but the sheep population) look at these deductions as money that's being taken away from them, versus money that just changes their AGI from $100K to $90K. That certainly can change their tax bracket if they are near a line*, but it's more like maybe $1K extra taxes to pay, which may or may not be balanced out by other stuff in the final plan.

This is a problem.  Deductions just don't help much if you're in, say, the 10% bracket, because you still pay 90%.  It's why I prefer credits if the government MUST subsidize something.

For example, let's take solar power subsidies.  As a deduction, you putting solar panels on your roof as a middle class person with a marginal tax rate of 25%*, means that a $40k install has the feds paying you $10k to do it.  If you're making closer to half a million, the government pays nearly $16k for you to put the exact same install in.  I'd rather the feds just make it a credit at 25%.  If they MUST do it, of course.

*Another reason I wish we could go to a flat tax, which would truly be "progressive". It always bugs me that a $1000 change in income can make a significant change in the taxes you pay if it throws you into one tax bracket or another if you are on the line. Paying 10% flat on both $90K and $100K smooths that out.

That's not how taxes work.  It's more like:
10%, from 0 to 10k
15% from 10k to 38k
etc...

Make $11k and you pay $1k for your first $10k of income, then another $150 for the $1k left.
Marginal tax rate: 15% (If you earn $1 more, what percent are you paying?)
Effective tax rate: 10.5%

[charby]

Is there any example where a tax cut to the wealthy/business that made a significant job growth and payroll taxes covered the cut?

The more I look at the house and senate plans, seems like we are going to be hosed. Appears that in time the deficit is going to be so great that taxes will be raised and services cut. 

[Scout26]

Is there any example where a tax cut to the wealthy/business that made a significant job growth and payroll taxes covered the cut?

The more I look at the house and senate plans, seems like we are going to be hosed. Appears that in time the deficit is going to be so great that taxes will be raised and services cut. 

Has there ever been a tax cut that did NOT increase tax revenues from the resulting growth in the economy ??


(Hint:  No. )

[Firethorn]

Is there any example where a tax cut to the wealthy/business that made a significant job growth and payroll taxes covered the cut?

Not that I'm aware of.  Now, a tax cut to businesses would help, I think, because we're so far above the other nations.  It's a significant tax on retirement investments and such.

That said, businesses don't expand and the wealthy don't invest unless they think they can get their money back, so when looking to stimulate the economy you need to always consider where the economy is lacking - supply or demand.  

All the supply stimulus in the world won't do jack if there isn't enough demand seen to consume said supply.  On the other hand, it doesn't matter how much demand there is if there isn't enough supply to go around, prices will merely rise to provide the same amount of supply.

I generally see demand stimulus as being better, because if you stimulate demand, supply WILL rise so long as there is credit available to borrow to increase supply.

Poor people, allowed to keep more of their own money, will tend to spend it, stimulating the economy faster and more reliably than giving rich people money.  

Personally, I look at our historically low interest rates, and see the country and world awash in money looking for investments.  Even at near 0% interest rates, there just aren't enough business cases out there that have rewards considerate with the risks.

So, supply is taken care of.  Demand is what needs work.

The more I look at the house and senate plans, seems like we are going to be hosed. Appears that in time the deficit is going to be so great that taxes will be raised and services cut.

Yeah, balance the freaking budget dudes.

Has there ever been a tax cut that did NOT increase tax revenues from the resulting growth in the economy ??

Lots of them.  In many cases the growth would have happened anyways.  That said, deficit spending and the resulting interest that must be paid can create a false economy if the extra interest consumes the extra tax revenue and more.

We must always intelligently fight fraud, waste, and abuse.  We need to cut spending before cutting taxes too much further.

[charby]

Has there ever been a tax cut that did NOT increase tax revenues from the resulting growth in the economy ??


(Hint:  No. )

Example (s) please.

[DittoHead]

balance the freaking budget dudes.

hahahaha    no.
That's a thing you worry about when the other party is in power, duh!

[Scout26]

Example (s) please.

[Firethorn]

Doesn't mean a thing when you don't adjust receipts for the population.  Also, the curve looks more like it doesn't care what the top marginal bracket is, more or less.

Why would the top marginal bracket matter all that much?  Only a tiny fraction of people ever paid it, and usually only on a tiny amount of income.

I think that a more important graph to check would be something like gross receipts compared to average personal tax rate.