The Gang Tries Fixing the Tax Code

[mvd10]

Anyway, a quick calcution based on this: https://files.taxfoundation.org/20170130145208/TF_Options_for_Reforming_Americas_Tax_Code.pdf

Cutting the corporate tax rate to 15 percent costs $2.2 trillion over a decade
Cutting income tax rates to 10, 25 and 35 percent costs $3.1 trillion over a decade
Couldn't find anything about cutting the top rate on pass-through businesses to 15 percent, but I suppose it's something like $1.5 trillion since cutting it to 25 percent costs $800 billion
Doubling the standard deduction costs $1.3 trillion over a decade
Repealing the AMT costs $400 billion over a decade
Repealing the Obamacare investment income tax costs $600 billion over a decade
Repealing the estate tax costs $200 billion over a decade

Repealing all itemized deductions except the ones for mortgage interest and charitable contributions raises $2.4 trillion over a decade
Repealing (almost) all tax credits and deductions for businesses raises $900 billion over a decade

If you add everything up you get a $6.0 trillion dollar tax cut. Now, I know it doesn't work exactly like that since repealing deductions while tax rates are low (under Trump's plan)doesn't raise as much revenue as repealing deductions with higher tax rates (current situation) and doubling the standard deduction will cost more if less people itemize their deductions (which happens when you repeal most itemized deductions) but you can make a decent estimation with the info Trump released. And the US really can't afford a $6 trillion tax cut unless it's combined with massive spending cuts (and I have a feeling Trump won't do that).

There are also economic growth considerations - with a corporate tax rate of only 15%, many, many companies who moved production overseas would return production to the US. Tax cuts for the middle class could raise consumer spending and thus grow the economy overtime. Furthermore, we have to consider the amount of money that is raised from the one time overseas tax, which could end up being quite a bit.

In the end, it probably raises the deficit, and thus I likely  can't​ support it - but I will wait for the CBO estimate here.

Yeah, especially cutting the corporate income tax will increase economic growth, but not nearly enough to make the cut revenue neutral (Taxfoundation's own growth projections probably are way to rosy).

[Virginiá]

The national debt? Let me stop you right there, my friend. That was caused by the spendthrift social programs. Let's remember that defense is only a relatively smaller portion of the deficit as compared to Social Security and Medicare.

Putting aside the GOP's own contributions to the debt, it doesn't actually matter how it got to where it is. What matters is the Republican Party's seemingly rock-solid devotion to a balanced budget / reducing the debt, but only when Democrats are in control. In other words, it is just an excuse for them to deny Democrats anything they want to do.

I could be wrong and maybe they do find a way to pay for whatever it is they plan on doing, but my money is on them just opting to do a large amount of deficit spending instead.

[Attorney General, LGC Speaker, and Former PPT Dwarven Dragon]

The national debt? Let me stop you right there, my friend. That was caused by the spendthrift social programs. Let's remember that defense is only a relatively smaller portion of the deficit as compared to Social Security and Medicare.

Putting aside the GOP's own contributions to the debt, it doesn't actually matter how it got to where it is. What matters is the Republican Party's seemingly rock-solid devotion to a balanced budget / reducing the debt, but only when Democrats are in control. In other words, it is just an excuse for them to deny Democrats anything they want to do.

I could be wrong and maybe they do find a way to pay for whatever it is they plan on doing, but my money is on them just opting to do a large amount of deficit spending instead.

It's not as if your party​ is that much better though. Sure, it leaped into action when the deficit was over one trillion and they had little other choice, but the attitude of the democratic party toward the current ~$600 B deficit seems to be a collective shrug.

[Virginiá]

@super: yawn

It's not as if your party​ is that much better though. Sure, it leaped into action when the deficit was over one trillion and they had little other choice, but the attitude of the democratic party toward the current ~$600 B deficit seems to be a collective shrug.

Both parties' attitudes towards the deficit is unsettling, but many Republicans in Congress are consistently being hypocrites about this. You can't nitpick at every little thing Democrats want to do, jabbering about money, then turn around when you get into power and immediately start planning a massive tax reform package that in all likelihood won't be properly paid for. And I'm not even going to get into my views on blowing another hole in our budget just to shift more money into the pockets of those who need it the least.

[Attorney General, LGC Speaker, and Former PPT Dwarven Dragon]

The national debt? Let me stop you right there, my friend. That was caused by the spendthrift social programs. Let's remember that defense is only a relatively smaller portion of the deficit as compared to Social Security and Medicare.

Putting aside the GOP's own contributions to the debt, it doesn't actually matter how it got to where it is. What matters is the Republican Party's seemingly rock-solid devotion to a balanced budget / reducing the debt, but only when Democrats are in control. In other words, it is just an excuse for them to deny Democrats anything they want to do.

I could be wrong and maybe they do find a way to pay for whatever it is they plan on doing, but my money is on them just opting to do a large amount of deficit spending instead.

The Republicans will pay off the debt, to be fair. Here's the doctrine: a VAT tax that will level the playing field, make paying taxes simple, and end this corruption on the Federal level. If Democrats agree to abolish all of those boondoggle social programs, this might be the deal of the century.

Also, we need to abolish the Department of Education, Environment, Science, and all of the programs that save live- I mean, stifle competition.

Oh yes! The. Evils of Science and Education! That's why we have a YUGE deficit!

Actually, no. That's not remotely true.

[JA]

Looks like we have a couple of Democrats here. Maybe become a entrepreneur and make your own life better, rather than taxing the more fortunate at 70% every year.

[Attorney General, LGC Speaker, and Former PPT Dwarven Dragon]

Looks like we have a couple of Democrats here. Maybe become a entrepreneur and make your own life better, rather than taxing the more fortunate at 70% every year.

I'm an independent who is devoted to obtaining a balanced budget regardless of who is in charge. But we shouldn't do it by crippling our children's path to a good future (education), or by crushing science. And in any case, eliminating the three departments you mentioned wouldn't balance the budget, and doesn't address what we actually need to do to keep a balanced budget - defense cuts + entitlement reform.

And the top tax rate is about 40%, not 70%. Don't tell lies.

[Attorney General, LGC Speaker, and Former PPT Dwarven Dragon]

Uh... they pay 40% Federal income and payroll tax, 10% states income+sales tax, 15% capital gains, and 5% property taxes. What do you pay, exactly?

We're discussing the federal government on this thread, so don't count state taxes. Plus state taxes are so variant that I don't​ know how you came up with that number. State taxes in NY /=\ state taxes elsewhere. And property taxes are set by states and thus also vary -unless you are referring to the estate tax rate.

And even ignoring the above paragraph, your numbers are a gross oversimplification. Due to deductions and the fact that our income tax is marginal - income within the first $400K is taxed at a lower rate than the top rate - the average  millionaire effective tax rate is more like 25 or 30 percent, not 70 percent.

[Virginiá]

ssuperflash is playing a game, Wulfric.

[Technocracy Timmy]

The national debt? Let me stop you right there, my friend. That was caused by the spendthrift social programs. Let's remember that defense is only a relatively smaller portion of the deficit as compared to Social Security and Medicare.

Putting aside the GOP's own contributions to the debt, it doesn't actually matter how it got to where it is. What matters is the Republican Party's seemingly rock-solid devotion to a balanced budget / reducing the debt, but only when Democrats are in control. In other words, it is just an excuse for them to deny Democrats anything they want to do.

I could be wrong and maybe they do find a way to pay for whatever it is they plan on doing, but my money is on them just opting to do a large amount of deficit spending instead.

The Republicans will pay off the debt, to be fair. Here's the doctrine: a VAT tax that will level the playing field, make paying taxes simple, and end this corruption on the Federal level. If Democrats agree to abolish all of those boondoggle social programs, this might be the deal of the century.

Also, we need to abolish the Department of Education, Environment, Science, and all of the programs that save live- I mean, stifle competition.

Forgetting to include Energy. Typical cucksersvative.

[RI]

Getting rid of itemized deductions is a great way to screw over people with student loan debt. Or medical debt for that matter.

Eh, doubling the standard deduction likely more than cancels out any loss in benefit from the student debt interest payments deduction.

[Dr. Arch]

The national debt? Let me stop you right there, my friend. That was caused by the spendthrift social programs. Let's remember that defense is only a relatively smaller portion of the deficit as compared to Social Security and Medicare.

Putting aside the GOP's own contributions to the debt, it doesn't actually matter how it got to where it is. What matters is the Republican Party's seemingly rock-solid devotion to a balanced budget / reducing the debt, but only when Democrats are in control. In other words, it is just an excuse for them to deny Democrats anything they want to do.

I could be wrong and maybe they do find a way to pay for whatever it is they plan on doing, but my money is on them just opting to do a large amount of deficit spending instead.

The Republicans will pay off the debt, to be fair. Here's the doctrine: a VAT tax that will level the playing field, make paying taxes simple, and end this corruption on the Federal level. If Democrats agree to abolish all of those boondoggle social programs, this might be the deal of the century.

Also, we need to abolish the Department of Education, Environment, Science, and all of the programs that save live- I mean, stifle competition.

Forgetting to include Energy. Typical cucksersvative.

I know, right? Cuckservatives are terrible. Traditional conservatism is where it's at.

Traditional conservatism, especially the fiscal kind, is dead.

[parochial boy]

There are also economic growth considerations - with a corporate tax rate of only 15%, many, many companies who moved production overseas would return production to the US.

In practice it tends to mean companies reroute profit through low tax jurisdictions rather than actually moving production.

*goes off to work at factory owned by tax dodging corporation*

[jaichind]

The individual reform seems great

I tend to agree.  I did a bunch of simulations and for homeowners in the household income 600K-900K range but living in NY (especially NYC) NJ CA or CT this actually means a tax increase.    Higher income taxpayers that live in places like TX for sure will gain.  All things equal high income people that voted for Trump will get tax cuts and high income people that voted for Clinton will get hit with tax increase.  I am a net gainer even though I live in NY.  A small tax cut is better than no tax cut.  

What I like most about is that high tax states like NY NJ CA and CT will not have to fact the fact that the cost of hiring just went up in their state and they will become less competitive.  Good.  The Fed government should not be subsidizing high tax states.  Too bad the Mortgage and charity deduction are not gone either.  They should be gone as well even though the high standard deduction to some extent removes those deductions as well for lower income households.

The tax rate bracket shift will look something like this



Except it will be 10 25 35 and not 12 25 33.  In theory those in the 200K range will get hit under this plan but gets relief from AMT going away so it is those households that are beyond AMT (usually around 600K level) that has a lot of deductions that will get hit.

[jaichind]

What the plan is unclear about is will contribution to various  pension plans  (like 401K IRA etc etc) be allowed to be removed for taxable income.  There are rumors that there will be some impact on this but the plan seems to be silent on that topic one way or another.  While I might get hit by this I sort of think all things equal this should be removed as well.  A person should completely own and fund his or her retirement.  I do not see why the Fed government should subsidize a rational activity any logical person should be doing.

[jaichind]

Someone in CA with a household income of 1 million plus will actually see an INCREASE in marginal tax rates.

Under current tax structure the marginal tax rate is (1-.13$)*39.6% = 34.45% since CA state tax are 13% for income above 1 million.

Under Trump new plan it will be just 35%.

In many ways I back this. If CA wants a high tax state then the people living there should pay that true cost and not be subsidized by the Feds.  Said high income earner should take it up with the CA state government.

[Shadows]

This is going to blow up the deficit & as interest rates are rising, the deficit will further increase leading to a potential debt crisis. And most of the tax breaks go to Trump, estate tax, AMT etc is a flat out disaster, a giveaway.

This is absolutely terrible for the economy as it puts more money in the hands of already wealthy people with low Marginal Propensity to Consume (MPC). Somewhere down the line this to some extent has to be balanced on the back of the middle class. I see the Consumption Function of GDP (C) being negatively affected. If the tax breaks help put 1000's of $ in the hands of middle class, then okay, if it about millions of $ to uber wealthy, then it will do jack shi* to help economic growth.

This coupled up with Dodd Frank being torn down means another big bubble & a recession by 2019/2020 is very possible. Also, a lot of deductions are being taken off & many of these will go to the middle class. So their tax breaks will likely be balanced out.

In the end, the only people who gain will be major corporations & people who benefit from the estate tax repeal, financial investors (due to lower capital gains) etc - Basically uber wealthy - Trillions of $ in debt which the future generation will pay so that Trump & his cronies can get a massive tax break !

[Shadows]

Someone in CA with a household income of 1 million plus will actually see an INCREASE in marginal tax rates.

Under current tax structure the marginal tax rate is (1-.13$)*39.6% = 34.45% since CA state tax are 13% for income above 1 million.

Under Trump new plan it will be just 35%.

In many ways I back this. If CA wants a high tax state then the people living there should pay that true cost and not be subsidized by the Feds.  Said high income earner should take it up with the CA state government.

State Taxes should be there to fund the government. And every state should have a sales tax which is there in every major country, or have a national sales tax & split revenue with most of it going to the states.

I am interested to see what happens to the 30-200K odd people. Those are the people will contribute to the economy & create demand. Rest mostly are meaningless. So, the effect of tax cuts - Deductions being taken away to see the net effect is key. If atleast there is some positive net effect in the under 200K bracket, there is an argument for short term economic growth, otherwise even that is not possible !

[Shadows]

Uh... they pay 40% Federal income and payroll tax, 10% states income+sales tax, 15% capital gains, and 5% property taxes. What do you pay, exactly?

You called out someone about having a good life & a job but you don't have the basic intelligence or education to understand simplistic taxes which even children do. Taxes are progressives there are tax brackets going all the way upto 39.6%, your effective tax rates is lower. you are not paying a flat tax.

Secondly if someone ads Sales tax to income tax that guy should go back to kindergarten. You have 100$. You pay 45$ as as income taxes & are left with 55$. You buy goods worth 55$ including Sales Taxes of 5$ (10% rate on 50$ = 5$). The total taxes would be 45 + 5 = 50% of your income. That is 50% instead of 45% + 10% (Sales Tax rate) = 55%.

You are effectively putting a Sales Tax rate even on the federal income tax paid & adding it. That is either insanely dishonest or you probably need to go back to school to get a decent education !

[riceowl]

This is a tax increase for me. Neat!

[jaichind]

I am interested to see what happens to the 30-200K odd people. Those are the people will contribute to the economy & create demand. Rest mostly are meaningless. So, the effect of tax cuts - Deductions being taken away to see the net effect is key. If atleast there is some positive net effect in the under 200K bracket, there is an argument for short term economic growth, otherwise even that is not possible !

The bracket numbers are not out, but looking at Trump's numbers he published during the campaign it seems clear that below 200K everyone will get a tax cut.  200K-300K household income range might see some sort of increase but most likely canceled out by removal of AMT.

What is different about Trump's tax plan during the campaign and now are the rates are more progressive (10 25 35 vs 12 25 33) and he did not just cap the deductions but got rid of them completely both of which has the effect of lowering the impact on the deficit.

[jaichind]

How many votes does this need to pass in Congress?

If they accept these cuts will reverse themselves in 10 years then only a simple majority in the Senate is needed.

[ProudModerate2]

trump wants :
Massive tax cuts, which will raise the deficit.
Massive infrastructure spending, which will raise the deficit.
Considerable increase to the military budget, which will raise the deficit.

What the hell is the orange-haired clown thinking ?

[Virginiá]

trump wants :
Massive tax cuts, which will raise the deficit.
Massive infrastructure spending, which will raise the deficit.
Considerable increase to the military budget, which will raise the deficit.

What the hell is the orange-haired clown thinking ?

He's not thinking anything. As he has said himself, he loves spending other people's money (and coincidentally, as the King Of Debt™, running up debt too). He doesn't care what he does to America so long as it gets him short term popularity and/or monetary benefits for himself and his family.

He pretty much has all the qualities you'd hope to god a president would never have.

[Technocracy Timmy]

trump wants :
Massive tax cuts, which will raise the deficit.
Massive infrastructure spending, which will raise the deficit.
Considerable increase to the military budget, which will raise the deficit.

What the hell is the orange-haired clown thinking ?

The thinking is that we'll grow our way out of the deficit.

Basically the tax cuts combined with spending increases will boost GDP therefore incomes will rise so tax revenues go up, less people are unemployed and on government services so spending will decrease, etc. which in the long run will balance the budget. Also tax cuts means more people will keep more of their income which will act as an incentive to work even harder which further increases tax revenue and boosts GDP. A big giant virtuous cycle ensues.

Does it work? Not really.