$1.5 Trillion GOP Tax Cut Thread

[Tintrlvr]

This is why the tax code remains a completely corrupt mess. Everyone wants to keep their special provisions and special breaks, and uses their influence, lobbyists and pressure groups to preserve them. Which means they all get together and everyone get's their breaks maintained, and the sum total is that tax code compliance cost I mentioned above. Special interests thus win out of over the general welfare.

Clearly the tax code is never going to be reformed, until these groups are de-clawed by getting money out of politics.

Compliance costs could be cut dramatically with automatic filing even without removing the complicated deductions themselves. I fundamentally agree that the behavior-manipulating tax deductions and credits are a bad thing, but the issue of compliance costs is not really the same as the issue of tax code complexity, and eliminating deductions does not necessarily decrease compliance costs.

https://www.bloomberg.com/news/articles/2017-11-06/carried-interest-tax-break-may-be-changed-house-tax-chief-says

Carried Interest Tax Break May Be Changed, House Tax Chief Says

This idea would create a 2 year holding period to carried interest.  

This change in carried interest (as someone who actually works in a relevant industry), is comical window-dressing. It is very rare to take carried interest on assets held for less than two years, and it will just tweak the behavior of the small number of (mostly hedge) fund managers who do so. Presumably this change is primarily designed to allow them to make rosy assumptions about its fiscal impact and use that to cut (or restore deductions) elsewhere.

[Tintrlvr]

It kills federal student loan interest deductions http://money.cnn.com/2017/11/02/pf/college/house-tax-bill-student-loan-interest-deduction/index.html

I, along with 40 million others, claim this each year. Terrible idea. They do allow states to continue deductions for student loan interest, however.

The student loan interest deduction is capped at 2,500 dollars a year .


Your standard deduction will go up from 12k to 24k so no people who are struggling to pay back loans will not get hit .

Depends whether they are entitled to other deductions, such as mortgage deductions (or deductions that aren't surviving, like medical expenses). And the increase in the standard deduction is a smokescreen; because they're eliminating the personal exemption, it's barely a change overall for lower- and middle-income singles (and actually hurts single people with more than one dependent, or married people with lots of dependents, in some cases).

[Tintrlvr]

Upper middle class is 90k-250k

LMAO. Half of Americans make less than $30k per year; 71% less than $50k per year. To be in the literal Top 1%, all you need to do is earn $250k per year.

Your "upper middle class" figure basically applies to the top 10% of income earners minus the wealthiest 1%. There's nothing "middle" (and certainly not "median") about being in the top 10%.

And anybody who has a $500,000 house is f@%king rich, much less one million.

Inaccurate. Many homes in NoVA or even in southern VA cost this much for a small house. Also, I know folks who had like a 2 bedroom in SD and 500K would barely get you that out there. Home value, although somewhat indicative of overall income, is a wildly misleading indicator depending on the area of the country being discussed.

Just on the principle, a 500,000 home is about $1,500 a month on a 30 year mortgage. At the very least we are talking upper middle class. No one, who is lower middle class or working class can can afford that and anyone who does have one will more then likely lose it before they ever get close to paying it off.

There are plenty of people paying more than $1,500 a month in rent here in NYC on $40k incomes who would disagree with your position that there aren't middle- to lower-income people with those types of monthly outlays for housing. (Ownership rates are much lower in NYC, of course, but you'll find comparable people with mortgages in places like NOVA or California, or even NYC suburbs.)

Whether they "can" "afford" it is a semantic question since these are often homes at the very lower bound of prices: they either have to move out of the high-cost area, or they suck it up and pay nearly half of their gross income in housing outlays. The mortgage interest deduction is only a part of the problem here (and I'd be an advocate for eliminating it entirely), but you are clearly mistaken. In some parts of the country, housing costs make up an extraordinary portion of gross income, sometimes over 50%.

[Tintrlvr]

The vast majority of deductions are special interests at work, with a handful of exceptions. However, cutting the income tax rates is fiscally insane, and raising them is politically suicidal.  Cutting at deductions would be fine, though. That said, we really, really need to find a new way of raising money.

We really should be cutting the corporate rate though. But it is insane to not cut the taxes on small business at the same time and it is political suicide to cut business taxes and not poor people and the middle class.

So rates end up coming down for most of the individual brackets by necessity.

I'm not sure if this is simply a terminology difference, but there isn't a special "small business" rate, other than corporate rates progressively increasing based on an enterprise's income.

Any current business is plenty capable of paying $150 to incorporate in Delaware and availing itself of any lower corporate rate, whether the business has gross receipts of $100K or $100M.

The general political calculation seems reasonable and makes sense to me, but I'm just not sure where this idea that cutting the rate on partnerships = small business cut when that really just isn't the case. Any semi-savvy operator would just incorporate the business and take advantage of those rates.

Which is why I really think that the end result of this tax package exercise will be a moderate rate cut across the board (think down to 29% corporate rate, similar cuts for individuals) with a few revenue raisers to help neutralize any talking points about benefits accruing to the top 1%.

The post was about political optics. Of course they can incorporate to get that lower rate.

That's what I figured, but it's a common mistake when folks discuss taxes and I wanted to make sure we were on the same page

I would prefer a 25% corporate tax rate with far more aggressive approaches to things like the Carried interest deductions and hedge funds generally.

Agreed generally, but there just isn't enough revenue in those two things to make up for the lost revenue from lowering rates. The policy ideal would be a marginally lower corporate rate (in the 25-30% range) while removing some popular but no longer really necessary corporate deductions.

The corporate reform would, in an ideal world, be packaged separate from individual reform, allowing enough moderate Dems to sign on to make it something that'd be permanent, which would provide stability that businesses desire in reform.

Eliminating the separate brackets for capital gains (which takes care of carried interest as well) is the obvious low-hanging fruit to pair with corporate tax cuts.

[Tintrlvr]

Upper middle class is 90k-250k

LMAO. Half of Americans make less than $30k per year; 71% less than $50k per year. To be in the literal Top 1%, all you need to do is earn $250k per year.

Your "upper middle class" figure basically applies to the top 10% of income earners minus the wealthiest 1%. There's nothing "middle" (and certainly not "median") about being in the top 10%.

And anybody who has a $500,000 house is f@%king rich, much less one million.

Inaccurate. Many homes in NoVA or even in southern VA cost this much for a small house. Also, I know folks who had like a 2 bedroom in SD and 500K would barely get you that out there. Home value, although somewhat indicative of overall income, is a wildly misleading indicator depending on the area of the country being discussed.

Just on the principle, a 500,000 home is about $1,500 a month on a 30 year mortgage. At the very least we are talking upper middle class. No one, who is lower middle class or working class can can afford that and anyone who does have one will more then likely lose it before they ever get close to paying it off.

There are plenty of people paying more than $1,500 a month in rent here in NYC on $40k incomes who would disagree with your position that there aren't middle- to lower-income people with those types of monthly outlays for housing. (Ownership rates are much lower in NYC, of course, but you'll find comparable people with mortgages in places like NOVA or California, or even NYC suburbs.)

Whether they "can" "afford" it is a semantic question since these are often homes at the very lower bound of prices: they either have to move out of the high-cost area, or they suck it up and pay nearly half of their gross income in housing outlays. The mortgage interest deduction is only a part of the problem here (and I'd be an advocate for eliminating it entirely), but you are clearly mistaken. In some parts of the country, housing costs make up an extraordinary portion of gross income, sometimes over 50%.

And people wonder why housing crashed so hard. These are unsustainable levels of gross income being put towards housing.

Yes, although these areas are not the same areas that crashed in the housing crisis. Unlike in 2006 Nevada, Arizona or Florida, where the soaring prices were primarily the result of speculation, the fundamentals supporting elevated prices in high-cost areas of the country are quite stable. These are places with strong economies (based on industries other than housing construction) that therefore have very high demand but are nonetheless for a variety of reasons not producing much new housing. It is true that this squeezes low- and some middle-income people until they're close to popping, but it's not a bubble.

[Tintrlvr]

Senate keeps the endowment tax (yes !! And that is speaking as someone that went to Yale and gives to the Yale alumni fund) but keep student loan interest deduction (NO !!).  Frankly they do not go far enough.  I think universities should just bee taxed like any other business.  If they want to give financial aid, fine.  Just raise the price on everyone else so it can be paid for.   

The endowment tax makes no sense. Why are some charities taxed on investments but not others? Will just result in absurd things like universities transferring parts of their endowments to associated non-profit hospitals in order not to pay the tax, or religiously affiliated colleges claiming to be churches so as to avoid treatment as educational endowments.

[Tintrlvr]

If a tax cut plan does pass, I'd rather it be this one:

Middle class biggest winners in Senate tax plan, study says

You must be logged in to read this quote.

https://www.politico.com/story/2017/11/12/tax-middle-class-republicans-244815

Does this tax plan still tax graduate students for their tuition remission?

It's a mixed bag. 

Yeah, there's no way I can support this travesty of a bill. Getting taxed for nearly $50k on the $16k you're actually earning is just simply not feasible.

So what you're saying is that a year of grad school isn't actually worth the $30+ sticker price? Regardless of whether it's feasible, there's no denying that it is income. Income is not the same as cash flow. This is far from the most painful example of that. If you get a debt cancelled because the lender figures you'll never pay them back, the debt cancellation is treated as taxable income and Uncle Sam has ways of making you pay that aren't available to private lenders.

Well:

1) No, it's not worth it, but that's not the issue at hand.
2) It is not income. I am not seeing that money, and I don't have the ability to invest it or use it as I wish as if it were actual income.
3) This is not a debt cancellation; this is a waving of charging you something (100% discount). By your logic, states should start taxing coupon sales and the like (Buy 1, Get 1 Free [+taxes on what you didn't pay]). Got a discount? Pay taxes on the full price even though the price you're paying is lower. It's ridiculous.

Properly, this is how taxes should work: discounts, sales and rebates (whether a holiday sale at a retailer or a discount you receive as part of your compensation for employment) should be taxed. Otherwise, you incentivize compensating people with discounts, sales and rebates over income. The problem is that it is sometimes very difficult to figure out exactly how much a discount, sale or rebated item should be taxed or to assign it a value, especially when a large portion of such products are offered at a discount price. But the theory of the bill is absolutely 100% correct.

[Tintrlvr]

If a tax cut plan does pass, I'd rather it be this one:

Middle class biggest winners in Senate tax plan, study says

You must be logged in to read this quote.

https://www.politico.com/story/2017/11/12/tax-middle-class-republicans-244815

Does this tax plan still tax graduate students for their tuition remission?

It's a mixed bag.  

Yeah, there's no way I can support this travesty of a bill. Getting taxed for nearly $50k on the $16k you're actually earning is just simply not feasible.

So what you're saying is that a year of grad school isn't actually worth the $30+ sticker price? Regardless of whether it's feasible, there's no denying that it is income. Income is not the same as cash flow. This is far from the most painful example of that. If you get a debt cancelled because the lender figures you'll never pay them back, the debt cancellation is treated as taxable income and Uncle Sam has ways of making you pay that aren't available to private lenders.

Well:

1) No, it's not worth it, but that's not the issue at hand.
2) It is not income. I am not seeing that money, and I don't have the ability to invest it or use it as I wish as if it were actual income.
3) This is not a debt cancellation; this is a waving of charging you something (100% discount). By your logic, states should start taxing coupon sales and the like (Buy 1, Get 1 Free [+taxes on what you didn't pay]). Got a discount? Pay taxes on the full price even though the price you're paying is lower. It's ridiculous.

Properly, this is how taxes should work: discounts, sales and rebates (whether a holiday sale at a retailer or a discount you receive as part of your compensation for employment) should be taxed. Otherwise, you incentivize compensating people with discounts, sales and rebates over income. The problem is that it is sometimes very difficult to figure out exactly how much a discount, sale or rebated item should be taxed or to assign it a value, especially when a large portion of such products are offered at a discount price. But the theory of the bill is absolutely 100% correct.

The bill is purposefully targeting one population. If they're going to start doing this, they have to do it across the board if they're being honest about it. As it is, it's about punishing a group of people they don't like, who are already incredibly disadvantaged fiscally because of how out of control tuition is.

You were making a philosophical tax argument: that it would be absurd to charge tax on discounts and sales. But, of course, it's not only not absurd, it's actually quite sensible. Agree that this bill picks and chooses (and shouldn't do so), but that doesn't change the philosophical argument.

[Tintrlvr]

If a tax cut plan does pass, I'd rather it be this one:

Middle class biggest winners in Senate tax plan, study says

You must be logged in to read this quote.

https://www.politico.com/story/2017/11/12/tax-middle-class-republicans-244815

Does this tax plan still tax graduate students for their tuition remission?

It's a mixed bag.  

Yeah, there's no way I can support this travesty of a bill. Getting taxed for nearly $50k on the $16k you're actually earning is just simply not feasible.

So what you're saying is that a year of grad school isn't actually worth the $30+ sticker price? Regardless of whether it's feasible, there's no denying that it is income. Income is not the same as cash flow. This is far from the most painful example of that. If you get a debt cancelled because the lender figures you'll never pay them back, the debt cancellation is treated as taxable income and Uncle Sam has ways of making you pay that aren't available to private lenders.

Well:

1) No, it's not worth it, but that's not the issue at hand.
2) It is not income. I am not seeing that money, and I don't have the ability to invest it or use it as I wish as if it were actual income.
3) This is not a debt cancellation; this is a waving of charging you something (100% discount). By your logic, states should start taxing coupon sales and the like (Buy 1, Get 1 Free [+taxes on what you didn't pay]). Got a discount? Pay taxes on the full price even though the price you're paying is lower. It's ridiculous.

Properly, this is how taxes should work: discounts, sales and rebates (whether a holiday sale at a retailer or a discount you receive as part of your compensation for employment) should be taxed. Otherwise, you incentivize compensating people with discounts, sales and rebates over income. The problem is that it is sometimes very difficult to figure out exactly how much a discount, sale or rebated item should be taxed or to assign it a value, especially when a large portion of such products are offered at a discount price. But the theory of the bill is absolutely 100% correct.

The bill is purposefully targeting one population. If they're going to start doing this, they have to do it across the board if they're being honest about it. As it is, it's about punishing a group of people they don't like, who are already incredibly disadvantaged fiscally because of how out of control tuition is.

You were making a philosophical tax argument: that it would be absurd to charge tax on discounts and sales. But, of course, it's not only not absurd, it's actually quite sensible. Agree that this bill picks and chooses (and shouldn't do so), but that doesn't change the philosophical argument.

Do you have to insist on making arguments like you're living in a vacuum?  Logic dictates that these policies have negative impacts on struggling populations... yet you're worried about the philosophical argument.  Get out of your head.

I wasn't the one who made the philosophical argument in the first place. But apparently now we think posting on an Internet politics forum will influence the outcome of the Republicans' tax bill such that our posts are so important that we can't make theoretical arguments.

[Tintrlvr]

You're right.  What we argue here will not affect the outcome of the bill.  But it is a good idea to recognize when someone is distressed about something and acknowledge that even if you disagree and make an argument to the contrary.

That is just basic human decency, which does, in fact, matter here.

I'll rely on Arch to say that they found my post hurtful or offensive rather than randoms jumping in to make hostile accusations for the sake of fighting about it.

[Tintrlvr]

You're right.  What we argue here will not affect the outcome of the bill.  But it is a good idea to recognize when someone is distressed about something and acknowledge that even if you disagree and make an argument to the contrary.

That is just basic human decency, which does, in fact, matter here.

I'll rely on Arch to say that they found my post hurtful or offensive rather than randoms jumping in to make hostile accusations for the sake of fighting about it.

I don't think it was hurtful or offensive, but I found it rather insensitive, given that you're talking to a member who's directly affected by this.

In any case, the intent was not to engage in a dialogue devoid of context, but rather contextualize this change within the current paradigm of the status quo in the United States. If it applies to one, it should apply to all. This tax code change is a political hit on a currently-impoverished group of future professionals that this country will rely on.

Fair enough, and I agree that equal treatment is appropriate. Although my understanding is that what is proposed to be eliminated is a special exception for education, and other types of discounts provided by employers as compensation are already taxed as income, though the law is quite complicated. It seems to me that graduate discounts may mostly continue not to be taxed as no-additional-cost services as long as the classes would run regardless of whether the graduate students receiving the discount were present or not.

http://idahobusinessreview.com/2012/09/13/talking-tax-employee-discounts-can-be-taxable-income/

[Tintrlvr]

You're right.  What we argue here will not affect the outcome of the bill.  But it is a good idea to recognize when someone is distressed about something and acknowledge that even if you disagree and make an argument to the contrary.

That is just basic human decency, which does, in fact, matter here.

I'll rely on Arch to say that they found my post hurtful or offensive rather than randoms jumping in to make hostile accusations for the sake of fighting about it.

I don't think it was hurtful or offensive, but I found it rather insensitive, given that you're talking to a member who's directly affected by this.

In any case, the intent was not to engage in a dialogue devoid of context, but rather contextualize this change within the current paradigm of the status quo in the United States. If it applies to one, it should apply to all. This tax code change is a political hit on a currently-impoverished group of future professionals that this country will rely on.

Fair enough, and I agree that equal treatment is appropriate. Although my understanding is that what is proposed to be eliminated is a special exception for education, and other types of discounts provided by employers as compensation are already taxed as income.

http://idahobusinessreview.com/2012/09/13/talking-tax-employee-discounts-can-be-taxable-income/

Would this really count as a "discount"? It's a waiver, rather than a reduction.

Seems like the same thing as a 100% discount to me. I'm sure the exception was originally crafted because the impact on education is quite onerous (where most other fields don't offer such large discounts).

On the other hand, the existence of the special tax treatment has probably resulted in universities exploiting the loophole to their benefit. Economically, the change may result in universities paying graduate students the amount of the waiver (and the taxes now owed thereon), or even more, then charging for tuition, which should overall leave graduate students neutral or even better off. But the universities were the real beneficiaries before since it cost them less to offer discounted tuition than it would have to pay graduate students the tuition plus tax (if far enough less, i.e., if most of the classes were classes that would have run with excess capacity, I think there will be a plausible argument that the benefit isn't taxable anyway).

[Tintrlvr]

Hey, I just found a tax plan when I was making something on Pastebin:

https://pastebin.com/napnpULm

Seems to have a bit of a... noticeable title, though.

Interesting that they apparently contemplated a federal sales tax. To replace corporate tax entirely?

[Tintrlvr]

Just a reminder: if you’re married and making under $260,000 annually, you get a tax cut or at least break even. Single and under $200,000, same deal.

I really don’t get why this is “cutting taxes for the millionaires and billionaires.”

This is certainly not generally true. Marginal rates are only a portion of the overall calculation. As Ernest noted, the elimination of deductions and of the personal exemption (which is going way, way underreported for a change that literally only raises taxes on people making under ~$300,000/year to begin with since the personal exemption phases out for high earners) hit a lot of families and individuals, including many low and middle-income families and individuals and especially certain types of families and individuals that are more vulnerable than average, quite hard. Families or individuals with many children (or other dependents), families or individuals with high medical expenses, families or individuals that adopt, families or individuals with a member currently receiving tuition waivers, etc. will all see their taxes go up.

[Tintrlvr]

I played around with my income tax plan calculator that I built based on the House and Senate plans and added in the feature to do calculations for Singles and Head of Household recently. One thing I noticed about the House and Senate plans is that both closes the gap on the marriage penalty for higher income taxpayers.  But it seems the Senate plan is much more aggressive on closing that gap than the House.  High income singles will get hit badly by this.  It seems the greatest net loser in the Senate tax plan, by far, is the high income single salaried taxpayer living in an ultra-high tax area, say, San Francisco or NYC.   Wow.  My wife tells me some of her single investment banking friends in NYC are very steamed by this plan.  I can see why.  I put in some numbers and nearly fell off my seat on how badly they will get hit.

Combine this with the Republican Party's "family values" rhetoric, and I can't help but wonder if there's a motive for this.

Maybe. The real beneficiaries of the old system were one-income couples (i.e., mostly families with stay-at-home moms). It seems to me like the biggest beneficiaries now are double-income higher earners. Unclear what the "family" motives are if that's the case.

[Tintrlvr]

So who else here is about to start paying for someone else's new toys?

Big time here. I would guess I'm probably looking at the largest tax increase of anyone on this forum. Not much to be done about it, sadly.

[Tintrlvr]

Why did you only choose one of the charts to share? The other charts contain all the people who are going to pay more because they don't take only the standard deduction.

Nyt study: green dots represent families who will see net gain in income

I'm curious who the people are on the left of this chart - people with tons of kids, I think, but hard to be certain. It's a bit surprising Mormons aren't more opposed...

Either way, "If you exclude all of the people who are hurt, everyone is helped!" is a ridiculous way to spin things.

[Tintrlvr]

I'm being factual

I dislike the deficit side of the bill but to claim it raises taxes on the middle class is insanity

The cut for the middle class is much smaller than the cut for the rich, and the Poor may actually see a tax increase.

um no the standard deduction will be doubled so their taxes will be cut.

This is a canard. Double the standard deduction but get rid of the personal exemption so the benefits are very marginal, especially as compared to rising marginal rates from the use of chained CPI. For poor families with more than one kid, it's an immediate tax hike.

[Tintrlvr]

You must be logged in to read this quote.

Yeah, I call bull****.

This sounds like wishful thinking from some GOP aide. No Dem is going to vote for this bill.

Not after they've been voting against the bill thus far. No one who voted against the motion to proceed or in favor of the motion to send back to committee is going to vote for the bill, and that's all of the Democrats.

[Tintrlvr]

It may give him a boost next April when the median household finds out they are indeed getting a tax cut

Wouldn't happen until April 2019, so too late for Republicans losing seats in the midterms. April 2018 will be taxes for 2017, which are unaffected by the bill.

[Tintrlvr]

The motion by Sen. Stabenow to send the bill back to committee has failed by a vote of 45-55. Manchin/Heitkamp/Donnelly defect.

Wtf? Why did those three hayseeds defect?

Because they're tired of voting for the same thing over and over again.

Yeah, I think they were telling the rest of the Democratic caucus to cut it out. Which seems fair; not sure what is being accomplished by all of the return-to-committee votes.

[Tintrlvr]

So how are they going to live with the $1 trillion deficit increase?

By using it to justify cutting social spending later.  Isn't that obviously the plan?

Yes, that's always the plan. "These food stamps are just too expensive when we have to pay for tax cuts for the wealthy."

[Tintrlvr]

Also, what do we know for sure is in the bill?

By McCaskill tweet, we know that


1685 (deduction only for religous private schools and not secular ones??)

Anything else we know for sure?

Congress shall make no law respecting an establishment of religion

Agree, though there is some ambiguity in court precedents as to whether Congress can favor religion (generally) over non-religion. I think the answer should be no, but some courts would rule the other way.

[Tintrlvr]

Updated bill: (From politico, last one was from Bloomberg):

https://www.politico.com/f/?id=00000160-149e-da42-a7f2-3dff49b30000

Did anyone know they were going to totally screw people who file as Head of Household? They kept only the tiniest of distinctions from single filers at the very bottom of the margins. Let's stick in the knife in single parents...

[Tintrlvr]

In their rush to pass this scam, the Senate GOP didn't realize they defacto repealed literally every corporate deduction: http://nymag.com/daily/intelligencer/2017/12/senate-gop-accidentally-killed-all-corporate-tax-deductions.html

FF's. Closing loopholes is a good thing .

But not for their donors.

They're standing up to their donors. True champions of the people/fiscal responsibility!

Except, of course, that this was unintentional and is going to get removed/"fixed".