GOP Tax Bill

cptlo

cptlo

Pursuit Driver
It'll probably get changed many times before it passes. I hope all the below is correct (I copied/pasted). Good or bad?

Reduces income tax brackets: There are seven federal income tax brackets in today's code that are taxed at 10%, 15%, 25%, 28%, 33%, 35% and 39.6%.

The House bill consolidates those into four brackets:

12% (on the first $45,000 of taxable income for individuals; $90,000 for married couples filing jointly)
25% (starts at $45,000 for individuals; $90,000 for married couples)
35% (starts at $200,000 for individuals; $260,000 for married couples)
39.6% (starts at $500,000 for individuals; $1 million for married couples)

Nearly doubles the standard deduction: The bill raises today's standard deduction for singles to $12,000 from $6,350 currently; and it raises it for married couples filing jointly to $24,000 from $12,700.

That would drastically reduce the number of people who opt to itemize their deductions, since the only reason to do so is if your individual deductions combined exceed the standard deduction amount.

Eliminates personal exemptions: Today you're allowed to claim a $4,050 personal exemption for yourself, your spouse and each of your dependents. The House bill eliminates that option.

Expands child tax credit: The bill would increase the child tax credit to $1,600, up from $1,000, for any child under 17.

But that $600 increase won't be available to the lowest-income families if they don't end up owing federal income taxes. That's because unlike the first $1,000, the extra $600 won't be refundable.

Creates two new family credits: The bill would create two different $300 tax credits, but they would be in effect only for five years and would not be refundable.

Limits deductible mortgage interest: The bill preserves the mortgage deduction as currently structured for existing mortgages. But it curbs it for mortgages on newly purchased homes going forward. You would only be able to claim a deduction for interest you pay on mortgage debt up to $500,000, down from $1 million today.

Repeals many other deductions: These include those for medical expenses, tax preparation fees, alimony payments, student loan interest and moving expenses.

Leaves 401(k)s alone: After strong pushback from President Trump, among others, the House bill did not propose lowering the cap on pre-tax contributions from $18,000 today.

Repeals the Alternative Minimum Tax: The AMT, originally intended to ensure the richest tax filers pay at least some tax by disallowing many tax breaks, most typically hits filers making between $200,000 and $1 million today.

The House bill, however, has delayed the repeal until 2024, and in the meantime doubles the exemption levels.

Drastically cuts the Corporate Tax: The House Bill permanently lowers the Corporate rate from 35% to 20%.
 
I think that those middle class families with two or fewer kids and a mortgage will be big losers here. I also think that the elimination of the Earned Income Tax Credit is a huge mistake. The idea should be to widen the entire tax base, not shift the burden. If it doesn't lower taxes for everyone it's a non starter in my book.

I'm all for eliminating many of the tax expenditures and simplifying the code. I'm all for replacing some income tax revenue with VAT. I'm for the fair tax with some reservations. But the fact is that tax cuts don't fully pay for themselves, and shifting more burden to middle class tax payers is a bad idea.Here is a really good article that explains a little more what is or should be on the table and how big a deal each preference is:

https://www.mercatus.org/publicatio...facebook&utm_medium=research&utm_campaign=SBI
 
Funny that when taxes are raised by liberals that the question never comes up regarding how WE pay for it. Another thing that sticks out like a sore thumb is that it is the first time since Bush did the tax refund that they have said squat about the national debt. I like the Fair Tax best myself, but y'all know as well as I that they may as well not do anything as opposed to even mentioning that. It would basically strip ALL power from Washington....which would be great....but I'm not wearing rose colored glasses today.
 
lotstodo said:
I think that those middle class families with two or fewer kids and a mortgage will be big losers here. I also think that the elimination of the Earned Income Tax Credit is a huge mistake. The idea should be to widen the entire tax base, not shift the burden. If it doesn't lower taxes for everyone it's a non starter in my book.

I'm all for eliminating many of the tax expenditures and simplifying the code. I'm all for replacing some income tax revenue with VAT. I'm for the fair tax with some reservations. But the fact is that tax cuts don't fully pay for themselves, and shifting more burden to middle class tax payers is a bad idea.Here is a really good article that explains a little more what is or should be on the table and how big a deal each preference is:

https://www.mercatus.org/publicatio...facebook&utm_medium=research&utm_campaign=SBI
Click to expand...
I have been to several European countries that have a VAT and I didn't like it as it cost more to make purchases. The VAT in most European countries is imposed on all finished goods. When a store purchases inventory, they must pay a VAT. A VAT is also paid by the customer making purchases in that store. A manufacturer such as BMW pays a VAT on the parts they order from their vendors. For instance, they purchase tires, radios, and many others they don't manufacture themselves. All that increases the price of automobiles. Then there is the VAT the customer pays when purchasing that automobile. I saw far more people in Germany using public transportation than driving their cars to and from work and shopping. The reason is most of them didn't own automobiles. I talked to a few Germans about this and they said it's because the VAT makes them too expensive for them to buy.
 
Boss 302 said:
I have been to several European countries that have a VAT and I didn't like it as it cost more to make purchases. The VAT in most European countries is imposed on all finished goods. When a store purchases inventory, they must pay a VAT. A VAT is also paid by the customer making purchases in that store. A manufacturer such as BMW pays a VAT on the parts they order from their vendors. For instance, they purchase tires, radios, and many others they don't manufacture themselves. All that increases the price of automobiles. Then there is the VAT the customer pays when purchasing that automobile. I saw far more people in Germany using public transportation than driving their cars to and from work and shopping. The reason is most of them didn't own automobiles. I talked to a few Germans about this and they said it's because the VAT makes them too expensive for them to buy.
Click to expand...

The other thing about a VAT or the Fairtax is that it changes the timing of when you pay the taxes.

For those who use credit, now, you purchase the item, then each year pay taxes on the money you use to make the payments. The tax payments are stretched out over time. If you sell the item, you no longer have to pay taxes on the rest of the value.

With VAT and Fairtax, you have to pay all the taxes up front, then borrow the money to pay for the item *and* the taxes too, increasing your interest expense on what you borrow. Then if you sell it, if your buyer doesn't have to pay VAT, you might get some of the VAT you paid back in the value of the item, but I suspect it will be less than what you would have saved in the old system. if they have to pay the VAT on the used item, like a car, then you are just screwed out of the extra taxes you paid.

The transition between schemes has to be managed as well, otherwise those with credit will purchase everything they can *before* the VAT goes into affect, the pay for it with the lower (or no tax dollars in the case of the fair tax) which will allow them to take a large chunk out of the tax income in the short run.

Since the value of homes would jump the amount of the VAT soon after it takes affect, property tax rates would have to change or homeowners would get it int he wallet. The interest paid on the extra 10% to 30% of VAT on a house would make a big crimp in the housing market. Yea, in theory people would have extra money from the reduction in rates of income tax, but do you really see the government making that *balanced*? LOL.

In the long run, having to pay interest on the taxes will make purchasing on credit much less desirable, which will put a crimp on the economy that is all ready taking a hit from the transition purchases. How many people would trade cars every other year if they are paying the total tax on the car every time they purchase one? I think most would drive the sucker into the ground first. Those Germans not only have a more expensive car to deal with, they have to pay interest on the taxes if they borrow it as well.

Not sure that VATs are the best way to go.
 
I'll take any changes that result in a reduction of tax liability. Poll 10 people and you'll get 10 different answers because what's important for one isn't necessarily the same for the other. Just let me keep some extra cash and we'll call it even.

On a related note I want to update that I did receive a check from the IRS for my intentional overpayment. I cashed my 10 cent check yesterday and gave a nickel to the Queen. I had posted a thread about it a while back ago. I sent them a "nice" letter to which I did receive a reply and a reimbursement check.
 
Last edited:
The fair tax is a VAT, it just isn't imposed at the intermediate level. VAT's in Europe vary widely by country and product. In Denmark the VAT on cars is 150%, but nothing on food. The average VAT including the increased price of products to cover the intermediate tax paid by consumers throughout Europe is around 25%. They also have income taxes that go from 15% to 50%. This is the cost of a welfare state.

In the US, a VAT has been discussed as a replacement for a portion of the income tax insuring that everyone except the poorest pays something. I will always support a partial national sales tax as a replacement for some income tax.
 
lotstodo said:
The fair tax is a VAT, it just isn't imposed at the intermediate level. VAT's in Europe vary widely by country and product. In Denmark the VAT on cars is 150%, but nothing on food. The average VAT including the increased price of products to cover the intermediate tax paid by consumers throughout Europe is around 25%. They also have income taxes that go from 15% to 50%. This is the cost of a welfare state.

In the US, a VAT has been discussed as a replacement for a portion of the income tax insuring that everyone except the poorest pays something. I will always support a partial national sales tax as a replacement for some income tax.
Click to expand...
Then that opens the flood gates for the government to increase such a tax when they feel the need. In all honesty, I prefer a flat tax.
 
Germany's national deficit is 2.1 trilllion Euros; $2.5 trillion USD. Germany has a VAT of 19%, which is lower than most European countries. There is a lower VAT rate of 7% that is paid on foods, local transportation use (bus, train each time you ride). Each German province also has a sales tax, which varies from province to province. Still, they have a national deficit 0f $2.5 trillion and their defense spending is much less than ours. Their defense budget is $43.5 billion with an armed forces of 178,000 military personnel and outdated material. One reason why they are so dependent upon our involvement in NATO as we have been paying for most of that funding. The biggest line-item in their budget for 2017 is the labor and social welfare ministry (42.2% of budget). They did pass a balanced budget for 2017. Their total budget for the year is $349 billion USD.
 
The mortgage deduction is back with a $500,000 limit. That's a good compromise. I would still like to see the EITC in there.

Congress has set a 10 year debt increase limit of $1.5 trillion which is disappointing. I would like to see them take the debt seriously and move to reduce it, not increase it. It does however show a realization that these cuts will not "pay for themselves".

Looking forward to scoring for various typical taxpayers. I think there will be some unintended surprise tax increased in some middle class families.
 
The Fair Tax will never happen simply because it takes too much power out of the hands of politicians.

I've been too busy to dig into the tax bill, but as loud as the Democrats are screaming there must be some merit to it.
 
Guard Dad said:
The Fair Tax will never happen simply because it takes too much power out of the hands of politicians.

I've been too busy to dig into the tax bill, but as loud as the Democrats are screaming there must be some merit to it.
Click to expand...

A good bill will have some people in all the parties screaming about something. That would be compromise.
 
As I suspected, JCT has found that both lower and upper middle class average taxpayers will find tax increases over the next ten years. Tax Policy Center released preliminary results but later retracted due to a problem with modeling one of the new credits. They should have new run published tomorrow.

One big problem is that Republicans used some trickery to keep the ten year debt additions under $1.5 trillion. Some of the major middle class tax breaks are set to expire in order to stop the bleeding. Curiously no such sunset for those changes to the upper class tax breaks. They need to do better and hopefully they will.
 
You must log in or register to reply here.
Back
Top