Trump Tax Cut

Bick
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Re: Trump Tax Cut

Post by Bick »

Any chance we could debate specific provisions of the tax bill on its merits, one at a time?

How about doubling the standard deduction? Good or bad, and why?

Seems this would be a positive for middle class in the short run, and have an effect on lowering home prices on the high end by removing an incentive to pay higher prices. That deduction should not have been implemented some 100+ years ago.

I believe limiting deduction of state income and property taxes is going to provide an incentive for state taxpayers to push back on their gov't also.
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Re: Trump Tax Cut

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Your post makes the assumption that I think our taxes are too high and I don't. I understand that there are costs involved in living in a civilized society and I don't have a problem with paying my share. I guess some people really do think those things should be free but I realize that they aren't and I understand that they have to be paid for. And I understand that we need to pay to defend ourselves but I do have a problem with paying for a megalomaniac's dream of controlling the world through military might or being able to destroy the world 100 times over. That, to me, is grossly unnecessary spending.

And I have a problem with the limits on property taxes and state income taxes, especially the latter. That's double taxation. It's being taxed on a tax or taxed for money you don't make, or however you want to look at it. However you choose to look at it, it's wrong.
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Bick
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Re: Trump Tax Cut

Post by Bick »

Bick wrote: Any chance we could debate specific provisions of the tax bill on its merits, one at a time?
Does your response mean "no"?
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Re: Trump Tax Cut

Post by Bick »

John Q. Public wrote: And I have a problem with the limits on property taxes and state income taxes, especially the latter. That's double taxation. It's being taxed on a tax or taxed for money you don't make, or however you want to look at it. However you choose to look at it, it's wrong.
Given this means the highest earners would lose the ability to write off state income and property taxes over $10k, I'm surprised you wouldn't be applauding this. Same with the movement toward lowering the mortgage interest deductability threshold.
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Re: Trump Tax Cut

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My SMH moment is the silence of all the GOP deficit hawks who excoriated Obama for eight years about adding to the national debt. Falsely claiming Obama had doubled the debt when in fact he had not.

Now all those voices are silent.

Can we believe all that acrimony for eight years was a facade? That how it seems.

Keeping in mind that debt is a form of increased taxation.
Last edited by Wabash on Fri Dec 22, 2017 8:32 am, edited 2 times in total.
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Re: Trump Tax Cut

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Bick why do you think I'd be in favor of taxing people on money they don't make? We fought a war over that sort of thing a couple hundred years ago.
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Re: Trump Tax Cut

Post by not4u13 »

A few comments.
1) MDDad is spot on about how corporations work. I'm really surprised anyone here would disagree with it. Business do not invest when they have the money. They invest when they can see an ROI. That can be from increased sales or lower costs. Pay rates will only increase if there is a requirement to increase them, such as competition from labor, government mandate, contractual requirement and rarely due to employee dis-satisfaction. Bonuses are often a different matter so it's possible some of that tax cut will make it's way back to employees, if profits rise and bonuses are tied to profitability.

2) AT&T made this announcement to spend $200,000. That's wonderful news for those workers, but you may have missed the news that they are also laying off 300 workers in North Texas since that news was only covered locally. Might be wise to hold off on all that praise for a company trying to win favor from the Trump administration to get their merger approved.
(https://www.dallasnews.com/business/att ... -next-year).

3) When I look at how the tax plan affects me personally, I think I will come out OK. One reason is I happen to live in a state that has no personal income tax. Losing that deduction doesn't hurt me. I keep my property tax deduction (although it is capped) and my mortgage interest deduction (also capped). I see a lower tax rate. The lower corporate tax rate will help profitability for the company I work for, so I may see a few dollars more in a bonus. I won't expect a wage increase though.

4) The tax cuts take affect in 2019 but I don't think they affect your 2017 filing. I'd be interested to learn if anyone has evidence clearly stating that the changes will affect the 2017 tax year. I know the new tax rates for 2018 will be effective immediately, so deductions will be lower and paychecks will be bigger as early as February, even if Trump signs the bill in January.

5) The long term affects are not yet known, but there is a poison pill of sorts in this bill. The GOP really believes this tax plan will benefit the majority of Americans, despite all the information we have that suggests otherwise. They set the expiration date such that the Dems who don't support it may be in an uncomfortable position of campaigning on a platform of "raising" taxes. Who is going to vote for someone who will promise to increase taxes? This could be a neat little trick to keep the GOP in power, assuming they are actually right and the tax plan does benefit the majority of Americans. If it doesn't, the whole thing could backfire.
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Re: Trump Tax Cut

Post by Bick »

John Q. Public wrote: Bick why do you think I'd be in favor of taxing people on money they don't make? We fought a war over that sort of thing a couple hundred years ago.
What are you talking about? Are you opposed to a phase out of deductions for higher bracket taxpayers?
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Re: Trump Tax Cut

Post by not4u13 »

Bick wrote:Any chance we could debate specific provisions of the tax bill on its merits, one at a time?

How about doubling the standard deduction? Good or bad, and why?
Doubling the standard deduction is good. It helps those who need it most.
Bick wrote:
Seems this would be a positive for middle class in the short run, and have an effect on lowering home prices on the high end by removing an incentive to pay higher prices. That deduction should not have been implemented some 100+ years ago.

I believe limiting deduction of state income and property taxes is going to provide an incentive for state taxpayers to push back on their gov't also.
I don't think it's a good thing to see home prices go down. Unfortunately there are a LOT of people that use their home equity to make large purchases that helps drive a lot of other parts of our economy. That's a bad thing to do, but if home prices fall, we'll see more foreclosures again.

The limit on property tax deductions is also a very bad move. It isn't only the wealthy that have property taxes higher than $10,000 a year. A lot of middle class families that own homes are going to be affected. Property tax rates in San Francisco for example are 1.18%. It's going to take a home worth nearly $1M to reach the maximum, where the median home price is $1.2M. There are 13 states with property taxes above $1.5%. That's just the state tax rate mind you. When you add the local taxes, that rate increases substantially. A 2% total property tax means a home value of $500,000 will put you at the maximum. In some areas, that's a LOT of house, but not everywhere the tax rate is so high. Having come from CA, I realize many look at their personal tax bill (which is controlled by Prop 13) and think $10,000 is very high. It's really not.

When you take the property tax deduction and cap it and then limit the mortgage interest deduction to the first $750,000, I think your going to see a bigger impact on the middle class in certain communities than you might imagine. It could also affect the home prices of the higher end homes as home buyers may be looking to stay under that cap in a new home purchase.
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Re: Trump Tax Cut

Post by Bick »

not4u13 wrote: MDDad is spot on about how corporations work. I'm really surprised anyone here would disagree with it. Business do not invest when they have the money. They invest when they can see an ROI. That can be from increased sales or lower costs. Pay rates will only increase if there is a requirement to increase them, such as competition from labor, government mandate, contractual requirement and rarely due to employee dis-satisfaction. Bonuses are often a different matter so it's possible some of that tax cut will make it's way back to employees, if profits rise and bonuses are tied to profitability.
With a lower corporate tax rate, the expected ROI just improved. We should see more investment because of the incentive.

Compare that with one-off stimulus spending. No business can rely upon any sustained future economic activity beyond the windfall, and won't (didn't) invest in larger capacity because of it.

Labor is subject to the same supply / demand forces. Those companies reporting they'll be paying higher wages do so to attract better quality labor. They're able to do so because now they have more reliable discretionary income from the tax cut.
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Re: Trump Tax Cut

Post by Bick »

not4u13 wrote: When you take the property tax deduction and cap it and then limit the mortgage interest deduction to the first $750,000, I think your going to see a bigger impact on the middle class in certain communities than you might imagine. It could also affect the home prices of the higher end homes as home buyers may be looking to stay under that cap in a new home purchase.
Less than 30% of taxpayers itemize deductions, and with the doubling of the standard deduction, that number should drop. The top 10% of the taxpayers make $133k+, so I think it's safe to say those most affected by the phase out of the property tax / mortgage interest deductions are those individuals who can afford it most. Would you agree?
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Re: Trump Tax Cut

Post by not4u13 »

If an investment in plant and equipment can lower costs enough to offset the cost of the equipment, then that is an investment a company will make. The corporate tax rate is not part of that ROI calculation as it is not part of the cost to produce the goods nor is it a cost to acquire the equipment.

If the investment is to increase plant capacity, there must be sales to warrant the capacity increase. A lower corporate tax rate will not be part of that calculation either as that won't affect sales volume. There must be consumer demand to warrant an increase in production that would require an investment in capacity. It's possible that a corporation will decide to lower prices with the tax break to create demand, but its a gamble as their competitors may choose to do the same thing since they also have the tax break, resulting in lower prices but no increase in demand and therefore no additional investment. Not a gamble many will take.

More corporate profits could mean an increase in investment, but only if the company believes that the investment dollars will have a direct ROI that increases profits. That calculation is done before the corporate tax rate is applied. The lower corporate tax rate could have an effect on some investments that were considered marginally profitable or higher risk, but to assume the additional profits gained by lowering the corporate tax rate will have a direct impact on investment is not correct.

I do think it is a good idea to lower the corporate tax rate and I do think some of the savings from lowering the tax rate will benefit consumers and the economy, but I think the cuts were too steep and I believe the expected results are too optimistic. There will be some additional investment. There will be a very modest wage increase at some companies (but only where demand warrants).

Companies that have already established an overseas subsidiary aren't going to change that strategy. They might consider new investment differently when new investment is warranted. Should that new investment be in the US or in their overseas operations? That calculation could be tipped in favor of the US, but if the companies are making a long term investment and are unclear of the long term position on corporate taxes, they may see that move as too risky and continue to shift production to their overseas subsidiaries.
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Re: Trump Tax Cut

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Wabash wrote: My SMH moment is the silence of all the GOP deficit hawks who excoriated Obama for eight years about adding to the national debt. Falsely claiming Obama had doubled the debt when in fact he had not.

Now all those voices are silent.

Can we believe all that acrimony for eight years was a facade? That how it seems.

Keeping in mind that debt is a form of increased taxation.
After a moment of silence for your latest lament, do you have something meaningful to add to this about a specific provision of the new tax law you agree or disagree with?
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Re: Trump Tax Cut

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"afford it most" is an interesting statement. Household expenses vary widely. What one person views as a necessary expanse, another may view as a luxury. I think you'd be hard pressed to convince a lot of those folks in that top 10% that they can "afford it most". Looking solely at income is deceiving.

My point is that this group of people that itemize that will be affected is still a very large number of Americans (44M).

Once you get to incomes over $75,000, the numbers change dramatically with nearly 60% choosing to itemize. Middle class starts at approximately $55k nationwide and is much higher in some states. At $55k, over 40% of households choose to itemize.

https://taxfoundation.org/who-itemizes-deductions/

My position is that these changes do hurt middle class homeowners. I stated earlier that I do think increasing the standard deduction is a good thing and it will likely change who itemizes, but that just means it's simpler to file the paperwork. It's not clear it will lower the actual tax burden.
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Re: Trump Tax Cut

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Bick wrote: After a moment of silence for your latest lament, do you have something meaningful to add to this about a specific provision of the new tax law you agree or disagree with?
That it adds debt and effectively increases taxes.

I thought that would have been clear.
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Re: Trump Tax Cut

Post by Bick »

Not4u - the threshold for ROI was just lowered, increasing the incentive to take the risk of capital investment. For corporate america, the decisions for what to do with after-tax profits will either be greater returns to shareholders thru dividends or reinvestment for future growth. Either way, the $$ goes from the gov't hands into private hands.
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Re: Trump Tax Cut

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Wabash wrote: That it adds debt and effectively increases taxes.

I thought that would have been clear.
Won't know what happens to the debt until the budget is released. I'll bet you a dollar the deficit will be less than the $1.6 Trillion just added in 2016.

Is there a specific provision you disagree with?
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Re: Trump Tax Cut

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The provision(s) that add debt.

Regardless of the amount, debt effectively raises taxes.
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Re: Trump Tax Cut

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As the Trump said its about the "numbers". Significant increases in jobs, wages, gdp and other indicators. Only way to justify the changes.
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Re: Trump Tax Cut

Post by ShiftyMutt »

On a personal note, and as a California homeowner.. I have unrepaired earthquake damage that I didn’t want to fix until I was ready to move (which is soon now). Apparently included in this new bill, you cannot write off your losses from earthquakes and wildfires. Anyone know if this is retroactive to 2017 taxes or going forward? In other words, I have about 2 weeks to fix it to get the write off or am I already screwed?
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