Tax Reform Discussion Thread

I don't think it's going to affect me much.

From another thread:

Looking only at federal income tax liability currently vs what is proposed here, and ignoring things like itemized deductions and tax credits, is there a single group of personal income tax payers projected to pay more (again, considering only the new brackets, rates and standard deductions)?

I want to isolate the Federal impact first and put a model together, before moving on to consider the impact of the property tax, mortgage interest and state and local tax deduction caps.

I believe looking only at these factors that everyone would be expected to pay less; if so, that would allow us to limit the conversation only to all of the "other changes."

From another thread (my critique of the NYT review of the plan):

On the whole, a surprisingly objective article from the NYT, although there are a couple points I disagree with and others they either get wrong or omit. A few critiques:

1) It's hard for me to say Trump's tax plan would cause people living in high tax states to "lose" under this plan. That's the high tax states' fault; not Trump's tax plan's fault.

2) They are right that people in high property tax states may pay more, but it's because of the cap on the property tax deduction, not the cap on the mortgage interest deduction. They got this wrong early in the article but got it right later.

3) They are wrong that the deficit impact is ~$1.5T unless growth targets aren't hit, in which case it would be >~$1.5T. My understanding is that it would be ~$1.5T if growth targets aren't hit, and <~$1.5T (and even neutral or net positive) if growth targets are hit.

4) As far as I can tell, "most" middle class families would benefit, not just "some" of them.

5) They forget to call out the lower class as a "winner." If the standard deduction for single and joint filers is roughly doubled, that means those making just above the previous standard deduction limits now won't pay any taxes. This is a very important point. While it's not an element of the plan I agree with, it will be important for proponents of the plan to shout this point from the mountaintops so that the plan, with its net benefits to the majority of taxpayers, can get as much cross-class support as possible. The NYT should know better not to overlook something of this significance.

6) The charity point is a bit of a stretch. While the plan could have ripple effects that negatively impact charities, it would have innumerable other ripple effects that aren't mentioned. For instance, more money in middle class pockets may mean more people choose to go to the movies vs. stay home. But this kind of reasoning is a slippery slope that never ends, and should thus be avoided.

...

I have no problem with the rest of the article, but want to highlight these points so grassroots supporters such as many on TD can articulate all of the benefits and counter the erroneous critiques in our daily ramblings with fellow citizens. This plan should get a groundswell of support as far as I'm concerned.

Otherwise, I applaud the NYT for an honest review of the plan.

LINK /

Looks like a good synopsis, although I didn't realize the student loan interest deduction was eliminated (I haven't made it all the way through the plan yet). A few more:

Eliminates ability to deduct mortgage interest on non-primary residences.

Eliminates ability to deduct interest on mortgage amounts in excess of $500k

...

I realize those points, and the fact even more in the lower class will be paying NO taxes, may not go over well with conservatives. On the whole, though, it's a solid step in the right direction, and the corporate tax reform coupled with the fact the U.S. already has a comparative advantage when it comes to natural gas feedstock prices, should be a boon to manufacturing and accelerate the reshoring trend places like Texas and Louisiana have already been experiencing.

quote:

---

As far as I can tell, "most" middle class families would benefit, not just "some" of them

---

I know quite a few who would stay about even given that itemizing may no longer be in their interest

On top of that killing the student loan deduction is going to cripple quite a few middle class earners/ make them "losers"

You really sound like you are grasping at straws....

My understanding is that the only cohort to be worse off would be (a) those making between $150k and $350k who (b) itemize their deductions.

On the whole, that's going to be offset by the rest of the middle class and the upper class who will benefit, not to mention (and although I disagree with it) the expansion of lower class cohorts who will now pay nothing.

Not everyone can win, but in this case, most do. It's also worth noting the plan isn't trying to "target" the $150k-$350k crowd. It's simply a negative effect of restructuring the itemized deductions.

The student loan interest deduction elimination, I agree, is going to hurt. I say that not because it will impact me (which it will), but because many student loan borrowers are already struggling and that cohort as a whole is looking bubbly. I'd like to avoid another bubble bursting if we can, and doing anything to make the people in the bubble pay more will strain things even more.

Nonetheless, I still believe the net benefits, particularly when considering the corporate benefits and their follow-on benefits to individual citizens, outweigh the cons pretty heavily.

There is no such thing as a perfect tax plan.

quote:

---

My understanding is that the only cohort to be worse off would be (a) those making between $150k and $350k who (b) itemize their deductions.

---

Where are you getting that from? Not arguing, just wondering where I'll shake out. My wife and I fall in that range but my quick glance at Lynxcat's summary had me thinking we'll do better - but our student loans are paid off and I've got Tricare, so I never hit the medical expense threshold anyhow. Selfishly, I'm glad to see those 2 eliminated if it means a more favorable shift elsewhere.

thanks

Yeah, I can see for filers who may be losing itemized deductions and are above the new standard deductions. At least the 25% rate rather than 28% rate above $90k will help soften the blow.

quote:

---

is there a single group of personal income tax payers projected to pay more

---

I hate to sound over the top political, but IMO the biggest hits will be to middle class families who want to have more than a kid or two.