Trump's Full Court Press on Tax Reform

[malchior]

Yes it is Kevin Drum and he is a huge lefty but he just posted some decent infographics that give some insight into how targeted these policy changes are at Democratic voters.

[gbasden]

Second, is the "SALT deduction bad". I said it was, because it distorts consumption decisions, both along the public vs private dimension (public ponies versus private ponies) and along the intensive dimension (yes to ponies or no to ponies). I'm 100% confident in this argument. It's basic economics.

I completely and utterly don't understand your argument and I'm hoping you can dumb it down for me. As the father of an autistic son, the first thing that springs to my mind is that your argument implies that since high tax California offers fantastic services to help autistic children and low tax Texas does not, that ordinary people will start demanding their "pony" and want the same services for their non-autistic children? What are these state pony services that get distorted? If I make a better DMV (hypothetically speaking only) and my state's citizens get faster, better service, how is this distortion and of what? If my state builds better roads or bridges or dams how does that distort anything?

I just rationally do not understand this innate conclusion that anything private sector does and pays for is good, but anything the public sector pays for is bad and distorting. Can you help me understand the argument in a way I can comprehend?

On a completely separate point, I'd like to agree that personally I would be fine with tax rates going up if it were part of a rational plan that would benefit the country, and not to (fractionally) finance a huge windfall for the wealthiest Americans.

[Remus West]

My people online are reporting that the Cut Cut Cut Plan will allow you to purchase a 529 College Savings account for your unborn child, i.e. a developing fetus.

Because if you can purchase a college education for a fetus, life must have started at conception ERGO no abortion. I really don't know any other way to interpret that, but clearly this is a well-thought out policy adjustment designed to really address taxation issues in the United States.

If they leave the child tax credit in place I look forward to claiming the intent to have an unlimited number of children throughout my remaining years. 1 child per sperm.

[raydude]

My people online are reporting that the Cut Cut Cut Plan will allow you to purchase a 529 College Savings account for your unborn child, i.e. a developing fetus.

Because if you can purchase a college education for a fetus, life must have started at conception ERGO no abortion. I really don't know any other way to interpret that, but clearly this is a well-thought out policy adjustment designed to really address taxation issues in the United States.

If they leave the child tax credit in place I look forward to claiming the intent to have an unlimited number of children throughout my remaining years. 1 child per sperm.

So what happens when an unscrupulous or incompetent OBGYN declares you have 8 unborn fetuses in your womb, you set up 8 529 plans, but only 1 baby comes out? Could one sue for a waiver on the 10% penalty on taking out the money on the premise that you created 8 plans in good faith?

[El Guapo]

My people online are reporting that the Cut Cut Cut Plan will allow you to purchase a 529 College Savings account for your unborn child, i.e. a developing fetus.

Because if you can purchase a college education for a fetus, life must have started at conception ERGO no abortion. I really don't know any other way to interpret that, but clearly this is a well-thought out policy adjustment designed to really address taxation issues in the United States.

If they leave the child tax credit in place I look forward to claiming the intent to have an unlimited number of children throughout my remaining years. 1 child per sperm.

As always, it gets worse. The bill also would eliminate the deduction for adoption costs. Which I understand can run in the range of $25,000 - $50,000ish. And of course, adoption is the pro-life solution for unwanted pregnancies.

[El Guapo]

Great column on how the Republican tax plan is political suicide.

[Pyperkub]

We've talked a lot about the reforms to the individual's taxes - but do the OO'ers have any input on the corporate changes?

I found this, which goes over some of the changes:

Business Taxes

Corporate Tax Rate


Lowers the corporate income tax rate from 35 to 20 percent.

Pass-Through Rate


Creates a new 25 percent maximum tax rate on pass-through business income, subject to anti-abuse rules.

Pass-Through Anti-Abuse Rules


Begins with assumption that 70 percent of income derived from a business is compensation subject to ordinary rates and 30 percent is business income subject to the maximum 25 percent rate for active owners. Businesses can “prove out” of the 70/30 split based on demonstrated return on business capital at the short-term applicable federal rate (AFR) plus 7 percent. Certain specified service industries, like health, law, financial services, professional services, and the performing arts are excluded from the 70/30 split and can only claim the benefit of the lower pass-through rate to the extent that they can “prove out” their business income.

Capital Investment


Allows full expensing of short-lived capital investment (currently subject to “bonus” depreciation), such as equipment and machinery, for five years. Increases Section 179 expensing from $500,000 to $5 million and increases the phaseout threshold from $2 million to $20 million.

Tax Treatment of Interest


Limits the deductibility of net interest expense on future loans to 30 percent of earnings before interest, taxes, depreciation, and amortization (EBITDA), with a five-year carryforward, for all businesses with gross receipts of $25 million or more.

Net Operating Loss Provisions


Allows Net Operating Losses (NOLs) to be carried forward indefinitely and increased by a factor reflecting inflation and the real return to capital, while restricting the deduction of NOLs to 90 percent of current year taxable income and eliminating NOL carrybacks, except for one-year carrybacks for certain disaster losses.

Business Credits and Deductions


Eliminates the Section 199 manufacturing deduction and the New Market Tax Credit, along with like-kind exchanges for personal property (retained for real property), and deductions for entertainment. Eliminates credits for orphan drugs, private activity bonds, energy, rehabilitation, and contributions for capital, among others.

Alternative Minimum Tax


Eliminates the corporate alternative minimum tax.

International Income


Moves to a territorial tax system, in which foreign-source dividends and profits of U.S. companies are not subject to U.S. tax upon repatriation. However, 50 percent of excess returns (those greater than a routine return, defined as AFR plus 7 percent) earned by controlled foreign corporations (CFCs) are included in U.S. shareholders’ gross income. In addition, payments made from US corporations to a related foreign corporation are subject to a 20 percent excise tax unless the US corporation claims the transaction as effectively connected income (ECI). ECI is added to the taxable income of the US corporation, but the related foreign corporation’s expenses can be deducted from this income.

Deemed Repatriation


Enacts deemed repatriation of currently deferred foreign profits, at a rate of 12 percent for cash and cash-equivalent profits and 5 percent for reinvested foreign earnings.

I've read that the hedge-fund exception allowing hedge-fund managers to have their income taxed at capital gains rates is still there, but from looking at the pass-through rate provisions in the business section, I'm not necessarily seeing it - can someone clarify?

I also wonder why we don't have progressive rates for corporations/business income - is there an historical reason here, or is it more just that the more libertarian wing of the GOP has managed to write these rules to block that out?

[Remus West]

Great column on how the Republican tax plan is political suicide.

Suicide for their political career maybe but it will sure provide a nice golden parachute from their donors I'm sure.

[LawBeefaroni]

Looks like it doesn't mess with the 401(k) deduction, at least.

Call me cynical, but it just says it "retains popular options." They could still be lowering contributing caps. They wouldn't put that on their sell sheet.

[El Guapo]

Great column on how the Republican tax plan is political suicide.

Suicide for their political career maybe but it will sure provide a nice golden parachute from their donors I'm sure.

Right, but the thing is that on its face this bill can't pass the Senate in its current form. Under reconciliation rules it has to be deficit neutral after 10 years in order to qualify - that's why the Bush tax cuts sunsetted after 10 years. This is not deficit neutral. So Ryan's going to be asking his members to pass a politically toxic bill that the Senate will have to rewrite anyway.

[Chaz]

The new lower maximum rate on pass through businesses should be great for Trump, since his business is set up as a pass through.

[PLW]

I completely and utterly don't understand your argument and I'm hoping you can dumb it down for me. As the father of an autistic son, the first thing that springs to my mind is that your argument implies that since high tax California offers fantastic services to help autistic children and low tax Texas does not, that ordinary people will start demanding their "pony" and want the same services for their non-autistic children?

There's two issues. 1) Distortion between public and private and 2) the level of provision.

For 1), They might get publicly provided services instead of privately provided, even when private provision is actually cheaper to produce/provide, b/c the publicly provided version is actually subsidized by the federal govt (since it's paid for with pre-tax dollars).

For 2) The problem is not that non-autistic children might get autisim treatment, but rather that we might get more autism treatment than is efficient (i.e., more than you would be willing to pay for if it wasn't tax advantaged).

What are these state pony services that get distorted? If I make a better DMV (hypothetically speaking only) and my state's citizens get faster, better service, how is this distortion and of what? If my state builds better roads or bridges or dams how does that distort anything?

All those things cost resources. Making a bridge better is costly. There is some point at which it doesn't make sense to make it even better/faster/bigger. The resources are better spent elsewhere (bigger better/faster TVs! or ponies!). But when bridges are subsidized, relative to TVs, as they are when you buy bridges pre-tax and TVs post-tax, people will choose wrong. They will get more bridge and less TV than they should.

[gbasden]

I completely and utterly don't understand your argument and I'm hoping you can dumb it down for me. As the father of an autistic son, the first thing that springs to my mind is that your argument implies that since high tax California offers fantastic services to help autistic children and low tax Texas does not, that ordinary people will start demanding their "pony" and want the same services for their non-autistic children?

There's two issues. 1) Distortion between public and private and 2) the level of provision.

For 1), They might get publicly provided services instead of privately provided, even when private provision is actually cheaper to produce/provide, b/c the publicly provided version is actually subsidized by the federal govt (since it's paid for with pre-tax dollars).

For 2) The problem is not that non-autistic children might get autisim treatment, but rather that we might get more autism treatment than is efficient (i.e., more than you would be willing to pay for if it wasn't tax advantaged).

What are these state pony services that get distorted? If I make a better DMV (hypothetically speaking only) and my state's citizens get faster, better service, how is this distortion and of what? If my state builds better roads or bridges or dams how does that distort anything?

All those things cost resources. Making a bridge better is costly. There is some point at which it doesn't make sense to make it even better/faster/bigger. The resources are better spent elsewhere (bigger better/faster TVs! or ponies!). But when bridges are subsidized, relative to TVs, as they are when you buy bridges pre-tax and TVs post-tax, people will choose wrong. They will get more bridge and less TV than they should.

OK, I can kind of vaguely see that. I'm not sure there is such a thing as too much autism assistance, which is why my child is self sufficient, going to go to college and be a productive member of society and my friend's son in Texas is completely dependent on his parents and will probably be a burden on society. To me, the same is true of roads - I'd much rather accept some inefficiency in pricing than have everything be built by the private sector and have endless toll roads that increase my commute inefficiency. Or bridges that are built to a higher standard and don't collapse.

[NickAragua]

The new lower maximum rate on pass through businesses should be great for Trump, since his business is set up as a pass through.

Is this a poop joke? It looks like a poop joke.

[ImLawBoy]

the Health Care deduction elimination is going to absolutely crush us next year if it becomes law.

I'm surprised that nobody is talking about this...maybe because the threshold is so high? People with huge medical bills need relief more than anyone. And with the Republicans actively working to ruin the health insurance marketplace as the American population ages, that's going to be more and more of us.

I haven't looked too closely into the tax bill at this point, but this hasn't raised my personal alarms. Despite my family's excessive medical costs, we've rarely actually hit the spend level that would make it worth it to deduct medical expenses. I don't know if it's a sliding scale thing because of income or what, but the only time we hit it was when we bought a wheelchair accessible van. We were able to deduct the $27K cost of the wheelchair conversion as a medical expense (although not the cost of the actual van - just that conversion cost).

From what little I've read so far, the changes to deductions for dependents is more likely to harm me. I saw somewhere that said that families with 3+ kids (I have 3) are likely to have their taxes go up because of this.

[Isgrimnur]

Power politics

The nascent market for electric cars will suffer a big setback if the Republican tax plan released on Thursday enters into law. Among the changes to the current tax code would be an end to the Plug-In Electric Drive Vehicle Credit. That's the tax incentive that currently means up to $7,500 back from the IRS when you purchase a new battery or plug-in hybrid electric vehicle.
...
Things aren't quite as bad on the renewable energy side. There are new incentives to invest in small-scale wind, geothermal, solar, or fuel cell energy properties, and others have been extended. The nuclear industry also gets an extension on a tax incentive that was meant to expire in 2021. But the wind industry won't be happy. Currently, wind power qualifies for a 2.3 cents/kWh credit; under the new scheme this would be just 1.5c/kWh.

[Pyperkub]

the Health Care deduction elimination is going to absolutely crush us next year if it becomes law.

I'm surprised that nobody is talking about this...maybe because the threshold is so high? People with huge medical bills need relief more than anyone. And with the Republicans actively working to ruin the health insurance marketplace as the American population ages, that's going to be more and more of us.

I haven't looked too closely into the tax bill at this point, but this hasn't raised my personal alarms. Despite my family's excessive medical costs, we've rarely actually hit the spend level that would make it worth it to deduct medical expenses. I don't know if it's a sliding scale thing because of income or what, but the only time we hit it was when we bought a wheelchair accessible van. We were able to deduct the $27K cost of the wheelchair conversion as a medical expense (although not the cost of the actual van - just that conversion cost).

From what little I've read so far, the changes to deductions for dependents is more likely to harm me. I saw somewhere that said that families with 3+ kids (I have 3) are likely to have their taxes go up because of this.

We've itemized them maybe 4 of the past 10 years or so. We're also expecting some large, uncovered medical expenses next year that I don't know if I can accelerate into this calendar year, it already being November...

[Zaxxon]

Hey, look: this would kill the EV tax credit, as well. Tilting purchase decisions toward gas guzzlers will help MAGA, for sure.

And I must be missing something on the 529 commentary above: you've always been able to open a 529 plan before assigning it to a live child, and you've always been able to reassign them as needed.

[Kraken]

Hey, look: this would kill the EV tax credit, as well. Tilting purchase decisions toward gas guzzlers will help MAGA, for sure.

Nazi Germany built some coal-burning cars. Why don't we have those now? Nazis and coal are two of Trump's favorite things.

[Fitzy]

Education gets more expensive. My wife just started her doctorate at Penn and I'm paying off my Master's. If this goes through, it will hurt next year. Assuming they don't make it retroactive in which case it will hurt this year.

Suckers.

If all deductions were removed I could sort of see the point at least everyone would probably be hurt. This plan is just picking winners and losers. There's no reform. And living in Maryland I can't even call my rep to bitch them out.

[Chaz]

Can't have folks getting too educated.

[Blackhawk]

This was the answer when someone posed the question, "How can we grow our base?"

[Smoove_B]

And I must be missing something on the 529 commentary above: you've always been able to open a 529 plan before assigning it to a live child, and you've always been able to reassign them as needed.

I...don't think that's true. I just randomly pulled up the Vanguard site on opening a 529 and Step #1 is:

Have the Social Security number, birth date, and address of the beneficiary of the 529 account (as well as your own).

The changes proposed in the Cut Cut Cut Plan would mean all you need is a doctor to indicate you're pregnant and then you can assign the 529 to a fetus. How that happens without a social security number I have no idea, but maybe there's another plan in the works to allow people to obtain a SSI# when they get a pregnancy test at the supermarket? Read more here.

I would also like to point out how interesting it is that the GOP wants to allow a fetus to save money, but once that child is born? No health care for you.

[Zaxxon]

You need to assign it to someone. Doesn't have to be your child, and there's no penalty for reassigning. Sorry, I should have been more clear-wasn't trying to imply you could assign to a fetus today, but rather that from a practical standpoint you can already open one early and reassign as needed.

[RunningMn9]

Yeah, 529s aren’t really tied to a person. I mean they are, but not really since you can reassign them so easily.

[stessier]

Hey, look: this would kill the EV tax credit, as well.

I saw this as well. So when would this theoretically occur if it were to pass? My current savings plan (barring catastrophe) has me buying one in March, 2019. If I move that up to 2018, will I get in under the wire? Or does it have to be this year to be safe? $5k is a lot of money to miss out on.

[Zaxxon]

The bill ends the EV credit for vehicles placed into service after 12/31/2017. If it passes as-is.

[stessier]

Ugh....that may not be possible.

[Zaxxon]

Yeah, that's not a lot of notice. And with the new Leaf and Model 3 not even (really) available in the US until next year, the choices are limited.

I hear the Bolt can be had for way under sticker if that meets your needs, though.

[Rip]

Democrats could end up pushing the Republican tax bill over the finish line in Congress.

“I’m not ruling out supporting it. Heck, no,” Sen. Joe Manchin (D-W. Va.) told Politico. Manchin is gearing up for a re-election fight next year in his red state.

And several vulnerable Dems — including Sens. Heidi Heitkamp of North Dakota and Joe Donnelly of Indiana, as well as moderate House members like Henry Cuellar of Texas — are signaling their potential support for the bill.

But Democratic leaders Rep. Nancy Pelosi and Sen. Charles Schumer are pushing their members to hold firm.

President Trump has wooed the wavering Dems by name in speeches on the tax plan.

http://nypost.com/2017/11/04/dems-could ... -congress/

[pr0ner]

So why do you support this tax "cut" plan, Rip?

[Rip]

I don't support or oppose it. It is pretty much a wash for me.

[Zarathud]

Pretty telling that the bill's only vocal supporter gets nothing, while most of the rest of us get screwed.

Who wins? Trump and people already doing well.

This isn't tax reform. It's a crass tax day payoff to Republican corporate and wealthy supporters. With barely any gold spray paint.

[pr0ner]

I don't support or oppose it. It is pretty much a wash for me.

That's pretty terrible considering the tax bill is uniformly awful unless you're super wealthy.

[Zaxxon]

Yeah. Sorry, Rip, but you don't get to be ambivalent on this one. This bill will mark a huge change to tax policy nationwide. Either you think it's a positive change or you can oppose it.

Don't get to give it a pass just because folks with the right letter behind their name submitted it.

[RunningMn9]

Is anyone surprised at his ambivalence when it comes to paying taxes?

[pr0ner]

Is anyone surprised at his ambivalence when it comes to paying taxes?

I'm not.

[Zaxxon]

Is anyone surprised at his ambivalence when it comes to paying taxes?

I'm not.

We'll accept that, but the complete answer was 'no, no one is surprised.'

[pr0ner]

Is anyone surprised at his ambivalence when it comes to paying taxes?

I'm not.

We'll accept that, but the complete answer was 'no, no one is surprised.'

I was being succinct.

[Chaz]

He doesn't have ambivalence about paying taxes, he has ambivalence about anything that doesn't directly affect him, personally. From his postings here, Rip pretty much doesn't give a rat's ass about anything happening to anyone else, good or bad. As long as this new bill doesn't do anything to him that he considers bad (like being mandated to buy health insurance), he doesn't care about anything bad that it does to anyone else.