OT: Income tax changes

[B. Winstonworth]

The carried interest loop hole is one that should have been nixed completely instead of eliminating the ability of hard working middle class Americans like @ArmyTiger27 's ability to deduct legitimate job expenses. Or better yet, capital gains shielded by the lower rate should be capped for everyone to keep billionaires from having a lower effective tax rate than @ArmyTiger27 .

The sad thing is most of Trump's base have no idea how horrible a deal this tax reform bill was for this country and middle America long term.

TBF, you also don't understand carried interest if you're referring to hedge funds. The benefits largely didn't apply to hedge funds before, and are effectively gone for hedge funds under the new law with the 3 year holding requirement for carried interest.

 

[1Clemzunfan]

TBF, you also don't understand carried interest if you're referring to hedge funds. The benefits largely didn't apply to hedge funds before, and are effectively gone for hedge funds under the new law with the 3 year holding requirement for carried interest.

I'm talking about fund managers subject to carried interest. Yes, the 3 year holding impacted them but there was a loop hole that excluded corporations and led to many if not most of the fund managers setting up a corporate structure to shield themselves and protect their carried interest from the 3 year holding rule.

 

[whitesixmile]

It's funny that some people think that the people in the multi-million to billion status are some how getting a paycheck monthly for whatever it is you all believe is their annual wealth accumulation divided by 12. Bezos is considered the wealthiest man in the country. He doesn't have a billion dollars sitting in a bank account somewhere and he doest have some direct deposit where he receives $40mm monthly and can look at his SS and other deductions. And the crazy socialist who want to take all this money away from the wealthy are just jealous and don't have the drive or intelligence to build their own massive wealth themselves. They should be looking up to the industry elite, not down.

I don’t agree with this at all. I’m not complaining about how much I pay I just think there is a better way to spread the tax burden where we can get this country back out of debt and stop pissing about how high taxes are. I have a friend who has 8 or 9 biusnesses and calls himself a “ job creator “ funny thing is the same 4 or 5 guys work all the different companies so he ends up not paying taxes every year. Well the business he had needs roads to drive on which I have to pay taxes for so he can deliver his product. Things like this pisses me off. Another thing that pisses me off in a multi millionaire complaining about taxes and wanting to move to another country when they probably made their millions off the backs of hard working middle class.

 

[scotchtiger]

It will impact more than you think. Many of those people in sales, of which there are a good many, stand to lose or net nothing depending on their other deductions. There are at least 4 people in this thread alone that are losing and these are middle class wage earners.

When middle class wage earners are netting nothing and in some cases losing while lower wage earners are netting an immaterial savings of $1k to $2k, it's a bad deal when anywhere from $4 Trillion to $7 Trillion dollars will be added to the deficit. That deficit spending will be to fund the material tax savings in this bill that are going to the rich and corporations who are just doing stock buybacks and raising executive salaries and bonuses. Add in the long term cost to those lower wage earners due to the deficit spending and it will cost them more than the $1k to $2k they are saving in other benefits, interest expense, stifled wages, inflation, etc. etc.

94% of Americans are expected to take the standard deduction. The group that falls into this category has to be a very small percentage of the remaining 6%.

I don’t buy that 4 people in this thread will be adversely affected. I don’t think they understand the net impact when all factors are applied.

Keep in mind that I’m losing more deductions than what anyone else ITT has described and I am also in sales. I get it.

 

[CUPLAYER1]

Your taxes doubled?

Return doubled

 

[SaltyMeatBallsOO]

My wife and I will be in the new 32% tax bracket. I think our taxes owed will go down slightly but I'm not even sure about that due to the complexity of our taxes. We pay a shitload in taxes and I feel like we could use a break. I wish we didn't have to pay for as many freeloaders so they could cut taxes even further!

 

[1Clemzunfan]

94% of Americans are expected to take the standard deduction. The group that falls into this category has to be a very small percentage of the remaining 6%.

I don’t buy that 4 people in this thread will be adversely affected. I don’t think they understand the net impact when all factors are applied.

Keep in mind that I’m losing more deductions than what anyone else ITT has described and I am also in sales. I get it.

You may be in sales but you also stated earlier that you are benefiting from the preferential treatment of pass through income from this tax bill. Most people in sales are not running a business where they can take advantage of those rules nor take advantage of the deductions that a business owner can. Those in this thread who indicate they are being hurt or are not benefiting in any way do not sound like they are in the same position.

I know my situation and you can believe it or not. I dont care. I know it is not representative of the majority. But I dont think you understand fully a lot of economic factors and drivers outside of those impacting your personal situation. You seem to look at everything from a very narrow perspective primarily driven by what will benefit you most personally today.

Sounds like you have come out ahead on this bill with your personal tax bill. Good for you. Seriously. A lot of less fortunate people will also think they are coming out ahead when they get what is a tiny tax break relative to the overall burden this bill will place on all of us with increased deficit spending to the tune of an additional $300 billion to $700 billion a year in coming years.

It's a bad deal for America and it was passed at a time when it was not needed. The bulk of the benefit was not structured to benefit the bulk of the people in a proportionate manner. Taking on massive debt spending when the economy was already strong and had been strong for several years running was extremely short sighted and frivolous. There will be a price to pay down the road. The winners in the long run, when all costs are factored, will be a small fraction of tax payers. And you can guess who they will be.

 

[B. Winstonworth]

I'm talking about fund managers subject to carried interest. Yes, the 3 year holding impacted them but there was a loop hole that excluded corporations and led to many if not most of the fund managers setting up a corporate structure to shield themselves and protect their carried interest from the 3 year holding rule.

Lol. Fund managers aren’t putting corporate blockers in between themselves and the fund to keep carried interest. Again, this is a non-issue for Hedge Funds because 90% of their trading is held for less than a year, so their “carried interest” is all short term capital gains. But if they put a corporate blocker between them, the corporation would pay tax and then the manager’s paying again on what will almost certainly be non-qualified dividends (i.e., normal income rates).

Feel free to be angry at private equity fund managers, but you should at least get your talking points straight. (To your credit, you at least dropped the hedge fund bit in this post).

 

[scotchtiger]

You may be in sales but you also stated earlier that you are benefiting from the preferential treatment of pass through income from this tax bill. Most people in sales are not running a business where they can take advantage of those rules nor take advantage of the deductions that a business owner can. Those in this thread who indicate they are being hurt or are not benefiting in any way do not sound like they are in the same position.

I know my situation and you can believe it or not. I dont care. I know it is not representative of the majority. But I dont think you understand fully a lot of economic factors and drivers outside of those impacting your personal situation. You seem to look at everything from a very narrow perspective primarily driven by what will benefit you most personally today.

Sounds like you have come out ahead on this bill with your personal tax bill. Good for you. Seriously. A lot of less fortunate people will also think they are coming out ahead when they get what is a tiny tax break relative to the overall burden this bill will place on all of us with increased deficit spending to the tune of an additional $300 billion to $700 billion a year in coming years.

It's a bad deal for America and it was passed at a time when it was not needed. The bulk of the benefit was not structured to benefit the bulk of the people in a proportionate manner. Taking on massive debt spending when the economy was already strong and had been strong for several years running was extremely short sighted and frivolous. There will be a price to pay down the road. The winners in the long run, when all costs are factored, will be a small fraction of tax payers. And you can guess who they will be.

My wife is 1099 and we have her structured so that the 1099 recipient is actually a SCorp. SCorp pays her a “salary” and the rest is a distribution not subject to self-employment tax. Also benefits from the pass through provision.

I’m in sales and am W2. I don’t have any pass through benefits.

The vast majority of people will see a net tax reduction. We have a national spending problem that needs to be addressed. Entitlements have grown to a ridiculous level. Those in my situation were being drilled with an unfairly high effective rate and this was a small but welcome relief.

Hopefully we vote this in leaders that will address the spending issue.

 

[johnhugh]

The carried interest loop hole is one that should have been nixed completely instead of eliminating the ability of hard working middle class Americans like @ArmyTiger27 's ability to deduct legitimate job expenses. Or better yet, capital gains shielded by the lower rate should be capped for everyone to keep billionaires from having a lower effective tax rate than @ArmyTiger27 .

When campaigning to the blue collar Americans who elected him, Trump said that he was for eliminating the carried interest loop hole. See article here. But, guess what happened? A group of hedge fund managers like Anthony Scarramuchi, John Paulson, etc. started throwing fundraisers for Trump with their cronies at a cost of $250k a plate. Trump gave them favor in naming them to his list of economic advisers as tax policy was being formed. Next thing you know, @ArmyTiger27 loses his tax deduction for job related expenses so Scarramuchi, Paulson and other hedge fund managers come out with the carried interest loop hole untouched and other tax advantages to boot. See the latest from Paulson here and as he brags about his support for Trump's tax and economic policy which he helped draft to shield him and his cronies and keep their effective tax rate at single digits.

The sad thing is most of Trump's base have no idea what carried interest is much less how horrible a deal this tax reform bill was for this country and middle America long term.

I’m not sure most of Trump’s base thinks.

 

[1Clemzunfan]

Lol. Fund managers aren’t putting corporate blockers in between themselves and the fund to keep carried interest. Again, this is a non-issue for Hedge Funds because 90% of their trading is held for less than a year, so their “carried interest” is all short term capital gains. But if they put a corporate blocker between them, the corporation would pay tax and then the manager’s paying again on what will almost certainly be non-qualified dividends (i.e., normal income rates).

Feel free to be angry at private equity fund managers, but you should at least get your talking points straight. (To your credit, you at least dropped the hedge fund bit in this post).

As for the corporation loop hole, certainly noone was creating C Corps because of the double taxation. S Corps and LLCs were, however, created with the idea of avoiding the 3 year rule. The tax law was not specific to exclude S Corp and LLCs. It only says corporations. The IRS issued a guidance to say the "intent" of the law was to exclude S Corps and LLCs, but that will be challenged by those who moved to form LLCs and S Corps because it is a guidance and not specifically stated in the law. The law was not specific to what type of corporations. Maybe they lose out, but the law was not specific.

 

[firegiver]

This. I don't come out a winner. I am probably in a similar situation to @ArmyTiger27 . I itemized a good bit already between tithes, other charitable giving, mortgage interest, Iptay dues, unreimbursed business expenses, etc. so increasing the standard deduction didnt do anything for me. We also don't have kids, so no benefit there.

In fact, when you take away my wife's ability to deduct her unreimbursed business expenses (she is in sales and the amount was significant) and Iptay dues, etc. I am losing a great deal of ability to deduct because those were items that would still be above the $24k standard deduction that I wont get credit for when I itemize. I pretty much exceeded the increase in standard deduction with just tithing and mortgage interest, but taking those unreimbursed business expenses and Iptay dues off the top hurt.

If you didnt itemize before because you didnt give much to charity, have much mortgage interest, tithe, give to Iptay or have unreimbursed job expenses, then you are gaining a little. If you are a very wealthy person or corporation, you are very happy. Meanwhile I will see no benefit while I watch deficit spending increase substantially to around $1 Trillion annually and growing.

I think Mortgage interest rate is still deductible even if you do standard deduction. Im certain actually.

 

[1Clemzunfan]

I think Mortgage interest rate is still deductible even if you do standard deduction. Im certain actually.

Mortgage interest is still deductible up to a limit, but you would have to itemize to take it. If you take the standard deduction that means you arent itemizing. You cant take both itemized deductions and the standard deduction. That is not a change, that has always been the case.

 

[firegiver]

Mortgage interest is still deductible up to a limit, but you would have to itemize to take it. If you take the standard deduction that means you arent itemizing. You cant take both itemized deductions and the standard deduction. That is not a change, that has always been the case.

ah my bad. I'm using turbo tax for the 8th year. They applied my standard deduction and still wanted to know about mortgage interest and childcare costs.

 

[FLaw47]

How do we feel about mortgage interest being deductible as a thing? I think there are pretty compelling arguments against it.

1) It artificially inflates the cost of housing
2) It's almost exclusively a middle class and up tax benefit. Doesn't do anything to help poorer people

I don't know that home ownership is something that we specifically want to incentivize as a general rule.

 

[SixFiveTiger]

I am all for taxing my dollar if I can see legitimate results to where it's going, IE infrastructure for roads, schools who actually put better plans in place for education opportunities and salaries for teachers. I want to see a nation wide safety measures to eliminate the fear when we drop off our kids that there are measures in place to try to prevent tragedy, things of that nature. But we can all dream right

 

[scotchtiger]

2) It's almost exclusively a middle class and up tax benefit. Doesn't do anything to help poorer people

I don't know that home ownership is something that we specifically want to incentivize as a general rule.

Aren’t all tax benefits middle class and up? Poor people don’t pay income tax. The middle 20% pays low single digits per my chart above. Pretty much any tax incentive has to be aimed at those who actually pay taxes.

Why wouldn’t we want to incentivize home ownership? So people can waste money on rent and never build equity and long term wealth?

 

[FLaw47]

Aren’t all tax benefits middle class and up? Poor people don’t pay income tax. The middle 20% pays low single digits per my chart above. Pretty much any tax incentive has to be aimed at those who actually pay taxes.

Why wouldn’t we want to incentivize home ownership? So people can waste money on rent and never build equity and long term wealth?

I get pretty tired of this mindset that Taxes MUST go down > Rich People Pay the Most Taxes > Focus Tax Decreases on the Rich.

I say that these tax cuts are a BAD thing full stop. Even if they were going primarily to the middle class they'd be bad (but better than status quo). They're marginally helping people who could use more help and significantly helping people for whom the marginal utility of a dollar is quite low.

To answer your second question: home ownership can be bad for a few reasons
1) It decreases geographic mobility which is pretty awful economically and also diverts power away from labor and towards capital.
2) Home owners (and I can't find stats on this so if I'm wrong I'll just own up to it) are going to disproportionately live in single family dwellings. Single family dwellings take up more space and thereby decrease housing density and drive up housing costs. From an economics perspective we'd be better off all living in multi family dwellings but I'm not planning on giving up my house anytime soon.
3) Since the mortgage interest deduction artificially increases housing costs, it drives up housing prices for landlords (since they're often not going to be able to deduct interest) which in turn drives up rent for renters.
4) Since it artificially increases housing costs, it punishes homeowners who don't have a mortgage.

That's not to say that home ownership is a bad thing but it comes with costs. I'm just not sure that the government needs to be in the business of subsidizing loans.

 

[scotchtiger]

I get pretty tired of this mindset that Taxes MUST go down > Rich People Pay the Most Taxes > Focus Tax Decreases on the Rich.

I say that these tax cuts are a BAD thing full stop. Even if they were going primarily to the middle class they'd be bad (but better than status quo). They're marginally helping people who could use more help and significantly helping people for whom the marginal utility of a dollar is quite low.

To answer your second question: home ownership can be bad for a few reasons
1) It decreases geographic mobility which is pretty awful economically and also diverts power away from labor and towards capital.
2) Home owners (and I can't find stats on this so if I'm wrong I'll just own up to it) are going to disproportionately live in single family dwellings. Single family dwellings take up more space and thereby decrease housing density and drive up housing costs. From an economics perspective we'd be better off all living in multi family dwellings but I'm not planning on giving up my house anytime soon.
3) Since the mortgage interest deduction artificially increases housing costs, it drives up housing prices for landlords (since they're often not going to be able to deduct interest) which in turn drives up rent for renters.
4) Since it artificially increases housing costs, it punishes homeowners who don't have a mortgage.

That's not to say that home ownership is a bad thing but it comes with costs. I'm just not sure that the government needs to be in the business of subsidizing loans.

My point was more simple than that. It doesn't make sense to criticize a tax measure because it's "middle class and up" since everyone below middle class doesn't pay income taxes. Hard to do any better than making it free to live in this great nation with all of its benefits.

Tax reform did cap the mortgage interest deduction, so there's that.

 

[FLaw47]

My point was more simple than that. It doesn't make sense to criticize a tax measure because it's "middle class and up" since everyone below middle class doesn't pay income taxes. Hard to do any better than making it free to live in this great nation with all of its benefits.

Tax reform did cap the mortgage interest deduction, so there's that.

To be accurate, poor people don't pay no taxes, they often don't pay federal income tax. They're still subject to payroll taxes, sales tax, property tax, et al. They also contribute to the economy by providing labor and buying things. One's contribution to society isn't solely their federal income tax liability.

No thoughts on my arguments on home ownership? I thought my points were at least interesting (biased, obviously).

 

[scotchtiger]

To be accurate, poor people don't pay no taxes, they often don't pay federal income tax. They're still subject to payroll taxes, sales tax, property tax, et al. They also contribute to the economy by providing labor and buying things. One's contribution to society isn't solely their federal income tax liability.

No thoughts on my arguments on home ownership? I thought my points were at least interesting (biased, obviously).

Sorry, juggling actual work

I specified income tax. Understand they pay other taxes and later get disproportionately high direct benefits from them (ie their ROI from SS and Medicare is much higher than mine). Not complaining, that's just the math. And poor people aren't paying property taxes unless they actually own property.

My initial thought on the home ownership piece is that you are viewing it more like a working herd rather than individuals. People want to put down roots. People don't want to raise their kids in a townhome. They want to be near their family rather than traveling city to city chasing job demand. They want to be able to retire without rent or a house payment. Home ownership is a big part of all of these.

 

[ArmyTiger27]

It’s a pretty simple fix. Your employer needs to have an accountable plan for your mileage and do so by reducing your salary.

I think you meant increasing the salary. Which they better or I'm out.

 

[CLEMSON96JDH]

I think you meant increasing the salary. Which they better or I'm out.

I did not. You get an expense reimbursement check from your employer for your expenses, which is not taxable to you. To offset that, the employer reduces your salary.