New tax proposals

Parent Cafe
2861

On the argument that a progressive tax system amounts to income redistribution:

Those in the US who are fortunate enough to have wealth are beneficiaries of a system where we respect the rule of law–where property rights are honored, where due process is required before a person can be deprived of liberty or property, where people are largely free to move about without worrying about being kidnapped. We have a relatively stable currency and economic system, relatively few riots in the streets (so far), and we don’t have to pay bribes to carry out business. Strong institutions are the basis for a system that rewards investment. In spite of obvious flaws, it is a remarkable system, and its benefits are particularly important to those with the most money–because they have the most to lose when the system fails. It amazes me to see the wealthiest among us scrounging for a few more dollars that they don’t need, when their quality of life would be so much better if they improved the society around them–so that they wouldn’t have to be bothered with homeless people on the streets, with potholes that bend the wheels of their Maseratis—and ultimately, with the real danger of a collapse of the society that has so benefited them, if trends continue. How satisfying would it really be to be fabulously wealthy, but to live in a gated, guarded enclave with a Favela down the street, and sewage running down the gutters?

Everybody benefits when we have more equal income and wealth distribution, and when our public facilities are properly funded. Even the wealthy. This is why a progressive tax system makes sense.

2862

I just saw an article saying foreign investors in US stocks will pay lower tax on those same stock (cap gains, I assume) than US citizens will. Does that sound right to those who have looked at the bill?

2863

This? https://www.americanprogress.org/issues/economy/news/2017/12/19/444363/final-tax-bill-bigger-win-foreign-investors-entire-working-middle-class-trump-states/

2864

A College Discussion group. New tax plan adds $500 tax credit for having kids in college that didn’t qualify for the child care tax credit once they turned 17. Still, nobody is happy.

2865

@rocket88 said:

I am not against a progressive tax system. I was merely responding to a poster’s assertion that the new tax code is going to redistribute from poor to rich, which is laughably inaccurate. You then make a number of good points about the merits that a progressive tax system provides. But again, I don’t see anyone arguing against a progressive system.

This tax bill is still highly progressive, but just less so than before. In fact, even with the new tax rates, the US system is still as progressive or more progressive than many other countries, depending upon how you look at it. If we measure the difference between the highest and lowest tax brackets. The US brackets will range from 10%-37%, a delta of 27%. The UK has rates that go from 20-45% (25% delta), and Sweden has rates that go from 31-56%, a delta of 25%. If we look at ratios instead, the US looks even more progressive. The ratio of top to bottom for the US is 3.7, for the UK it is 2.25, and for Sweden it is 1.81. In other words, the rich in America are shouldering much more of the burden than in other countries.

The problem is not that the US is insufficiently progressive. The problem is that for the social services many people want, tax rates are too low across the board. But what percent of the people do you think are willing to have their tax brackets increase by 10% (20% - 47%) in order to 1) Reduce the deficit, and 2) Provide increased social services for the roughly bottom 20% of the US population that are less well off in the US than in a European country? I think you might be lucky to get 20% of the population to agree to this.

The rich provide a convenient target. And the poor writing of this bill certainly didn’t help matters. But at the end of the day, the real problem remains the low tax rates at all income levels. It is easier to just blame the rich than sign up for a much higher tax rate for yourself.

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2867

According to the article the lower job gets taxes lower by about 20%. better paying jobs not so much. If true, the poor fares ok. The tax plan may not bolster middle-class but it’s not robbing the poor.

https://www.yahoo.com/finance/news/heres-tax-cuts-will-look-like-americas-popular-jobs-153708591.html

2868

Ok…so for every year we have been married…kids dependent…or not…we have claimed zero exemptions because I believe that is how the max was taken out of our pay each pay period. Even WITH that…and an extra $100 taken out each pay, we still had to pay additional when we filed.

I’m not complaining…but what I want to know is…how will we know what to do now? Exemptions are gone. We don’t have dependents.

Lovely.

2869

What’s there to know? Exemptions wouldn’t have affected you much anyway without dependents?

2870

@rocket88,

What do any of your arguments have to do with a progressive tax system? If anything they are an argument against it. Every time we impose more government control and higher taxes, we get less economic activity and more crime, homelessness, and misery. Impose too much and go full socialist, like in Venezuela and Cuba, and you get complete economic collapse.

Those ‘institutions’ you speak of are bloated, inefficient job destroyers when funded publicly.

Europe has been economically stagnant for decades by following those policies. Spain has a 17% unemployment rate. Even in Germany, highly skilled workers rarely change jobs. The lightly regulated and taxed capitalist economies of Asia have high growth, low unemployment, and rapidly increasing prosperity for the vast majority of the population, while also minting lots of billionaires. See any homeless people in Shanghai? Then go to San Francisco and tell me the Peoples Republic of California is working.

Who cares if some rich person gets an 3rd Maserati if the rest of the population has good jobs and can provide for themselves and their children? Maybe at some point your average Joe or Josephine will be able to afford their own. Vibrant economies provide economic mobility. Economics is not a zero sum game.

2871

Gosh. Maybe if they hadn’t been in such a rush to pass this bill so they couid chalk up one “win” they could have held hearings with expert testimony on these issues (and others) that are cropping up.

“According to the article the lower job gets taxes lower by about 20%. better paying jobs not so much. If true, the poor fares ok. The tax plan may not bolster middle-class but it’s not robbing the poor.”

It was “sold” as a middle class tax cut. Every R said so. Everyone else said that was a lie. And they are right.

2872

What do you mean by that, Bunsen? I thought there was nothing you could do about WA estate tax.

2873

I agree. It was absolutely a mistake to sell this as a massive middle class tax cut, because anyone could look at it and see right through it. If you’re going to bs, at least have a semblance of truth that you can cling on to.

They would have been far better served if they would have first done a business tax cut alone, with more focus on small businesses and keeping a corporate AMT. But then again, they didn’t ask me.

2874

^ or better yet - actually cut taxes for the middle class because that is who really needs it. Corporations and the insanely wealthy are awash in money. They don’t need tax relief at all.

2875

They eliminated the corporate AMT but put in so many little complex limits, add backs and exclusions…simplication, right?

2876

We have no mortgage, but our property tax is $30K. With the $10K cap, that is a big ouch. Supposedly the tax changes benefits people in our situation, but so far I don’t see it.

2877

They have been talking about a business tax cut, specifically lowering the rate on business taxes and making it more attractive for businesses to repatriate overseas profits forever. But it is impossible politically to only cut business taxes, so they had to do something to lower individual tax rates. I’m not sure the middle class “needs” tax relief, the actual tax burden on middle class families is not that high. We have a highly progressive system and the rich pay more taxes, not just in absolute terms but as a percentage of income.

2878

We’re in a similar situation @Nrdsb4, and the calculator still showed a significant cut based upon the rates and brackets changing. However, who really knows for sure until the taxes are done.

2879

I agree, and give tax credits to lower income. If you want to make the economy move, put the money into the hands of people who will spend every cent.

On the other hand, the higher income working class are tired of being the tax donkeys and will welcome some relief. But in this bill, if you’re a tax donkey in a high tax state, be ready to take on more of the load.

2880

Since this is a board about all things college…

“It sounds good, but there is a hole that could trap parents just as their children are racking up big college tuition bills – one that doesn’t appear to be intentional.

“I don’t think they gave it a lot of thought,” said Steve Wamhoff, senior fellow for federal tax policy at the Institute on Taxation and Economic Policy.

The pain point could be for families with dependent children 17 to 24 years old. The math works out less kindly for them. No one gets personal exemptions, and their children no longer qualify for a child tax credit, but the new family tax credit is much smaller.

So a married couple with very low income – under $30,000 – and two college-age children wouldn’t see a big change, said Elaine Maag, senior research associate at the Tax Policy Center. In this case, the changes to the tax code mostly work out for them.

But a married couple with $100,000 in annual income and kids in college could face problems. The tax code changes end up covering only part of their first college student – compared to the tax benefit today.

Two kids in college? Then the parents lose out – and end up potentially paying $500 to $1,000 or more in taxes. It’s hard to say with precision because of the tax bill’s host of changes.

So the changes proposed in the GOP tax bill would likely lead to a tax hit for, at the very least, upper middle-class parents of children in college.

And it will hurt more in the future. The current personal and dependent exemption is tied to inflation. It rose $100 from 2016 to 2017. But the proposed tax credits are not. So they will only get less valuable in the future, raising the tax burden for families.

Maag said she considered a tax credit to be more fair than a tax exemption for children because it gives the same tax benefit no matter how much the parents earn.

But that means some parents will lose out. And those are concentrated in the upper middle class.

https://www.washingtonpost.com/news/wonk/wp/2017/12/19/the-gop-tax-plan-has-a-nasty-surprise-for-upper-middle-class-parents-with-kids-in-college/?utm_term=.cdeeb1383832

Merry Christmas!