I am sure most people would be willing to pay higher taxes if they felt it was going to a worthwhile cause. And there are many causes people don’t want to pay for besides wealthy individuals, big business and estates. There’s a long list.
But what I’m curious about is if they wiped out almost everything, or left in deductions that only a lucky and connected few get to collect on.
Most of the news chatter has been about the personal income tax changes. Seems like very little attention has been paid to whether the corporate taxes have been simplified (i.e. removal of special interest credits and deductions, understood to be the desired tradeoff to lowering the headline tax rate).
https://www.forbes.com/sites/beltway/2017/11/02/the-house-gop-tax-bill-is-mostly-a-business-tax-cut-that-will-create-many-winners-and-losers/ has some information on the business side of the proposed changes.
Just because they say something, it doesn’t make it true…
They’re “wiping the slate pretty much virtually clean” on individual income tax deductions, under a (mostly phony) promise of lower tax rates in exchange for elimination of deductions—except for the holy trinity of mortgage interest deductibility (partially saved), property tax deductibility (partially saved), and charitable contribution deductibility (saved, but with fewer individuals itemizing and the estate tax being phased out, there’s likely to be a lot less of it).
What they haven’t touched is business tax deductions. For years, people talked about lowering the corporate tax rate in exchange for eliminating a slew of special-interest corporate tax breaks. Those deductions pushed the average “effective” corporate tax rate (what corporations actually pay) to somewhere around 18%—well below the nominal rate of 35%. This proposal dramatically lowers the nominal corporate tax rate but leaves business tax breaks almost entirely intact, or in some cases expanded. Just a guess, but this could result in an average effective corporate tax rate of somewhere around 12%.
The cut in the corporate tax rate alone will cost the federal government something in excess of $2 trillion. But they only budgeted for $1.5 billion in tax cuts, So they need to get the difference from somewhere. .Guess where? Individuals, of course. But the pain isn’t evenly spread. It’s concentrated on Blue states with high taxes and high home prices, the professional classes, students, colleges and universities, the severely and/or chronically ill. (Connect the dots).
That was the idea initially, take away all deductions both from corporate side and individual side. Charitable contributions are left alone. Property tax deduction and mortgage deduction got reduced. Really, why do employers get to deduct the health insurance cost for their employees when you don’t get tax deduction when you buy it for yourself? The same about tuition waiver. Why should that not be subject to tax when other grad students who pays tuition out of their pocket pay tax on it whether it’s parents who pay the tax or you get loans and pay it back with after tax money? It’s hard let go benefits that suited one’s life but if you think about it there are a lot of disparity.
Those are some helpful answers, thank you, that does clarify it somewhat for me.
Married filing jointly who makes $1M or more get to pay higher tax under the new plan as I read it. The rate stays the same at 39.6% but their deductions are taken away. It is probably reasonable to assume many of highly paid people live in a high tax state that they don’t get to deduct. The mortgage they can deduct is also lowered. Yes inheritors get a break. I am not happy about it. One silver lining it won’t be so until 2024. Hopefully, we can reverse it at some point. That leaves corporations that benefit hugely under the new plan. The thing is that’s the only thing everyone agrees that they need to be lower. Household making between $460K and $1M sees their tax lower from 39.6% to %35.
@MinnesotaDadof3 Actually, your D may not be subject to the kiddie tax if tuition waiver counts as earned income. With that and the stipends, she will be supporting herself more than half.
But isn’t that only on the amount they make over 1 million? And before, they were paying that rate after $470,000, now it’s not until after 1M. So how does that work out to paying higher taxes?
I forgot about that. So they get about $20-25K from it. Is it more than the lost SALT and other deductions? If more, they come out ahead.
The real break is given to those making $460-$1M-ish, I think. Their tax got lowered to 35% from 39.6% and they weren’t deducting SALT or property anyway since many of them were paying AMT. Repubicans shoudl adjust it and make them take a bigger burden.
“Married filing jointly who makes $1M or more get to pay higher tax under the new plan as I read it.”
Nope, not necessarily. Here is a bunch of hypothetical examples of families:
Everyone gets a cut! Hallelujah!! <:-P
/sarcasm off.
However, many of the super-wealthy get much of their income from capital, where there are tax rates much lower than 39.6% (e.g. for long term capital gains, dividends). Someone who makes that much from labor (entertainer? professional athlete?) would be the one paying more taxes in your situation, not the plutocrat-wealthy who get the largest share of their income from capital.
Everyone agrees that the corporate tax rate should be lower, but many would say so only in exchange for removing many of the special interest credits and deductions that make the corporate tax more complicated and cause the effective corporate tax rate in the US to be around 18-19%. Most people would say that cutting the corporate tax rate to that level while removing the special interest credits and deductions (so that the effective tax rate would be the same, resulting in revenue-neutrality instead of a huge deficit, but a simpler tax code without the distorting incentives of the special interest credits and deductions) would be desirable (except those whose businesses depend highly on those special interest credits and deductions), but far fewer would agree to cutting the corporate tax rate without removing the special interest credits and deductions (greatly increasing the deficit, partially compensated by tax increases elsewhere).
I’m surprised nobody has mentioned it here (unless I missed it), but universities are also being hit with a 1.4% excise tax on net endowment earnings if their endowment exceeds $100K per student. At last count, something like 160 schools were at that level. Apparently “small schools” will be exempt, but I’m not sure what that cutoff will be.
Also, any “charitable organization” that pays its executives in excess of $1 million will need to pay a 20% excise tax on that compensation. Some college and university presidents make that much, and a lot of managers of the bigger endowments do. The schools say they need to pay their fund managers that much in order to compete for top talent.
Add to that the loss of tuition tax credits, tax-exempt tuition benefits, and student loan interest deductibility. Colleges and universities are getting hit pretty hard here.
True but it was the same under current law and all the laws before it except for one year in the 1980’s. New proposal isn’t giving them an additional break.
Are you saying corporate deductions remain as is? I thought they were eliminated under the new plan.
Actually, that is the Wealthy colleges and universities. The top 1% so to speak. Isn’t that the group that we all want to tax? 
Did someone post this already? (This thread has moved quickly today, and I can’t recall where I have read different things.)
For-profit CEO’s don’t get a break, either. For compensations over $1M, they don’t get to deduct it as business cost effectively taxing any compensation over $1M at 20%. I am guessing the 20% excise tax came from the same reasoning. You can hire them for higher pay but you will have to pay the tax. Is it so bad? Suddenly, we are feeling sorry for people making more than $1M. i thought runaway CEO pays were bad.
In general, this tax proposal benefits the wealthy and harms middle-class and lower-income families and individuals. If you’re okay with that, fine, but cherry-picking and discussing a few provisions that ding wealthy individuals or help middle- and lower-income people does not change the overall, intended effect of the tax proposal.
https://mobile.nytimes.com/2017/11/02/business/economy/tax-housing.html
NAR is not pleased. Stocks of home builders plummeted.
Not just the wealthy colleges and universities. The loss of tuition tax credits, tax-free tuition benefits, and student loan interest deductibility will probably hit the more financially challenged schools harder than the wealthy ones. And as for the excise tax on endowment earnings, the $100K/student threshold is pretty low. At a 4% or 5% payout from endowment annually, which is pretty standard, that would produce about $4K to $5K per student annually. Most schools at or slightly above that level rely pretty heavily on endowment earnings to pay for institutionally sourced FA—and most don’t come anywhere close to meeting full need as it is.
I’m not saying salaries at that level are good or bad. I’m merely pointing out that this tax proposal has a redistributive effect, taking money out of the non-profit higher education sector and redistributing it to for-profit corporations and the uber-wealthy. I’m not averse to redistribution, but that’s not a redistributive choice I would make. Within the universities, my guess is it will not take one penny out of the salaries of the most highly compensated executives. It will simply mean less is available for education programs, financial aid to students, and research—the areas where colleges and universities provide unique added value to society that isn’t easily replaced elsewhere.