That’s 20% after deductions, exemptions, etc. So the average tax rate paid by corporations would end up being much lower.
A revenue-neutral simplification would be one thing. These proposals are not revenue neutral and not simple.
Re estate tax: Meaning when you sell your Mom and Dad’s stocks when settling the estate, you’d have to pay capital gains? That could be an accounting nightmare, trying to figure out what the basis is on each fund or stock or even the home.
I think getting rid of the step up hurts the less affluent (surprise). We have nowhere near the amount of assets that would be impacted by estate tax so it was never going to affect us (barring winning the lottery). But if they get rid of the step up then any investments we leave to the kids will now incur taxes when they dispose of them. For the wealthy with estates over the limit it reduces the tax on investments sold from the 40% estate tax to whatever their cap gains rate is. For those that were never going to incur estate taxes, it increase the tax from zero to whatever their (or their beneficiaries) rate is.
McConnell and Ryan are now admitting that they “misspoke” when they said everyone will get a tax cut. Ryan said “It’s a tax cut for everybody. There’s a lot of misinformation out there, a lot of confusion — and more or less, a lot of hits from the left. But it’s a tax cut for everybody. … If you look underneath the rate, more of your income is taxed at a lower rate, and so according to the Joint Committee on Taxation — which is the official scorekeeper of these things — every single person, every rate payer, every bracket person gets a rate cut,” but now he’s saying he misspoke.
As it turns out, many will not get a tax cut. Some will pay the same. Some will pay more.
https://www.nytimes.com/2017/11/10/us/politics/senate-tax-bill.html
It gets complicated. That was done before tho. When estate tax disappeared briefly, step-up was also removed. No idea how they did it in that year.
Do you know any deduction that’s allowed under new plan that I don’t know about? The only deduction allowed in the House plan were, R&D and Low Income Housing. You can’t complain about that.
I’ve read several articles on both the Senate and House proposals and saw nothing about eliminating the stepped up basis.
H and I both have very elderly parents and really don’t want to have to figure out when this stock was bought and for how much, how much they paid for a house 50 years ago, how much they spent on improvements, etc. in order to figure out the basis.
The first business deduction I think of off the top of my head that’s still allowed is the golf course deduction, but of course there are zillions.
can’t imagine why…
I heard it in one of the video news. The commentator made a point bringing that up. With all things estate, I don’t take anything seriously. It may change again and again before it applies to me. Ask any estate lawyer.
Creey, I agree. I would hate to park like that.
Maybe I spoke too soon. According to the article the estate tax stays.
https://finance.yahoo.com/news/everything-know-senate-gop-tax-200055321.html
If the revenue neutral rate after removing deductions is 28.5%, then setting it at 20% means either raising taxes elsewhere, greatly increasing the deficit, or greatly cutting spending, or some combination of these. Which is your preference if you want it to be 20%? (and if it is raising taxes and/or cutting spending, the hard part is deciding which taxes to raise or spending to cut)
@Iglooo wrote -
Those still are deductions, and they are 2 of the top 3 costliest deductions to the IRS so they certainly count!
I don’t see how anyone can be in favor of a 40% corporate tax cut when they aren’t closing loopholes.
The whole estate tax removal is a joke as well. Let’s see if you give me a gift over the IRS annual gift limit I have to pay taxes, but if you die and leave millions to me I don’t pay taxes.
Comparing the loss of the deductability of medical expenses to the end of the estate tax is just infuriating. What a telling contrast.
No, you can gift up to $5.5M still not get taxed. In my book that’s still better than repealing both. Do you want them to repeal both? If it’s up to me, I would lower the exemption limit from $5.5M for the sum of estate and life time gift.
@ucbalumnus Lowering corporate tax seems universally agreed. How to make up the deficit? I would eliminate all the deductions including charity and mortgage interest and go from there. I would focus on median income true middle class, $45K-$130K(?) and $250K home. Whatever tax advantage should be given to them not to $1M dollar mortgage crowd. And I would lower the estate exemption amount. No idea how much revenue they will bring. Whatever it takes to strengthen middle class. Many on this board are above that and would pay more if I had a say.
“Let’s see if you give me a gift over the IRS annual gift limit I have to pay taxes, but if you die and leave millions to me I don’t pay taxes.”
Let me clarify how this stuff currently works. The recipient of the gift does not pay any taxes. The giver does. The gifts come out of the same deduction “bucket” of the $5.5M deduction. A gift over $14k annual personal exemption has to be reported to the IRS. The IRS keeps tally of these gifts so when you die, that amount gets taken out of your $5.5М.
So if you gave away $1M, for example, you can only leave $4.5M tax-free to your heirs.
If estate tax is repealed, then gift giving should be tax-free, too.
Lowering the corporate tax rate in exchange for eliminating many deductions/credits/tax-expenditures in a revenue-neutral way tends to be widely agreed on, except for those who benefit more from the deductions/credits/tax-expenditures than they would from such an exchange.
It is not universally agreed that a general lowering of the corporate tax (such that revenue is reduced) is desired, or that it is more desirable than the any negative effect that the tradeoffs from the revenue loss would require.
I.e. there are two different things being combined into the tax bill here. Do not assume that one of them having wide support means that the other has wide support.
It may be easier to think of it as two things rolled into one:
A. Lowering the corporate tax rate to 28.5% in exchange for eliminating many deductions/credits/tax-expenditures in a revenue-neutral way.
B. Lowering the corporate tax rate by 8.5% with no other changes. (i.e. from 28.5% to 20% if A above is already done)