As a NY’er, this plan doesn’t seem like it would help my family at all. The largest deduction I have right now is for my property taxes. I have already told H that if they take that away, there is absolutely NO reason to live in a house as opposed to an apartment. I can’t pay $20K plus without getting a tax benefit for it. I guarantee that rates of home ownership would decrease, at least in high property tax states, if this passes. I would rather spend that money to live in an apartment with a super who can fix things than on non-deductible taxes. If H disagrees, this might be the thing that forces me to divorce him. He can buy me out of the house and pay the taxes on his own. I’ll take my share and rent. I won’t throw money away on taxes. If I take my taxes, add my mortgage interest, Homeowner’s insurance and utility costs, I can rent a decent apartment for that. Of course, my kids are out of school, so living in a top school district isn’t a concern so I would live someplace less fancy with cheaper rent.
I have already been slammed by AMT for years and didn’t qualify for Excelsior, so I am not a happy camper.
If you want to tax them on world wide income, US based corporations would incorporate in another country and/or enter into restructure transactions that would make them foreign based entities with US subsidiaries and foreign subsidiaries (rather than US entities with US and foreign subsidiaries). Result would be taxes being paid on US operations.
Money isn’t being repatriated to the US because it isn’t needed here.
@ucbalumnus - My accountant balances everything for me each year and I let him choose. I have no idea how they correlate, but I thought that the amount of the property taxes reduced the AMT. I guess I was wrong? I trust my accountant implicitly and do what he says and sign what he tells me to. All I know is that I am just hankering for a reason to no longer live in a house - I grew up in apartments and am an apartment dweller at heart.
https://www.irs.gov/pub/irs-pdf/f6251.pdf is the AMT form. On line 3, you add back your state/local/property taxes to your income in the process of calculating your income for AMT purposes.
IF property taxes in high tax states are no longer deductible, would that bring the cost of houses down? People might move into apartments. Less demand for houses, means the price of a house goes lower.
@TatinG If the house prices went down enough, many people would go underwater with their mortgages and some would lose a lot if they were forced to sell due to a job change, etc.
That some people would be under water doesn’t mean values won’t decrease. Unless there is a lot of unused capacity in apartments, the prices of apartments would increase significantly if people abandoned homes for apartments. And housing values are likely inflated already to a degree (at least assuming interest rates are restored to normal historical levels).
I like the new tax proposal a lot so far. Eliminating deductions as much as possible is great. I like the state and local tax deduction being eliminated. High tax state and locality often means affluent residents. So it’s taxing the rich. I would like it more if mortgage deduction over $500,000 is eliminated as someone mentioned above. I have to see what estate tax elimination involves. Does estate tax elimination mean no longer step up in capital gains and heirs will be taxed on capital gains of their inheritance?
Estate tax elimination won’t affect step-up in capital gains at death, only that the current exclusion of 5.5 million will be eliminated. It’s touted to help families transfer small businesses, including farms, to offspring without incurring hefty taxes. If passed it will eliminate the need for a lot of high paid “wealth transfer” specialist attorneys who created a cottage industry of helping the elite avoid estate taxes.
The vast majority of these “elite” attorneys you are talking about are small business owners themselves. Know a couple of very good ones practicing here in WA. Our estate tax is not going anywhere any time soon, and our exemption is so much smaller. A couple of professionals with an average house and well-funded retirement accounts are all it takes to get over that threshold. I don’t see these two lawyers worrying about significant decrease in their practices.
Eliminating estate tax doesn’t necessarily benefit the super wealthy. Of it comes with also eliminating step up. Eliminating step up could bring just as much tax. We will have to wait for more detailed analysis.
Also most trust lawyers don’t believe any change will be permanent and keep trust as is believing that the law will change again before their clients die.
Of course, that extra tax on the “lower” rich is unlikely to pay for the much larger reduction in revenue from tax cuts that the plutocrat class can take advantage of. Note that the plutocrat class is already subject to a reduction of itemized deductions as described at https://www.irs.gov/publications/p17#en_US_2016_publink1000300879 . Also note that much of the “lower” rich has already lost the state/local/property tax deduction due to the AMT.
@salliakeerie exactly right, very few people understand that the US cannot just raise rates on corps without having them change their domicile.
I wish they would eliminate all tax deductions and go with a flat tax of X% for individuals. I wonder how many of the folks that are complaining about the taxes we pay also want free healthcare for all and numerous other social programs - all of these things come at a price. In the US our effective tax rates are pretty low compared to most comparable countries.
In the interest of having people discussing a charged issue begin from the same starting point, I’d suggest that before conventional-wisdom assumptions that may not have any basis in reality get vectored, folks should actually actually look up things like taxation levels and wealth/poverty rates. For starters, there isn’t really anything approaching a clean correlation between states’ tax burdens and either wealth or poverty levels. At all. Further, it isn’t even always the case that the wealthier pay more in taxes in many jurisdictions.
Really, it’s messy, and that’s why simple solutions often actually aren’t.
Most of the complexity in the tax laws and calculations are in defining what income is. Of course, that includes numerous special interest exemptions that each special interest will strongly defend from elimination.
^^^ don’t even get me started on my kid having to pay Kiddie Tax at our tax rate on scholarships! Yes I’m greatful for scholarships but between paying state taxes in two states and the Fedral Kiddie Tax on scholarships it seems unfair. Because of the way MA figures “income” even though she was making below minimum wage at her summer camp job she should have gotten the state taxes they with held back, but then MA calculated her taxable scholarships as income so she didn’t get any of the state taxes back in addition to the federal tax she had to pay.