New Tax Reform

[Singuy]

So what do you guys think about the new tax reform? Please stick to discussing about the tax reform ONLY.

Summery:

3 brackets, 12% lower, 25% middle, 35% upper.
Corporation tax cut down to 20%
Small Business passthru taxes now at 25% unless it's a "business of service"
Standard deductions increased to 12k/person, 24k/household
Personal exemptions GONE
Increase Child Credit to ???
500 dollars extra for dependents
AMT is now gone
Many misc tax deductions are now gone
Estate Tax gone

Personally this is a healthy tax break for my household at first glance, but then I noticed that my wife is most likely is in the "business of service" since she is selling a service like Drs, Lawyers, consultants, etc etc. The elimination of AMT sounds like a tax break at first but then all the misc tax deductions are gone, which was what the AMT was trying to prevent in the first place.

Lets now talk about that "double of standard deduction". Sounds good but not really because of the caveat is that personal exemption is now gone. Personal exemption ($4050) PLUS standard deduction ($6350) for an individual is 10,400..so this "doubling of standard deduction" while taking away personal exemption is more or less a talking point than a real doubling.

Now lets talk about that Child credit. It will increase to an unknown amount. But lets also be wary that since personal exemption is gone, we can't deduct that 4,050 of the child or ANY dependent. Child credit has a phase out for household filling jointly making above 110k/year and reaches 0 when the household makes 130k/year. This will be a tax increase for these individuals when it comes to tax credit. Trump is giving out a 500 tax credit for non child dependent, but this is at the expense of not able to deduct the $4050 which is worth more to me than the 500 dollars of tax credit.

This tax reform is extremely small business friendly if it's non service related and upper class friendly with the top tax bracket, of course we are missing a boat load of details.

To those who doesn't understand taxes(majority of Americans), this tax reform has a lot of "positive" talking points, but in the end I think a lot of individuals who are not wealthy may end up paying more or the same. I'm not sure yet if I'll put this tax break as the "largest in American history". For corporations and small businesses it's a win. For very high income individuals, it's a win. For the majority of Americans, it's a minor win or a minor loss..can't really tell.

[Nutria]

What are the income levels for the three brackets?

[MooseBucks]

What are the income levels for the three brackets?

To be determined. Also apparently they have discretion to add a 4th tax bracket.

[disneysteve]

What are the income levels for the three brackets?

Nobody knows.

My initial thoughts from what I've heard and read so far are negative. I'm willing to bet that my taxes will go up because I'll probably get bumped from the 25% bracket today to the new 35% bracket. I haven't read much about how deductions and credits will change so I'm not sure what impact that will have.

I don't expect that the plan, as presented, will benefit most Americans, but that's no surprise.

[kork13]

I did notice the little word game they're advertising about the standard deduction vs. exemptions... For those who take the standard deduction, it's almost a net zero change. Notable for me, however, in the fact that I always itemize due to large charitable contributions and mortgage interest deductions. Sure, those will still exist, but because the standard deduction is meaningless to me, I'd lose the benefit of the personal exemptions to reduce my taxable. But then, it's no secret that one goal in this tax reform push is to discourage people from itemizing and instead just take the standard deduction.

With that said....I'm not worrying too much about this right now. It's almost certainly going to turn out different than its current form, so who knows what changes will be written in. Another big question is the income cutlines between the brackets. So ... meh ... We'll just have to see what happens.

[disneysteve]

I'm not worrying too much about this right now. It's almost certainly going to turn out different than its current form

For sure. Almost nothing turns out the way it is initially proposed.

[TexasHusker]

One must remember that there is never an appetite in Washington for any sort of "fair" income tax system.

That is because the income tax is system not only is the primary tool to fund the treasury, but the primary tool to control the electorate

[disneysteve]

One must remember that there is never an appetite in Washington for any sort of "fair" income tax system.

That is because the income tax is system not only is the primary tool to fund the treasury, but the primary tool to control the electorate

Plus the people in charge are all millionaires and billionaires. They're not going to propose anything that costs them money. This proposal clearly illustrates that.

[Singuy]

One must remember that there is never an appetite in Washington for any sort of "fair" income tax system.

That is because the income tax is system not only is the primary tool to fund the treasury, but the primary tool to control the electorate

"Fair" is relative and impossible to define. Everyone from the bum on the street to the multi-billionaire will cry about how their taxes are unfair vs the next guy.
It's just our inherent bias we have toward this issue.

I think our bracket system with deductions is decent but I do feel like there's a small group of people...those making between 150-750k/year who pays the highest percentage if they are wage earners. The top 0.1% pay mostly capital gains or 0 taxes via muni-bonds distribution...while the bottom 90% gets a large portion of their taxes written off via deductions.

[Smallsteps]

Most of the words thrown around by politicians are relative and have no definition. When the word "fair" comes up for taxes, I just shake my head.

The current system with so many loopholes and deductions is only favorable (in my opinion) to the wealthy. Looking simply at % rates is misleading since the details is what matters. if you know how to navigate or can afford to hire good tax help you can pay a much different rate then what you income status suggests.
Regardless of the hype there is NO one size fits all in taxes or any government program. Some will pay more /some less and people only get worked up when it hits their own wallet.
Many either make assumptions before anything passes / or finding out after the fact like we did with the ACA, then they take sides based on their own situation.
For a country who complains a lot about taxes, people seem to be too afraid to change things.
The same scare tactics have already started .... "it only benefits the wealthy, and companies". Many need to come up with new arguments or show us with real math NOT throwing up WORTHLESS percentages and skewed assumptions.
Misinformation and lack of real solid details and the reality that this is a starting point will certainly cause many discussions.

I also believe that EVERY taxpayer need skin in the game which is still NOT happening.

[disneysteve]

Most of the words thrown around by politicians are relative and have no definition.

Yep. Like "middle class".

[bjl584]

This tax proposal will be changed several times in Congress.
It won't look anything like what it looks like now.
It's pretty vague anyway. Not a lot of details yet.

[greenskeeper]

Corporate tax rate has to come down. That's really the only thing that matters if you ever want to get the economy rolling again. Having the highest corporate tax rate in a global economy is terrible for business.

[LivingAlmostLarge]

we'll owe a lot more. Either way. Never got child tax credit. Will lose out on mortgage interest. We itemized whenever we've owned a house. Meh either way we pay quite a bit. As Singuy said wage earners between $150-750k usually bit the bullet. I'm not going to worry, I'll be surprised if they get it done before the year ends.

[fairpolitics]

Is this reform fair???

Hi All, I am really getting upset about this tax reform, don’t get me wrong all about keeping more of my money but ( THIS POLICY DOESNT DO THAT). Let’s talk a little about how Congresses preparation started to precede this proposal. Federal budget and slashing social programs ( schools, elderly, disabled, poor, Medicaid, Medicare ) I can go on and on. Again don’t get me wrong all for cutting budgets ( FOR DEFICIT RELIEF) but that’s isn’t the intent of Congress for these cuts. When these cuts take effect in everyone’s local government they will need money ( AND LOTS OF IT ) what we have just done is took funding from a single hand and spread it out with hundreds of hands in it. Secondly now we are going to give breaks away on ( HOPES ) that business growth will become so strong that it generate significant revenues. This is a Las Vegas bet and a poor one at that if we look back at history. ( Ronald Regan and George W Bush significant deficit increases ) and really no proof that it improved wages. If you are old enough to remember this is when our wages went flat. Ok THIRD and last point this will be a tax reform that will keep giving to our children and our children’s children with a possibility of debt if this Vegas stile bet loses. There are other ways to grow business that the betting odds are way better.