April 28, 2017

Friday Off-Topic (Moderated) Open Thread (042817)

Filed under: Lucid Links — Tom @ 6:00 am

This open thread is meant for commenters to post on items either briefly noted below (if any) or otherwise not covered at this blog. Rules are here.

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3 Comments

  1. Fake News:

    Trump tax plan would hit blue states hardest

    http://thehill.com/homenews/state-watch/330943-trump-tax-plan-would-hit-blue-states-hardest

    resident Trump’s plan to overhaul the federal tax code threatens to fall disproportionately on residents of liberal-leaning states, a short-term boost for state governments that could turn into a long-term drag.

    Most states have tied their tax codes closely to the federal code. Since the federal income tax was first levied in 1913, taxpayers have been able to deduct the state and local taxes they pay from their federal taxable income. Taxpayers who live in states with higher tax rates are able to deduct more from their federal taxes than those who live in states with lower rates

    Those deductions cost the federal government more than $60 billion a year, according to the nonpartisan Tax Policy Center.

    Verus:

    Trump’s Tax Plan: Doubles Standard Deductions, Ends ‘Death Tax’

    http://www.foxbusiness.com/politics/2017/04/26/trumps-tax-plan-to-include-large-increase-in-personal-deductions.html

    Under the proposal, tax breaks for individuals and married couples filing separately will increase from $6,300 to $12,600. The standard deduction for a married couple filing jointly will jump from $12,700 to approximately $24,000, “so that a married couple will not have to pay taxes on the first $24,000 it earns,” said Cohn…

    …The new proposal calls for the collapse of the current seven-tier bracket system to just three brackets, with a decrease in the top tax rate from 39.6 percent to 35 percent. Previous floated proposals had the top rate at 33 percent. The administration aims to set the other two tax rates at 25 percent and 10 percent…

    Doubling the standard deduction more than makes up for the loss of the state tax deduction for most Americans.

    Actually, it is a clever way to give renters and equivalent to the home mortgage interest deduction and rewards those who paid off their mortgages (seniors). It sets the stage to when eliminating the home mortgage interest deduction will be greeted with ho hum when the vast majority of Americans will no longer itemize.

    But notice that liberals are concerned about high income earners who would be compensated by the lowering of the top end income tax rate.

    While it may be true that many state taxes mirror the federal tax code, it isn’t true that any change in the federal code would automatically change the state’s tax code. The states are totally responsible for any changes they decide to make if it turns out their tax code is now different from the federal. In other words, the disparity that spot lights creates transparency. States will lose no tax money unless they succumb to the angry tax payers who demand a reduction. The real issue is the heat that Blue State legislators will get when people notice how much they (greedy politicians) have been taking.

    A high end tax payer getting a 4.6% (39.6 -
    35) rate reduction on top of a doubled standard deduction may not need to itemize any more. What this really means is that many tax payers having simpler returns will stop using tax preparers… That’s what liberals are really concerned about.

    What was the stated purpose of tax simplification? Do it on a post card and cut out the tax preparer. Why would you pay H&R Block $500 to $1000 to do your tax return when Turbotax costs $70? Why would you use a 1040 when you could use a 1040 EZ? That is a significant hidden tax or deduction depending which one you use.

    Liberalism is NOT an ideology, it is a scam devised by profiteering elites to trick gullible rubes into supporting their narrative of disguised greed.

    Comment by dscott — April 28, 2017 @ 8:26 am

  2. I think your point about simplification for high-income wage earners is strong. Simplification for contract workers and entrepreneurs isn’t in the cards, but if they keep decent financials, the burden shouldn’t increase.

    Comment by Tom — April 28, 2017 @ 9:04 am

  3. I wouldn’t mind if most of Schedule A would disappear except for medical expenses. I am opposed to using the tax code to get people to do or not do things. The medical deductions on the other hand would be the better discounter of taxable income as it directly corresponds to the ” ability” to pay a tax that society would or should use for purposes other than benefiting certain individuals or groups. In that vein, I would remove the 10% AGI deduct from that expense. IF one were to exempt people from paying taxes, which is what a deduction and credit partially or wholey really do, then we should NOT burden those with expensive medical problems.

    Comment by dscott — April 28, 2017 @ 12:52 pm

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