12/2/2017: Senate Tax Bill Passes - Higher Taxes for my parents and many Middle Income Tax Earners!

Discussion in 'Business and Economics' started by xcel, Dec 4, 2017.

  1. xcel

    xcel PZEV, there's nothing like it :) Staff Member

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    My Parents just completed their 2016 taxes using the new Senate Tax reform bill rates and deductions.

    They are on SS, have small pensions, and dividends to live on. No mortgage interest since they do not have a mortgage but do have a $7k real estate tax bill. They are IL residents.

    Their 2016 taxes would have gone UP BY $1,527 under this tax "GIFT" from the Republicans compared to before!!!

    Meanwhile Trump will save about $1 billion USD.

    Hey Republican's, you guys are so full of $**t!!!

    When can I start chanting "Lock you up" Paul Ryan, Mitch McConnell, Lindsey Graham, Orrin Hatch, Ted Cruz, Rand Paul, Devin Nunes, Darrell Issa, Steve Mnuchin, and Donald Trump to name a few for lying to the American public? This is a damn sham except for your super rich donors. Who do you work for, 99 percent of the American people or the top 1 percent in your districts and the U.S?
     
  2. DaveJ

    DaveJ Well-Known Member

    I am in a similar situation as your folks. I have SS income, wife a small pension, interest income and IRA withdrawal income.I retired early and work hard to pay the lowest taxes possible. I do my own taxes myself as I have done for over 45 years. I used to do taxes for others several years ago to make extra cash but gave it up so I have more than a passing knowledge in taxes. I figured my taxes using both the proposed house bill and the senate bill. My taxes would go down $333 under the senate bill and $626 under the house bill.
    I don't itemize. I'd be curious what calculator your folks used to get that result and exactly what deduction they lost to make their taxes go up. If it is medical expenses the senate plan leaves that deduction in place, and you said they were calculated using the senate plan. The house plan removes that deduction. The final plan is unknown today.
     
  3. EdwinTheMagnificent

    EdwinTheMagnificent Legend In His Mind

    That's the way the gubmint wants it. We don't "need to know".
     
    xcel likes this.
  4. xcel

    xcel PZEV, there's nothing like it :) Staff Member

    Hi Dave:

    My mom is in a similar situation as you. She has been completing her own taxes for the last 5 decades and is what I would call an expert. She used the Senate bills provisions since that is the alt and most likely to pass in a final form. Their dividend income is their largest source and is what is killing them. She used Money and pulled her tax forms while changing the amounts to match the Senate bill provisions.

    I am going to get murdered as I have over $26k in Real Estate taxes on two homes, one of which I cannot sell and with the new cap at $10k, my taxes are going to go up by approximately $4,500.

    Wayne
     
  5. DaveJ

    DaveJ Well-Known Member

    I searched and found this. From

    https://www.investors.com/etfs-and-...e/what-does-trump-tax-cut-mean-for-dividends/

    Under both bills, tax brackets for cap gains and dividends will remain the same as they are under the current law. Right now, individuals in the higher marginal income tax brackets pay 15% to 20% on capital gains and dividends, while taxpayers in the lower brackets generally pay nothing. The House and Senate keep the existing 0%, 15% and 20% brackets in their proposals.

    This makes me think they are not changing dividend tax rates. Maybe your Mom knows something different?

    I feel your pain on the property taxes, but some look at it as the low tax states are subsidizing the high tax states by allowing the high deductions on RE taxes. Just curious if your home you can not sell is switched to rental property, can you then deduct the RE taxes?
     
  6. xcel

    xcel PZEV, there's nothing like it :) Staff Member

    Hi Dave:

    They make more on Dividends than they do on SS and Pensions. It was the elimination of personal exemptions - both bills eliminate those, and state taxes where the damage occurred. With the new scheme, they lose $1,527 per year. Did you complete yours properly including the standard deduction going up, elimination of personal, state tax, and now possibly a non-itemized filer and loss of the state tax deduction?

    Regarding low tax subsidizing high tax, double taxation is double taxation including State taxes, not just real estate. I am not sure how you can justify double taxation no matter what state you live in. As it is, the low tax states as a whole are drags on the Federal Government expenditures vs.the higher tax states that are net contributors so the low tax rate states are benefiting under the current situation, not losing. It will get worse if either of the bills go through.

    Wayne
     
  7. DaveJ

    DaveJ Well-Known Member

    We are double taxed on many things. Tires, gasoline, beer, and many others. I pay personal property tax on cars, trucks, boats ect. each year, but can not deduct it. Not fair as Illinois has no Personal Property tax. But higher RE tax, currently all deductible. Will never get equal and fair for all 50 states. Maybe this will put pressure to lower RE taxes in high tax states?

    Yes, I completed mine properly. Since I don't itemize, it is easy to change my std deduction and personal exemption from old to new($12,600 + 8100= $20700 changes to $24,000 or $3300 more deduction or nontaxable for me).

    Currently 30.1% itemize. According to reports, about 40% of itemizers will pay more, and 60% will pay the same or less. The 60% of itemizers will save on tax preparation.

    So by my guess , 88% of taxpayers will pay less or same, while preparing taxes will be somewhat easier.

    I'm going to have to study your comments of the low tax states being drags, as they are the ones with job growth, new businesses and inflow of people, while the high tax states have an exodus of people.

    Can you help yourself out on the taxes by converting unsold home to rental property and deducting taxes?
     
  8. xcel

    xcel PZEV, there's nothing like it :) Staff Member

    Hi Dave:

    Our home has also been setup for rent but nobody is biting even at a loss!

    You are missing the fact taxes not only went up for my parents in IL and I will be getting creamed in Calf. due to double taxation, you do not get double taxed to the tune of nearly $1,527 per year let alone my own estimated $4,500 while those two states are net contributors to the U.S. Government.

    Here is just the first of hundreds of links showing exactly that.

    https://wallethub.com/edu/states-most-least-dependent-on-the-federal-government/2700/

    High tax states have an exodus? California must be the only exception to that rule. The largest state in the country by 12 million citizens over Texas has been continuously growing every year over the past 56 years.

    California State Population - 1960 to 2016

    88 percent of the U.S Populace will pay less? Given California is the most populace state in the country and accounts for 12 percent of the U.S.' entire population, how is the middle class tax cut that will increase Federal taxes for 90+ percent of California tax payers a tax cut? The same can "possibly" be said of New Hampshire, Connecticut, Massachusetts, Nevada, Kansas, Illinois, New Jersey, Minnesota, Delaware, and New York to name a few.

    The fact the Super Wealthy and Corporate taxes are being reduced by trillions of $s while tens of millions of individuals taxes will be going up is the most immoral thing I have ever seen in my life! We already have a disparity of income and this will make it worse, not better all the while we sit on $20 trillion of debt and it is going up. Your individual tax cut will disappear over the next few years while your medical is going to rise far more than your minimal tax cut. My Aunts and Uncles MC insurance coverage will be reduced while my parents and your SS payments may be at risk in very short order.

    Wayne
     
  9. DaveJ

    DaveJ Well-Known Member

    https://en.wikipedia.org/wiki/List_of_U.S._states_by_population_growth_rate
    Interesting to look thru the list of what is growing and what is not. California is 17th

    If I understand when someone will pay more under the new laws, it is folks who itemize somewhat more than most. Are you saying 90% of folks in California itemize?

    I see articles like this in a California paper,
    http://www.ocregister.com/2017/09/30/will-federal-tax-reform-help-california/

    Something of interest was "According to a recent article in the Sacramento Bee, California lost more than 1 million people in net domestic outmigration between 2004 and 2013."

    Also, "
    In addition to helping middle-class Californians, the reform package would also help the state’s small businesses by limiting the maximum tax rate for small and family-owned businesses to 25 percent — significantly lower than the top rate that these businesses pay today.

    For larger businesses and corporations, the framework reduces the corporate tax rate to 20 percent — below the 22.5 percent average of the industrialized world. It also ends the perverse incentive to offshore jobs and keep foreign profits overseas.

    Finally, in a commonsense proposal, the framework would allow “repatriation” of American dollars by imposing a one-time, low tax rate on wealth that has already accumulated overseas so there is no tax incentive to keeping the money offshore."

    ***********************************************************************************************************************

    I agree the upper class and the upper middle class in California might take a hit.
    I saw something that said there was talk of upping the corp tax rate to 22% in the compromise bill to pay for putting back some of the things that will hit your Mom and you and I hope that happens.

    Since your home is currently set up for rent, can you show a loss the first year and deduct the taxes and other expenses?
     
  10. xcel

    xcel PZEV, there's nothing like it :) Staff Member

    Hi Dave:

    California with its "high" tax status has grown in population every year for the past 56 years and probably goes back another 40 to 50 years prior to that. If you also own a home in California, you are most certainly itemizing.

    As a middle class tax payer, my taxes are going to go way up. It is the State tax deduct-ability that is going to make most Californian's pay more. California is but one of the states that will get his with this but is the largest by far which in turn shows how this tax cut to the wealthiest and Corporations will be paid for.

    Regarding the Corporate rates, the average Corporations is already at 18.5 percent effective, far below that of the World Average. There is another difference. What Military expenditure protects a Corporations assets in this country vs. another? Under the Senate plan, U.S. Corporations may now pay as little as 10 percent. Do the math and figure out who pays for that? Small business' are the engine that drives employment growth as major Corporations have been downsizing through technology for decades. Major Corporations are going to nothing different as seen in the WSJ-CEO round table with White House economic adviser Gary Cohn last month.

    Watch CEOs cast doubt on tax reform's benefits

    Small business' are being helped very little in this one. You keep putting out the nominal tax rates which NOBODY pays. The "Effective" small to large "small business" sole proprietorship taxes are 13.3 percent. Small business partnerships face an average effective tax rate of 23.6 percent, and small business S corporations face an average effective tax rate of 26.9 percent. Source is the SBA itself.

    Unless of course you are a multi-millionaire or even Billionaire earner and the 15 percent Carried Interest provision can be used taking you even below the 15 percent result as you do not have to claim income in the year earned. Most of those people use it but I would not call them small business' and they are most certainly are not hiring. Look up Romney's 2012 Tax returns and the business' he downsized to see how that works.

    Wayne
     
  11. DaveJ

    DaveJ Well-Known Member

    Just to add to the conversation, I looked up the Sacramento Bee article

    From...http://www.sacbee.com/site-services/databases/article32679753.html


    Roughly 5 million people left California in the last decade. See where they went.
    By Phillip Reese - preese@sacbee.com

    An unprecedented number of Californians left for other states during the last decade, according to new tax return data from the Internal Revenue Service.

    About 5 million Californians left between 2004 and 2013. Roughly 3.9 million people came here from other states during that period, for a net population loss of more than 1 million people.

    The trend resulted in a net loss of about $26 billion in annual income.
    **********************************************************************************************

    Interesting conversation, no easy answers, and someone is always going to be unhappy.
    Hope the economy and the car business keep growing.
     
  12. xcel

    xcel PZEV, there's nothing like it :) Staff Member

    Hi Dave:

    Not sure why you are highlighting this when the population in California has clearly increased every year as has been shown in the previous links including one from the Sacramento Bee written in January of this year.

    California’s slowing population growth has many impacts – positive and negative.


    All in, where do you think the Corporate and very Wealthy Tax cuts in both the Senate and House tax bills were taken from? It was taken from both the lower and middle class. My parents in IL are one of them. My own situation here in Calif. is another.

    Wayne
     
  13. jcp123

    jcp123 Caliente!

    We were one of the families that left California, gone mid-2005. Taxes were part of it, but cost of living was a huge factor as well.

    Anyway, always be suspicious of anything called tax reform - the only way to really fix anything is to scrap what we have and start over. I have my own favorites, but whether we retain some sort of income tax, or look for other methods to tax, I don't think anyone is well-served by a tax code as dense, riddled with loopholes and special interests, and so dependent on tax attorneys to figure out as ours is. Even if you don't think the tax code is actually rigged, you should be troubled by how easily rigged it can be. We like to think of ourselves as innovators in this country, and I'd like to think we can do better than what we have.
     
    JonNC likes this.
  14. DaveJ

    DaveJ Well-Known Member

    According to the article you provided, California is getting close to no growth. No growth is a bad thing.

    "That sounds big, but in fact, it indicates that California’s population growth is continuing to slow and that we could see a no-growth situation in future decades."

    California is going downhill, and it does not seem you want to acknowledge it. If you are happy with the way your new state is going, great.
     
  15. DaveJ

    DaveJ Well-Known Member

    jcp123,
    I agree. Every time they try to simplify, someone screams bloody murder that they are not happy. This thread is an example.I would love to see the whole tax system scrapped and start new, but too many special interests.
     
  16. xcel

    xcel PZEV, there's nothing like it :) Staff Member

    Hi Dave:

    You said you had to investigate. California is the largest state by population by a significant margin and I cannot name the last year their was negative growth. Maybe you can find that out for us as you claimed above it was a negative growth state. Clearly that was incorrect and I have still not seen you correct that?

    Going forward, at some point, population size will slow to 0 and go negative. In the mean time, I have numerous friends that moved to Texas with Toyota. I have not heard of a single one yet that enjoyed this past summer's heat vs. where they were here in Southern Calif. Texas provided a steal of a deal on Taxes and Toyota moved, the employees did not want to go but went because that is where their large incomes and retirement $s were being accrued.

    In the mean time, tens of millions will see higher taxes, somehow Corporations and Multi-millionaires are going to get tax cuts, and yet we will only go into debt by another $1.4 trillion USD?

    Where are the $s coming from if the low and middle class receive tax cuts - Proven false by both my parents in IL and my own situation here in Calif., Corporation tax cuts, and the wealthiest tax cuts? Where is the positive income on this, growth? No, it is lower and middle class tax increases as shown above. You will get yours with higher medical and before 10-years are up, will pay even more.

    A prime example? Simplification without the math and giveaways to the wealthiest individuals when we sit on $20 trillion proves you have not completed the work.

    Wayne
     
  17. DaveJ

    DaveJ Well-Known Member

    Wayne,
    I guess I'm not making clear when I'm quoting from the links we've posted and when I'm making my opinion. It is kind of on a curve, in my opinion, and as the rate of growth slows, then stops, it can go downhill fast, and it appears to be headed that way if no changes. It's not negative growth yet, and I said it was going downhill, not negative growth. By going downhill, I mean quality of life,traffic, safety, tax growth, govt. regulation growth , freedom to live as you please, morality ect.
    Dave
     
  18. xcel

    xcel PZEV, there's nothing like it :) Staff Member

    Hi Dave:

    When an auto plant moves into an area, there is the secondary and tertiary business expansion that improves the local economy for maybe 10-years after the build out of the plant. Once that 10-years is up, the benefits flatten as does the increase in population due to that Billion $ investment. I am speaking about the Southern State Plants. I remember visiting the West Point GA Kia facility a few years ago. IIRC, that plant alone accounted for 2.5 percent of Georgia's entire economy! There are incremental new model changes but once the base population is supporting the plant and secondary/tertiary business', there is no more growth and the possibility of decline if the plant is shuddered.

    In the case of California, it lost NUMMI and now Toyota's NA HQ. A lot of others too. There are also few good land spots and affordable housing with adequate water. This also means traffic congestion. Once outside 40-miles off the Southern Calif. coast, it is essentially arid desert and undesirable. The growth decline has been predicted for decades and maybe it is coming. In the meantime, it continues to somehow grows and you have no idea of the benefits. A much stronger state safety net, I have not used heat or A/C in almost a year, and my real estate taxes out here are capped at 1.2 percent or less. Just 1/3 of what I have in IL despite 1/2 the house costing 1.5Xs as much. Tomorrow it will be in the low to mid-70s. Do you know why California is so desirable compared to Plano where Toyota moved too? I highly doubt we will see any heavy industry locating in California moving forward but startups and tech belong as the States College system is better than any state in the country and even the world.

    Do you want to speak about morality? The POTUS just endorsed an accused child molester for Senate. Apparently the majority of Alabama residents are ok with that too if the latest polls are correct? In prison that guy would have to concerned with an ice pick through his ear and into his brain. In public, he may become a Senator.

    All of your questioning about Calif. is a deflection from what the Senate passed the other night. A Wealthy Donor class giveaway while you will pay more very soon. I will be paying a ton more as soon as the thing is signed and enacted. I assume you are middle class as am I. It is simple math. The Corporate and Wealthy donor class had to be paid by somebody. Guess who that is? Look in the mirror,

    This is not a tax cut Christmas Present to the Middle Class as the POTUS continues to say. This is a giveaway to the Donor class and Corporations plain and simple. Did you miss the message that two middle class families in two different states and vastly different circumstances are going to pay significantly more in taxes?

    We do not need tax cuts, we need tax increases on those most able to help pay it and we need to stop paying for $ billion airplanes and $15 billion warships. That means the wealthiest to help pay down this National debt instead of the IOUs from SS which we pay all of our income too and the Wealthiest stop at $127,500. This bill does not do either no matter how many times the Administration and the Republican party backing it continues to say it.

    As an addendum, there may be a big screw up in the Republican Senate bill that passed the other night. Since none of them read it, apparently something happened in the pen written additions on Saturday afternoon. Corporate AMT "may" be instilled at 20 percent while the nominal tax rate was written up at 20 percent. Someone possibly screwed up the wording in a mention and instead added it in apparently? Meaning no matter what a Corporation did, they have to pay 20 percent. I am still reading about this but apparently the Republicans voted a flawed Senate bill and need the conference to fix that so it will not be voted directly in by the Republican House. This last paragraph could be all BS however as I have not seen it myself.

    Wayne
     

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