Trump Tax Reform - a total squeeze on middle class W2 workers

[Sig]

What is your def of middle class ? Washington Post analysis has couples making less than 86k paying less under this plan.

Obviously everyone will manipulate their definition of "middle class" to support their side of the issue. If you've got medical problems you're f*cked no matter what class with this. If you live in a place with high property tax you're losing money no matter what class if you own a house. If you care about debt, $1.5 trillion is a bit of money regardless of class.

On the other hand, as a 1%er who owns my company I am estimating my taxes will go down by at least 30%,. Not marginal, this is the overall reduction in tax I have to pay when I take into account the elimination of AMT and the money I would save through changing my business structure to a pass-through and getting a 25% rate on 30% of my income. We're talking tens to hundreds of thousands of dollars less I and people like me are paying, while someone making under $86k saves a few hundred bucks at most!

I and people like me are the last people in the world who need this tax break, and even for purely selfish reasons would far rather that money from me and people like me went to potential customers in the middle class, or we just maintained this system that's giving us 4% unemployment and the largest economy in the world, and a 17 year low unemployment level without trying to "fix" it. And the most telling thing is that before this tax cut I put all the extra money my company made back into growing the company, which mainly consisted of hiring people, because that's what the tax structure incentivised me to do. Now I'm incentivised to pay more back to myself earlier, which I'm going to use to buy a better French sailboat. How does that incentive structure help the economy again?

That said, eliminating depreciation and allowing expensing is a spectacularly good idea if you want to incentivize investment. And although meaningless in the grand scheme I also like the fact that they made the joint filing numbers all twice the single filing numbers; making it slightly less by some completely arbitrary amount always bugged me.

 

[newwurldmn]

Obviously everyone will manipulate their definition of "middle class" to support their side of the issue. If you've got medical problems you're f*cked no matter what class with this. If you live in a place with high property tax you're losing money no matter what class if you own a house. If you care about debt, $1.5 trillion is a bit of money regardless of class.

On the other hand, as a 1%er who owns my company I am estimating my taxes will go down by at least 30%,. Not marginal, this is the overall reduction in tax I have to pay when I take into account the elimination of AMT and the money I would save through changing my business structure to a pass-through and getting a 25% rate on 30% of my income. We're talking tens to hundreds of thousands of dollars less I and people like me are paying, while someone making under $86k saves a few hundred bucks at most!

I and people like me are the last people in the world who need this tax break, and even for purely selfish reasons would far rather that money from me and people like me went to potential customers in the middle class, or we just maintained this system that's giving us 4% unemployment and the largest economy in the world, and a 17 year low unemployment level without trying to "fix" it. And the most telling thing is that before this tax cut I put all the extra money my company made back into growing the company, which mainly consisted of hiring people, because that's what the tax structure incentivised me to do. Now I'm incentivised to pay more back to myself earlier, which I'm going to use to buy a better French sailboat. How does that incentive structure help the economy again?

That said, eliminating depreciation and allowing expensing is a spectacularly good idea if you want to incentivize investment. And although meaningless in the grand scheme I also like the fact that they made the joint filing numbers all twice the single filing numbers; making it slightly less by some completely arbitrary amount always bugged me.

They already have depreciation incentives (section 179) for small businesses.

From what I read you want a c-corp over a pass through. The c-corp is 20percent and the pass through is 25 percent. My businesses are s-corps and I am converting to c-corps. What is unclear is what Corp deductions will be allowed. If those are unchanged, my tax bill will also go down by hundreds of thousands.

And while I won't buy a French sailing boat, I don't see how my brokerage account will benefit the middle class.

 

[zdreg]

you can change your income: don't like being discriminated against, stop working; problem solved.

then learn how to game the welfare system. you will be pleasantly surprised how well you can live without working.

 

[zdreg]

Middle class in California is well into the six figures. I tell ya, you can't live off less than around $200,000 in SF.

I don't buy it.


Household Income and Average Income in San Francisco top
Average Household Income $104,879
Median Household Income $77,734
Percent Increase/Decrease in Income Since 2000 34%
Percent Increase/Decrease in Income Since 2010 10%
Average Household Net Worth $1,086,439

nobody is starving.

 

[Sig]

They already have depreciation incentives (section 179) for small businesses.

From what I read you want a c-corp over a pass through. The c-corp is 20percent and the pass through is percent. My businesses are s-corps and I am converting to c-corps. What is unclear is what Corp deductions will be allowed. If those are unchanged, my tax bill will also go down by hundreds of thousands.

And while I won't buy a French sailing boat, I don't see how my brokerage account will benefit the middle class.

The actual bill is quite confusing on that area, spent about an hour reading and rereading just that section yesterday. I'm guessing it will change a few times between now and when it reaches the final version the senate votes on, so might not be worth the effort to try to figure it all out now. I'm a C corp and may maintain it anyway because of the potential benefit of the section 1202 QSBS exemption of the first $10M from all capital gains if I sell the company. That aside, since I don't invest much in equipment and would be in the 23.8% dividend rate (20% plus the 3.8% ACA thing is still there) my total tax rate on my takehome would be the 20% corporate rate plus the 23.8% dividend rate, which at 43.8% is just about the same as simply paying it to myself as salary (39.6+2.9% for medicare). With the S corp it's not clear how much you can slide in at the 25% rate, but even if it was actually limited to 30% of profits you're still better off. It can also be read that it's limited to 30% of income, meaning that unless you have a greater than 30% profit margin, effectively all your profits will be taxed at 25%.

I can tell that no matter what there will be a few years where you'll be able to find loopholes aplenty to probably even more dramatically reduce your taxes, even some which weren't put there on purpose by the lobbyists who framed the model legislation.

Section 179 is a good start, but with a $500K limit it's pretty meaningless in the big picture of the economy. I have never heard any good arguments for why we should have depreciation in the tax code. As best I can tell everyone thinks we should do depreciation because we do depreciation in GAAP, despite the fact that GAAP and tax accounting are already significantly different in a number of ways. It severely distorts incentives away from investing in items subjected to it. I'd also assert that it has had a non-negligible impact on our transition to a service economy, which isn't necessarily bad unless you're a MAGA type but something I don't hear talked about often.

 

[newwurldmn]

The actual bill is quite confusing on that area, spent about an hour reading and rereading just that section yesterday. I'm guessing it will change a few times between now and when it reaches the final version the senate votes on, so might not be worth the effort to try to figure it all out now. I'm a C corp and may maintain it anyway because of the potential benefit of the section 1202 QSBS exemption of the first $10M from all capital gains if I sell the company. That aside, since I don't invest much in equipment and would be in the 23.8% dividend rate (20% plus the 3.8% ACA thing is still there) my total tax rate on my takehome would be the 20% corporate rate plus the 23.8% dividend rate, which at 43.8% is just about the same as simply paying it to myself as salary (39.6+2.9% for medicare). With the S corp it's not clear how much you can slide in at the 25% rate, but even if it was actually limited to 30% of profits you're still better off. It can also be read that it's limited to 30% of income, meaning that unless you have a greater than 30% profit margin, effectively all your profits will be taxed at 25%.

I can tell that no matter what there will be a few years where you'll be able to find loopholes aplenty to probably even more dramatically reduce your taxes, even some which weren't put there on purpose by the lobbyists who framed the model legislation.

Section 179 is a good start, but with a $500K limit it's pretty meaningless in the big picture of the economy. I have never heard any good arguments for why we should have depreciation in the tax code. As best I can tell everyone thinks we should do depreciation because we do depreciation in GAAP, despite the fact that GAAP and tax accounting are already significantly different in a number of ways. It severely distorts incentives away from investing in items subjected to it. I'd also assert that it has had a non-negligible impact on our transition to a service economy, which isn't necessarily bad unless you're a MAGA type but something I don't hear talked about often.

Are you referring to expending all capital expenditures vs depreciating over time? I think it makes sense to depreciate otherwise you will take operating losses for decades as the payback on machinery for a manufacturer is often several years.

I run several manufacturers and we use the section 179 every year. It only applies to small businesses but I know many owner operators who buy equipment just for the deduction. A lot of manufacturing is ultimately done by these small companies as the large manufacturers are becoming strictly assemblers.

I haven't read the code, I'm going on the summaries from my accountants and from news articles. A lot is still vague. Even after 400 something pages people seem less sure of the final plan today than they did with trump's one page bullet points in January.

 

[JesseJamesFinn1]

When I visited Loui

his tax reform bill cannot help middle class people. the reason is that the green shade people in the high tax blue states are working overtime to recapture any reduction in the federal tax. the monies will be used for to pay for the pensions and salaries of local government workers.

It might be interesting to get Robert Green CPA's view of this Tax Reform since he is one of the best Trader's CPA's in the World. If someone asked him, he might put in his view how this will help or not help the Middle Class.

 

[Buy1Sell2]

Look folks--Tax rates need to be the same on everyone. This would mean that taxes need to be raised on 40 to 50 percent of the population that pays no taxes or actually gets money from govt.---and yes that means tax rates need to be lowered on the rich and middle class. ---Having different rates is ridiculous class warfare and is unfair and unproductive.

 

[jj1111]

then learn how to game the welfare system. you will be pleasantly surprised how well you can live without working.

yes: everyone aspires to live on welfare

 

[zdreg]

yes: everyone aspires to live on welfare

you can change your income: don't like being discriminated against, stop working; problem solved.
_____________
zdreg: then learn how to game the welfare system. you will be pleasantly surprised how well you can live without working.

you were the one who suggested a solution to the income discrimination problem, stop working. I merely suggested how to make yourself more comfortable after ditching work.