Tax reform

[Anastasis 23469]

34 minutes ago, David Dennison said:

I am amazed that people don't realize that this is one of the main purposes of the tax code.

I am from the government and I am here to help!

[Bozo_Casanova 26452]

I am amazed that people don't realize that this is one of the main purposes of the tax code.

Or they imagine that it doesn’t mostly work better than other policy tools.

[David Dennison 18856]

9 minutes ago, Anastasis said:

I am from the government and I am here to help!

Get you a mortgage, develop a suburb, send your kid to college, etc.

[JimmyJames 12271]

1 hour ago, Brew said:

My assumption is because both parties see an investment of capital into business as a good thing and so they treat the return of capital as unearned income with a different rate just the same as they do with qualified dividends.

So the government picks the winners. Of course investment of capital into business is a good thing. So is working to earn a paycheck and provide a service. Which one is better?

[Anastasis 23469]

21 minutes ago, David Dennison said:

Get you a mortgage, develop a suburb, send your kid to college, etc.

Almost scuttle the entire financial system, incentivize  overextending mortgages and resulting sprawl, inflate the costs of college education, yea government intervention!

[Brew 3049]

8 hours ago, JimmyJames said:

So the government picks the winners. Of course investment of capital into business is a good thing. So is working to earn a paycheck and provide a service. Which one is better?

No, the government picks what to incentivize just like they incentivize home ownership over renting, just like they incentivize giving to charities, just like they incentivize those that produce a tangible good over those that provide a service, just like they incentivize being a landlord, just like they incentivize going to college, just like they incentivize retirement investing for lower income people which I don’t qualify for, etc. 

They incentivize the investment of cash into business interests over investing the cash in your local banks savings account and paying ordinary rates on the interest. Low/moderate income people pay zero capital gains tax so they have an even bigger incentive although most lack the means. I’m not saying it is right or wrong, but there is a reason and you may not agree with it. There are plenty of components that people don’t agree with and it’s usually the ones they aren’t getting.

You want to complain about social engineering, explain the child tax credit, the earned income credit, etc. to me. It’s a two way street and everyone in the system is getting some benefit. My vote is to scrap it all and go to a tiered system with no adjustments.

[sidis 9828]

14 hours ago, Brew said:

It is centered on business income. The pass through income deduction is a cluster fuck with no clarification provided in the tax law. The IRS and preparers are in a standoff at this point to see who blinks first. The elimination of entertainment deductions is going to be a cluster as well.

specifically, are you talking about pass-through entities as to whether or not they qualify for the reduced tax rate based on being a services company?  As in, if you are a 100% services company like a doctor's office or consulting group, one doesn't qualify for the reduced rate and are stuck with the old rate?  or something more specific?

[27-25 2047]

13 hours ago, Brew said:

My assumption is because both parties see an investment of capital into business as a good thing and so they treat the return of capital as unearned income with a different rate just the same as they do with qualified dividends.

I was under the impression that work was a good thing.  Was I misinformed?

And I'm not arguing that the rates be the same.  I am arguing that I see no rationale for widening the difference further.  The rich were already getting richer.  The endgame of widening income disparity will not end well for anyone, even the rich.

[Brew 3049]

4 hours ago, sidis said:

specifically, are you talking about pass-through entities as to whether or not they qualify for the reduced tax rate based on being a services company?  As in, if you are a 100% services company like a doctor's office or consulting group, one doesn't qualify for the reduced rate and are stuck with the old rate?  or something more specific?

That is one issue although it isn’t a rate issue. You get a 20% deduction on oss through entities with service providers having a phase out on that 20% deduction. Most service providers that phase out  rent buildings from partnerships they own separately, what income do you have to take into account under that scenario? Are there going to be reasonable rent adjustments for those like us that pay rent at a significant premium to lower self employment tax. Another is related to the issues around reasonable comp in those entities. There has been some movement this week, but there is still a lot that is vague at best.

[Brew 3049]

4 hours ago, 27-25 said:

I was under the impression that work was a good thing.  Was I misinformed?

And I'm not arguing that the rates be the same.  I am arguing that I see no rationale for widening the difference further.  The rich were already getting richer.  The endgame of widening income disparity will not end well for anyone, even the rich.

Your first statement is stupid just for the record and more hyperbole that goes nowhere other than inflaming one side or the other. The flip side of your argument is that without capital investment there would be no work for the worker bees to perform. Both sides of the aisle have placed a perceived value on that resulting in lower capital gains rates.

This whole us versus them mentality is tired at this point. I made my stance on the tax system clear in my post above. Go to a flat or tiered structure with no deductions so everyone pays something and the system can’t be gamed. However, there will still be rich/poor and employee/employer. The tax structure has jack shit to do with income disparity and those that lash out at it with that mentality are just trying to find an argument.

[JimmyJames 12271]

16 hours ago, Brew said:

No, the government picks what to incentivize just like they incentivize home ownership over renting, just like they incentivize giving to charities, just like they incentivize those that produce a tangible good over those that provide a service, just like they incentivize being a landlord, just like they incentivize going to college, just like they incentivize retirement investing for lower income people which I don’t qualify for, etc. 

They incentivize the investment of cash into business interests over investing the cash in your local banks savings account and paying ordinary rates on the interest. Low/moderate income people pay zero capital gains tax so they have an even bigger incentive although most lack the means. I’m not saying it is right or wrong, but there is a reason and you may not agree with it. There are plenty of components that people don’t agree with and it’s usually the ones they aren’t getting.

You want to complain about social engineering, explain the child tax credit, the earned income credit, etc. to me. It’s a two way street and everyone in the system is getting some benefit. My vote is to scrap it all and go to a tiered system with no adjustments.

My point is related to the difference between the tax rate between capital gains versus regular income, so your argument about the mortgage interest deduction misses the mark. Of course that incitiveses it. That’s not the point. And it’s minimal compared to overall taxes, as our resident troll has pointed out. 

Back to what I’m actually arguing, why should the federal government favor investment in capital gains over income derived from work? Why should Eric trump investment into his investment into a stock be taxed at a lower rate than a surgeon who performs heart surgery? Is his investment that much more valuable? 15 percent versus 40? 

[Brew 3049]

7 hours ago, JimmyJames said:

My point is related to the difference between the tax rate between capital gains versus regular income, so your argument about the mortgage interest deduction misses the mark. Of course that incitiveses it. That’s not the point. And it’s minimal compared to overall taxes, as our resident troll has pointed out. 

Back to what I’m actually arguing, why should the federal government favor investment in capital gains over income derived from work? Why should Eric trump investment into his investment into a stock be taxed at a lower rate than a surgeon who performs heart surgery? Is his investment that much more valuable? 15 percent versus 40? 

I answered and you responded to it in post #304. It has pinballed back and forth over the years but has generally been used to try and spur economic growth/investment/saving. I think the studies show little correlation between the rate and economic growth, but do show a higher rate of savings. I think there are other studies that show a lower capital gains tax being the sweet spot for total tax collections also. A higher capital gains tax results in less income subject to tax likely because of tax planning.

My comparison to interest deductions is relevant, the government is in the incentive business and uses the tax code to do it. 

[27-25 2047]

22 hours ago, Brew said:

Your first statement is stupid just for the record and more hyperbole that goes nowhere other than inflaming one side or the other. The flip side of your argument is that without capital investment there would be no work for the worker bees to perform. Both sides of the aisle have placed a perceived value on that resulting in lower capital gains rates.

This whole us versus them mentality is tired at this point. I made my stance on the tax system clear in my post above. Go to a flat or tiered structure with no deductions so everyone pays something and the system can’t be gamed. However, there will still be rich/poor and employee/employer. The tax structure has jack shit to do with income disparity and those that lash out at it with that mentality are just trying to find an argument.

My first comment is a bit snarky and for that I apologize.  Not quite sure how that warranted such a vitriolic response.  I even explicitly stated I was not arguing that capital gains should be taxed the same as earned income, just didn't see the need for the disparity to be increased. 

If tax structure has nothing ("jack shit") to do with raising the income of one group over another it would make no sense for some groups to spend so much money lobbying congress on modifying the tax structure.

Your proposal of a flat tax would certainly get rid of some gaming of the system (see lobbying above).  Unfortunately, given our current human nature, I do not see a pristine tax policy lasting a single Congressional session before the first "oh, well except this" gets thrown into the mix.  Seems like every tax simplification scheme has been but a temporary reprieve from the inevitable trend.

[Buzzrock 14920]

Have we covered consumption tax in this thread? Thoughts?

I read The Fair Tax by Boortz. Seems interesting to me. No one pays taxes on the essentials, everyone else pays taxes on what they consume via a sales tax. Hidden taxes are taken out so the cost of most goods stays essentially flat, e.g. a $20K car today costs $20K after the Fair Tax is implemented.

Aside from black markets, the impact of which would be debatable, no one could escape taxation except by being frugal.

[Anastasis 23469]

17 minutes ago, Buzzrock said:

Have we covered consumption tax in this thread? Thoughts?

I read The Fair Tax by Boortz. Seems interesting to me. No one pays taxes on the essentials, everyone else pays taxes on what they consume via a sales tax. Hidden taxes are taken out so the cost of most goods stays essentially flat, e.g. a $20K car today costs $20K after the Fair Tax is implemented.

Aside from black markets, the impact of which would be debatable, no one could escape taxation except by being frugal.

Why do you want to kill out economy based on frivolous consumerism?

[TwiceHorn 31463]

The thing about capital gains is that it assumes that investment provides capital to business.  It does, but in a very, very indirect way.  A corporation sees not a dime of your investment in its stock unless it's an IPO.  The capital markets are mostly about speculation and arbitrage in the post-capital-raise environment.  Investment in that market eventually operates to create capital or funds for businesses, but I think it's long past deserving a special break, say more than maybe 25% or less from your marginal rate.  Investment in real assets (i.e. real estate) may be a different deal.

 

A lot of the other "social engineering" incentives built into the tax code also no longer support their original purpose, if they ever did.

[Message Board User 12395]

Good job everyone.  High fives all around.

 

[Js1 85325]

So.... They'll pay for themselves after the Bush tax cuts finish paying for themselves after the Iraq War finishes paying for itself, right?

[Brew 3049]

I’m curious how they track their information. Outside of the bonus depreciation component that was retroactive to 9/1/17, all other changes were 2018 changes. Do they use estimates of tax collections during the year since collections really only happen quarterly? Are they using actual spring collections which are just true up payments/refunds and quarterly estimates?

[JBJ 3654]

Withholdings and quarterly estimates.

Here's what the CBO report actually says:

Paraphrased:

Quote

Total Receipts: Up by 1 Percent in the First 10 Months of Fiscal Year 2018

Receipts totaled $2,766 billion. $26 billion more than last year. The net increase resulted from:

- Individual income and payroll taxes rose by $105 billion

-- Withholdings rose by $32 billion - largely reflects increases in wages and salaries

-- Nonwithheld payments of income and payroll taxes rose by $79 billion

- Corporate income taxes fell by $66 billion. About one-third of the decline occurred in June, predominantly estimated payments for tax year 2018

- Revenues from other sources fell by $13 billion, reduced collections of fees and fines.

Edited August 9, 2018 by JBJ

[JBJ 3654]

Damn software quote shit.  Ignore that.

Here is link

Edited August 9, 2018 by JBJ

[JBJ 3654]

Son of bitch...technology should not be this hard.

Edited August 9, 2018 by JBJ

[Brew 3049]

Trump was right, lower taxes leads to more tax revenue. We should celebrate.

The headline in the post above is slightly misleading when the article specifically states that the effect of tax law changes on collections is uncertain. The article makes more sense than the Hill link above.

Edited August 9, 2018 by Brew

[ousuxndallas 65]

The thing about capital gains is that it assumes that investment provides capital to business.  It does, but in a very, very indirect way.  A corporation sees not a dime of your investment in its stock unless it's an IPO.  The capital markets are mostly about speculation and arbitrage in the post-capital-raise environment.  Investment in that market eventually operates to create capital or funds for businesses, but I think it's long past deserving a special break, say more than maybe 25% or less from your marginal rate.  Investment in real assets (i.e. real estate) may be a different deal.
 
A lot of the other "social engineering" incentives built into the tax code also no longer support their original purpose, if they ever did.

You are making an incorrect assumption. What about private companies? That investment is direct, and small companies are the driving engine behind America.

[David Dennison 18856]

21 minutes ago, Brew said:

Trump was right, lower taxes leads to more tax revenue. We should celebrate.

The headline in the post above is slightly misleading when the article specifically states that the effect of tax law changes on collections is uncertain. The article makes more sense than the Hill link above.

You didn't read any of the report, did you?

Edited August 9, 2018 by David Dennison

[Mojo Hand 4580]

No, the "first ten months of 2018" includes continuing receipts under the tax law as it was in 2017.   When you paid your 2017 taxes before April 17, 2018, that means they were paid in the 2018 year and count as 2018 revenue.   Even though they don't include the tax cut.   Every month since April, tax receipts are down significantly compared the same month last year —and they should be higher, not just unchanged, given the growing economy — which means tax receipts have decreased substantially because of the tax law. 

Edited August 9, 2018 by Mojo Hand

[Brew 3049]

28 minutes ago, David Dennison said:

You didn't read any of the report, did you?

Yes, did you? The first sentence in my post was facetious for the record in case that wasn’t clear enough to you.

“Although some provisions of last year’s major tax legislation (Public Law 115-97) affect receipts, the timing of those effects is highly uncertain. The amount collected in recent months might not indicate the amount that individuals or businesses ultimately will pay for tax year 2018.”

That from the CBO report doesn’t really match up with “The rising deficit is largely the result of the tax cuts President Trump signed into law at the end of last year, as well as a bipartisan agreement to boost spending, according to CBO.” from the Hill article.

Hence the reason I asked what they base it on. There was a report out last week that individuals were going to owe more than expected at year end because of screw ups in the IRS tax tables this year. We’re two estimated payments and half a year’s withholding into the tax law changes at this point. I think the corporate reduction is ultimately going to greatly exceed expectations, but it’s still early.

Edited August 9, 2018 by Brew

[Mojo Hand 4580]

27 minutes ago, Brew said:

Yes, did you? The first sentence in my post was facetious for the record in case that wasn’t clear enough to you.

“Although some provisions of last year’s major tax legislation (Public Law 115-97) affect receipts, the timing of those effects is highly uncertain. The amount collected in recent months might not indicate the amount that individuals or businesses ultimately will pay for tax year 2018.”

That from the CBO report doesn’t really match up with “The rising deficit is largely the result of the tax cuts President Trump signed into law at the end of last year, as well as a bipartisan agreement to boost spending, according to CBO.” from the Hill article.

Hence the reason I asked what they base it on. There was a report out last week that individuals were going to owe more than expected at year end because of screw ups in the IRS tax tables this year. We’re two estimated payments and half a year’s withholding into the tax law changes at this point. I think the corporate reduction is ultimately going to greatly exceed expectations, but it’s still early.

You said this proves that "Trump was right, lower taxes leads to more tax revenue. We should celebrate."  Now you are saying that the low receipts aren't necessarily caused by the tax law, we have to wait and see.   Those are two different arguments.  Regardless of whether you were saying it in a flippant way. 

Edited August 9, 2018 by Mojo Hand

[Brew 3049]

14 minutes ago, Mojo Hand said:

You said this proves that "Trump was right, lower taxes leads to more tax revenue. We should celebrate."  Now you are saying that the low receipts aren't necessarily caused by the tax law, we have to wait and see.   Those are two different arguments. 

Did you completely skip the first paragraph of the post you just quoted?

[Mojo Hand 4580]

13 minutes ago, Brew said:

Did you completely skip the first paragraph of the post you just quoted?

No, but I did already edit to add another sentence to clarify my response.  

[JimmyJames 12271]

19 minutes ago, Mojo Hand said:

You said this proves that "Trump was right, lower taxes leads to more tax revenue. We should celebrate."  Now you are saying that the low receipts aren't necessarily caused by the tax law, we have to wait and see.   Those are two different arguments.  Regardless of whether you were saying it in a flippant way. 

Appparently he’s like trump, whenever he says something completely wrong he was “joking.”

[David Dennison 18856]

34 minutes ago, Brew said:

Yes, did you? The first sentence in my post was facetious for the record in case that wasn’t clear enough to you.

“Although some provisions of last year’s major tax legislation (Public Law 115-97) affect receipts, the timing of those effects is highly uncertain. The amount collected in recent months might not indicate the amount that individuals or businesses ultimately will pay for tax year 2018.”

That from the CBO report doesn’t really match up with “The rising deficit is largely the result of the tax cuts President Trump signed into law at the end of last year, as well as a bipartisan agreement to boost spending, according to CBO.” from the Hill article.

Hence the reason I asked what they base it on. There was a report out last week that individuals were going to owe more than expected at year end because of screw ups in the IRS tax tables this year. We’re two estimated payments and half a year’s withholding into the tax law changes at this point. I think the corporate reduction is ultimately going to greatly exceed expectations, but it’s still early.

I did not realize you were being facetious. It read as earnest.

[Brew 3049]

Article says receipts up over 10 month period. 7 of those months fall in 2018. The only month specifically mentioned as down is July. Article last week said withholdings are going to be short this year due to table issues which will result in additional money or less refund in Spring of 2019. 

Point remains that it is too early to make any sort of determination as to what receipts will be for this year and the overall affect of the tax law changes on receipts and the CBO makes that same  assessment in the article. The Hill’s article is misleading above which was what started my questions.

Hope that clears up your confusion.

Edited August 9, 2018 by Brew

[Mojo Hand 4580]

18 minutes ago, Brew said:

Article says receipts up over 10 month period. 7 of those months fall in 2018. The only month specifically mentioned as down is July. Article last week said withholdings are going to be short this year due to table issues which will result in additional money or less refund in Spring of 2019. 

Point remains that it is too early to make any sort of determination as to what receipts will be for this year and the CBO makes that same  assessment in the article. The Hill’s article is misleading above which was what started my questions.

Hope that clears up your confusion.

From the previous two CBO reports:

"CBO estimates that receipts in May 2018 totaled $217 billion—$24 billion (or 10 percent) less than those 
in the same month last year" 

"CBO estimates that receipts in June 2018 totaled $314 billion—$25 billion (or 7 percent) less than those in the same month last year." 

I guess we'll see how big those table errors really were next year. 

Edited August 9, 2018 by Mojo Hand

[Buzzrock 14920]

Why do you want to kill out economy based on frivolous consumerism?

Nobody?

[JBJ 3654]

2 hours ago, Mojo Hand said:

From the previous two CBO reports:

"CBO estimates that receipts in May 2018 totaled $217 billion—$24 billion (or 10 percent) less than those 
in the same month last year" 

"CBO estimates that receipts in June 2018 totaled $314 billion—$25 billion (or 7 percent) less than those in the same month last year." 

I guess we'll see how big those table errors really were next year. 

Doesn't support your argument.  Beer's cuts would show up in June but not May.  So there's really hardly any effect (based on the overall of those two months).

Edited August 10, 2018 by JBJ

[Mojo Hand 4580]

14 minutes ago, JBJ said:

I know you don't know this, but those two data points don't support your case very well.  Beers cuts would show up in June but not May.  So there's really hardly any effect (based on the overall of those two months).

You're right, I don't follow.   What do you think caused tax receipts to be lower each of the last three months than the same months a year ago?  Particularly in a growing economy, where receipts should be higher than the equivalent months last year?

[JimmyJames 12271]

Lots of reasonable sounding liars showing up in this thread. In less than a year from now tax receipts will crater, and the liars currently posting here will be long long gone, never to be heard from again. 

[TwiceHorn 31463]

3 hours ago, ousuxndallas said:

On 8/7/2018 at 1:58 PM, TwiceHorn said:

The thing about capital gains is that it assumes that investment provides capital to business.  It does, but in a very, very indirect way.  A corporation sees not a dime of your investment in its stock unless it's an IPO.  The capital markets are mostly about speculation and arbitrage in the post-capital-raise environment.  Investment in that market eventually operates to create capital or funds for businesses, but I think it's long past deserving a special break, say more than maybe 25% or less from your marginal rate.  Investment in real assets (i.e. real estate) may be a different deal.
 
A lot of the other "social engineering" incentives built into the tax code also no longer support their original purpose, if they ever did.

You are making an incorrect assumption. What about private companies? That investment is direct, and small companies are the driving engine behind America.

And people rarely trade stock in small private corporations, so capital gains treatment is mostly irrelevant in that context.  Any return on that investment is going to be in the form of salary or dividend, both taxed at ordinary rates, or pass-through, again with ordinary income taxation.

[JBJ 3654]

14 minutes ago, Mojo Hand said:

You're right, I don't follow.   What do you think caused tax receipts to be lower each of the last three months than the same months a year ago?  Particularly in a growing economy, where receipts should be higher than the equivalent months last year?

It's in the report: Corporate revenues are down and QE unwinding means less remittances.

[JBJ 3654]

19 minutes ago, JBJ said:

It's in the report: Corporate revenues are down and QE unwinding means less remittances.

Oops July, here is what they say in May:

Individual income and payroll taxes dropped by $16 billion (or 7 percent), on net. Withholding of individual income and payroll taxes dropped by $10 billion (or 5 percent). Withheld taxes declined for two reasons. First, May 2018 had one fewer Monday, a particularly strong day for withheld taxes, than did May of last year. Second, the share of wages withheld for taxes was lower, CBO estimates, following the changes in tax law that took effect at the beginning of the calendar year. All other revenue sources declined by $8 billion.

And June:

Withholding of individual income and payroll taxes dropped by $10 billion (or 5 percent), and nonwithheld payments rose by $5 billion (or 7 percent). Withheld taxes declined for two reasons. First, June 2018 had one fewer weekday than June of last year. Second, the share of wages withheld for taxes was lower, CBO estimates, in keeping with changes made by P.L. 115-97. Corporate revenues declined by $20 billion (or 35 percent), reflecting lower quarterly payments of estimated taxes for the 2018 tax year.

[Mojo Hand 4580]

14 minutes ago, JBJ said:

Oops July, here is what they say in May:

 

 

And June:

 

 

This continues to support the conclusion that the tax law is responsible for the decline in receipts.   The parts you quoted expressly say so, both on the corporate side and the employee withholding side.  How are you reading this otherwise? 

[JBJ 3654]

13 minutes ago, Mojo Hand said:

This continues to support the conclusion that the tax law is responsible for the decline in receipts.   The parts you quoted expressly say so, both on the corporate side and the employee withholding side.  How are you reading this otherwise? 

We are still up overall (or at least flat), mostly due to wage growth, which was the target of the cuts.

I'm not calling it one way or other (can't at this point) just saying the Hill article is bullshit.

[zork 629]

Interest expense is going to be bigger for calendar year '18 for sure, YOY.  We'll see if the >3.5% GDP growth is sustainable.  

[Brew 3049]

39 minutes ago, TwiceHorn said:

And people rarely trade stock in small private corporations, so capital gains treatment is mostly irrelevant in that context.  Any return on that investment is going to be in the form of salary or dividend, both taxed at ordinary rates, or pass-through, again with ordinary income taxation.

That’s not true at all. There are plenty of privately held entities that sell on an annual basis and most sell under an asset sale scenario. The gains over depreciation recapture are taxed at capital gains rates just like a stock sale.

[JBJ 3654]

One more thing, when the CBO says we are down $XX because of tax cuts, it's only half true.  They are only comparing one rate to another, not the economic situation of one rate to the other situation.

Like if they compared the 35% rate to a 100% tax they'd say we were down 65%, but the reality is that a 100% would generate very few receipts.

[JimmyJames 12271]

32 minutes ago, Brew said:

That’s not true at all. There are plenty of privately held entities that sell on an annual basis and most sell under an asset sale scenario. The gains over depreciation recapture are taxed at capital gains rates just like a stock sale.

And what would the percentage of privately held companies would that be? 

[JimmyJames 12271]

Liars on this thread gonna lie. 

[LongestHorn 759]

The party of fiscal and personal responsibility is a punchline.

[Brew 3049]

23 minutes ago, JimmyJames said:

And what would the percentage of privately held companies would that be? 

Based on your past posting in this thread, I’m not sure why I’m even asking this. However, what exactly is your question?

Edited August 10, 2018 by Brew