philip964 wrote:Yes I live in Texas.
I'm solidly middle class with rich tastes. Want to pay off my credit card debt for me?
So if your itemized deductions are more than $ 25,000, ( that's me), my understanding is you will pay more taxes. This would generally be someone with a house that cost more than $500,000 in Texas. Less in other states with State income taxes. Removing state and local taxes will put my itemized deductions below the standard deduction amount. You take the higher of the two. Thus I will pay more taxes.
Understand it's a great deal for renters who take the standard deduction. But as they said it will generate 1.5 trillion in new taxes from people like me to pay. This will pay for the loss in Taxes from removal of death taxes for estates in excess of 5 million (not me) reducing the rates for the rich (not me) and for reducing the taxes for people whose itemized deductions are less than 25,000 dollars and for people who rent and take the standard deduction. (Not me ) It will continue to pay for people who pay no taxes or who work and have children and get more in taxes from the government than they pay. (Not me)
Winners and losers. I will be a loser.
When people talk about "tax reform" my taxes go up. That has been my memory from the first time I filed a tax return.
When people say reform. Does that mean to you allowing for me to voluntarily give money to a charity and deduct that, but if the government forces me to pay for charity, I cannot deduct that?
Does reform mean to you allowing a business to deduct something, but not allowing an individual to deduct the exact same thing?
Does reform mean to you paying higher tax rates for income earned by the sweat of your brow versus earning income by other means?
All for the goal reform and simplifying your tax return.
The thing that through me off was the singling out of the State and Local Tax (aka SALT) deduction. This will have a huge impact for folks in high tax states like California, New York, etc., but not so much for Texans. That's why I asked if you are a Texas resident. I think we have at least a couple non-Texans on this forum. Broadening it to the loss of itemized deductions in general, then yes I agree that there are examples of "middle class" (however you define that term) tax payers who will end up paying more because they have alot of deductions under the current tax scheme.
Personally, my taxes have generally gone down with every major tax reform / change going back to 1986. Then again, I tend to not have alot of deductions. I do have a mortgage. Two in fact since I have a rental house. But I don't have a lot of other deductions.
To answer your questions, reform, to me means change. That's it. There is a separate question as to whether that change makes things more or less fair. Getting back to the subject of the SALT deduction, is it fair that a person living in California pays less in federal income taxes than I do just because they choose to live in a less fiscally responsible state with resulting higher state and local taxes? I say no.
To address your other questions, my personal opinion is that yes, we should allow a business to deduct expenses that individuals cannot deduct. Doing otherwise would mean that we tax businesses on their total revenue. If these were taxed at anything close to individual tax rates, then almost every businesses would pay more in taxes than they make in profit. That would be the end of capitalism as we know it. So yes, the local Mc Donald's franchisee should be able to deduct the rent they pay on their building (or the interest and depreciation cost) because that building is used to generate revenue. They should also be able to deduct their electricity bill, and other costs of operating that building.
I'm not sure I understand the charity question. Are you saying that you want everyone to be able to deduct a percentage of their prior year income taxes based on the amount that the federal government spent for "charity" (presumably welfare and the like)? If so, that would be a net neutral since tax rates would then just have to rise to offset the impact of the deduction. Now I could get behind the idea of doing away with social programs entirely and instead allowing people to take a dollar for dollar tax credit up to X% of their income for charity. That way, the same money gets spent helping folks, but it goes to non-government organizations that will spend it more effectively, IMHO.
If you are "middle class", then you are likely going to max out at the 25% individual rate under the proposed plan, so I think you will be paying the same rate whether you own a business or you are employed. In both cases, your money would be earned by "the sweat of your brow" though, so I'm not sure if this is what you are referring to with that comment. If you are instead referring to your dividend income from investments, that income should be taxed at the same rate as individuals pay, IMHO. Note that it is currently taxed twice. When the corporation makes the dollar, and then again when they give you that dollar. To me, that is wrong. Just tax it once, and at the same rate that an individual pays.
Like you said, there will be winners and losers regardless of what we do. And saying that the "middle class" will be paying less taxes does not mean that every single member of the "middle class" will be paying less in taxes. We are nowhere near that homogeneous as a population. Ultimately, we can argue about whether specific parts of any tax plan are "fair" or "unfair" but most people won't even care about that. They will like the plan if their personal taxes go down, and they will not like the plan if their personal taxes go up. It's not about fairness to most people. It's just about greed.
