Trump's Tax Plan

[Kung Wu]

That is the exact opposite of what the Forbes author wrote in the linked article w/r/t pass throughs - why do you think he is incorrect?

Edit: article edited this morning, hah! You may be right - that is a huge difference!

I think it was just worded funny in the article.

[Aargh]

Some people in this thread seem to be applying a 33% tax rate to adjusted gross. The 33% rate would only affect adjusted gross over a certain amount. Someone earning $600,000 would pay the exact same amount of taxes on the first $200,000 of his earnings as the guy who makes $200,000 pays on his.

Ignoring the marginal factors in tax rates was the theme of one elecetion meme that got a lot of mileage on Facebook. The meme said that Hillary would raise inheritance tax rates to 65% and everybody was going to lose their family farm. It ignored the fact that nothing changed on estates under $1 billion, but there was a new bracket added for estates in excess of $1 billion. A family farm in Kansass worth $1 billion would be prime farmland covering an area equal to the area from Broadway to Augusta and then north to a few miles south of Newton.

[1972Shocker]

I am not sure where the simplification is. Reducing the tax brackets is not much of a simplification, if any. There may be a few people on the margins who will take a standard deduction instead of itemizing. Again not a major simplification.

We already have a tax system that has on two brackets but it is anything but simple. It is called the Alternative Minimum Tax. The probolem is it is not elective. You have to determine your tax liablity under both the regular tax system and the alternative minimum tax system and pay the larger amount. Doesn't apply to a lot of lowere income taxpayers because of the exemptions but thank goodness for computers in dealling with this if it does apply to you. Haven't heard any proposals regarding the AMT.

Perhaps one of the most complicating aspect of income taxation, which again most people don't have to deal with, is multi-state taxation where income is earned in mulitple states. This is not a Federal issue but if you have this situation it can be a pain in the ass. The more states, the bigger the pain.

The taxation of publicly traded master limited partnerships is a real pain also under current tax law. Would not mind seeing those eliminated also.

[1972Shocker]

Some people in this thread seem to be applying a 33% tax rate to adjusted gross. The 33% rate would only affect adjusted gross over a certain amount. Someone earning $600,000 would pay the exact same amount of taxes on the first $200,000 of his earnings as the guy who makes $200,000 pays on his.

Ignoring the marginal factors in tax rates was the theme of one elecetion meme that got a lot of mileage on Facebook. The meme said that Hillary would raise inheritance tax rates to 65% and everybody was going to lose their family farm. It ignored the fact that nothing changed on estates under $1 billion, but there was a new bracket added for estates in excess of $1 billion. A family farm in Kansass worth $1 billion would be prime farmland covering an area equal to the area from Broadway to Augusta and then north to a few miles south of Newton.

If they really wanted to generate revenues on inherited assets they would totallly eliminate gift and estate taxes which would also elimiate stepped up basis on inherited assets. Capital gains taxes would be paid at the time any gifted are inherited assets are sold to the extent the sale proceeds exceeds the inherited basis. That would raise substantially more money than the current gift and estate taxes do. Of course, it would also apply to everybody. Whereas the estate and gift taxes apply only transfers of $5 million per person ($10 million for a married couple) not to mention the many other ways there are to shied assets from estate and gift taxes under current law. This eliminates the biggest advantage of the estate tax. That is as a tool of class warfare demogoguery.

The advantage of this over the current estate tax is that the tax is not due until the assets are sold. Tax-free exchanges of like-kind assets would presumably still be available (primarily a real-eastate manuever). The disadvantage is that everyone would owe tax on any inherited gains when the assets are sold unless the asset declines in value to its inherited basis or below.

Marital exclusions would not doubt continue to apply. Proposals that have previously been made included some limited step-up in basis provisions that would exclude the majority of people from paying taxes on inherited gains. However, the logic of doing is primarily political. Don't want to piss off too many voters.

[wufan]

I'm glad there are other people here that understand this better than I do.

[1972Shocker]

I'm glad there are other people here that understand this better than I do.

That might be a dangerous assumption to make.

[Kung Wu]

Some people in this thread seem to be applying a 33% tax rate to adjusted gross. The 33% rate would only affect adjusted gross over a certain amount. Someone earning $600,000 would pay the exact same amount of taxes on the first $200,000 of his earnings as the guy who makes $200,000 pays on his.

Yes, I was hasty on the quick calculation to demonstrate the point that was actually being contested. The primary point is still valid I believe, the 15% is on business income that flows down to an S Corp owner. The small business owners in the lower range are getting a fantastic tax break too, not just the wealthy ones.

[Rocky Mountain Shock]

What gets lost in virtually every tax policy debate is a discussion about what motivates a company to purchase assets or labor. On the most part, business people are intelligent--they will not buy something they don't need just because it's cheap. Tax policy will never by itself be the impetus for investment. A company will purchase equipment only when there is a business purpose to do so, but they may strategically time that decision to take advantage of tax deductions, which defeats the purpose of the tax policy entirely.

Likewise, increasing business profits and expecting companies to spend it (use most of that to invest in the economy) instead of paying it out as dividends or stashing it in retained earnings, is terribly naive and ignores past experience.