Politics

[StopThePumpFakesShav]

That spreadsheet is neglecting the huge factor of getting rid of personal exemptions, which are $4k deductions per person, so $8k for a couple. About half of those middle class people will come out behind, depending on their circumstances (e.g., kids, home ownership). I'm confident some of you will be paying higher taxes due to this tax cut.

The immediate tax hits will be for the upper middle class/lower upper class in high tax locations like NY and CA. State and local deduction is a big deal, like $40k deduction for your typical highly educated couple in those areas making $400k. Instead of $40k plus $8k personal exemption, for $48k total itemized deduction, that couple will now take the standard deduction of $24k, which means a loss of about $10-12k post-tax income due to their marginal tax rate of close to 50%. This is balanced out partially or perhaps even fully by the lower tax rates in general, but many couples in this situation, who are almost entirely Democratic voters, will be paying more.

The millionaires are the only ones who will certainly benefit from the individual changes.

Yep. Where I live, state tax is in the 6-7% range and property taxes are 20-25K per year.

 

[DukeNukem05]

The spreadsheet also neglects to address how tax brackets work currently. The full income for the $76,000 couple wouldn’t have $64,000 taxed at 25%. It would be 10% of the first $9,325 + 15% of $37,950-$9,325 + 25% of $64,000-37,950.

Current tax for Scenario 2 should be $11,738.25. So not quite the dramatic drop presented there.

Edit - sorry, MFJ, this should come out to $8,667.50 (10% of first $18,650, then 15% of $64,000-$18,650)

 

[DukeNukem05]

The spreadsheet also neglects to address how tax brackets work currently. The full income for the $76,000 couple wouldn’t have $64,000 taxed at 25%. It would be 10% of the first $9,325 + 15% of $37,950-$9,325 + 25% of $64,000-37,950.

Current tax for Scenario 2 should be $11,738.25. So not quite the dramatic drop presented there.

The $38,000 single person example is worse. That's taxable income of $32,000, meaning $932.50 from the 10% bracket and $3,401 from the 15% bracket for total tax of $4,333.75. Never touches the 25% bracket.

I have no idea what the brackets are in the new plans. I'm sure those aren't calculated right in the spreadsheet. Point is, spreadsheet is not something you should be relying on.

 

[DukeNukem05]

Gotta edit... used single rates on my first post.

 

[Devilsforlife]

Thanks for your input. Very interesting.

 

[DukeNukem05]

I think tax liability under Senate plan for Scenario 2 would be $1905 (10% bracket) + $3,954 (12% bracket on rest) for $5,859 total. Compare that to $8,667.50. Does that offset increased costs of living that will likely pop up from this?

Edited to fix new deduction. Also didn't touch the current plan's personal exemption. I'm not sure how that factors in.

 

[DukeNukem05]

I decided to do a married couple making $100k instead. If my above calculations are right, then you'd see a drop from $13,300 to $8,700. So that looks more substantial and it's not unreasonable for a dual income family to approach that amount.

But this assumes they're using the standard deduction currently.

 

[SeanMayTriedToEatMe]

NYTimes has already done the legwork on how tax reform would affect the middle class:
https://www.nytimes.com/interactive...ook-like-for-25000-middle-class-families.html

 

[DukeNukem05]

That's beautiful. Thanks for sharing.

 

[aiw]

That is nice

 

[aiw]

Didn't read the article yet, but the headline fits in here.

 

[dkst0426]

Standard deduction, 4 kids. I guess I should buy them a bit more this Christmas since it looks like I'm actually going to benefit from this plan.

Still worried about CHIP and Medicaid, though.

 

[ZackM]

I'm single with no kids and itemize. I make upper middle class wages. Will this help me?

 

[deepdarkblue]

Standard deduction, 4 kids. I guess I should buy them a bit more this Christmas since it looks like I'm actually going to benefit from this plan.

Still worried about CHIP and Medicaid, though.

Nah, you better put that extra money away for when these deductions expire in 2025. This paragraph is kinda important:

Until now, we’ve been focusing on the impact of the Senate bill on people’s taxes in 2018, when most households would get at least a small tax cut. But the situation would look very different a decade from now. That’s because in order to reduce the cost of the bill, its authors set essentially all of the individual tax cuts — the doubled standard deduction, the more generous child credit, the lower tax rates — to expire after 2025. But one provision that’s bad for taxpayers — changing the measure of inflation used for many tax calculations — would not expire. As a result, two-thirds of middle-class households would get a tax increase in 2027, and none — zero percent — would get a tax cut.

 

[deepdarkblue]

I'm single with no kids and itemize. I make upper middle class wages. Will this help me?

You're fucked.

 

[aiw]

I'm single with no kids and itemize. I make upper middle class wages. Will this help me?

You're fucked.

 

[ZackM]

Am I for real? Or you guys are just fucking with me?

 

[DukeNukem05]

Am I for real? Or you guys are just fucking with me?

My assumption is if you currently deduct more than the Senate bill’s standard deduction, you will likely get screwed some. Losing the property tax and mortgage interest deductions (dunno how this part will turn out with reconciliation in house), and state/local tax deduction is pretty significant for a decent income and high cost of living homes.

 

[ZackM]

Yeah, I don't know if I'll still have to itemize with the new standard deduction.

 

[DrKlahn]

I'm in the same boat as you, and I'm pretty sure that the elimination of the state income tax deduction by itself means that I'm taking a bath. It's not going to kill me. I would have preferred, if I had to take a bath, that it have been because they eliminated the mortgage interest deduction but apparently people need to have way more house than they require.