The Republicans have already modified the bill. There was going to be a delay in indexing the tax rate to the chained CPI for several years. Now it will be immediate. The lowest tax rate (12 percent) may only last for one tax year.
I can’t find the cite (Washington post editorial?) but some number crunching agency came up with an estimate that according to the Tax plan, the median household would get about $600 extra money back in taxes. Basically they will pay for the weekday morning Starbucks Run for the head of household. Meanwhile the top 1% would get back over $100,000 a year, and the top 0.1% would get back over $700,000 a year. On the one year for which we have Trump’s taxes, dropping the alternative minimum tax would have saved him $31 million. So you can see why he would be in favor of it.
I just cannot see how it is.
CBO’s current estimate is that over the long term, our economy is expected to grow at 1.9%. Republicans are asserting that a tax cut that adds $1.5 trillion to the debt over ten years will have a stimulative effect of about 0.7%. (I’ll note that various Republicans are saying in the press that they want growth rates to be 3, 4, or even 5%, but I’ll limit my comments to what you have mentioned.)
So is it reasonable on its face that $150 billion of stimulus, for each year over the next ten years, would result in 0.7% additional economic growth in each of those years?
Let’s look at what the 2009 stimulus act resulted in. Reminder that this package was just under $800 billion, consisting of roughly 2/3rds spending and 1/3 tax cuts. CBO has estimated that the short-term impact of this stimulus was substantial: in 2010, economic growth was projected to have been between 0.7% and 4.1% higher than it would have been without the act.
But that stimulus peters out quickly, and by 2013, growth was estimated to be between 0.1% and 0.4% greater than without the stimulus.
So the Republican plan counts on the effect of a smaller stimulus, on an annual basis, will somehow compound to be more stimulative over a longer period of time? It just doesn’t seem plausible.
In many ways it appears to be a tax plan designed to get more federal taxes from (generally Democrat-leaning) urban coastal high wage earners, and give more tax breaks to (generally Republican-leaning) owners of business and capital. To the extent that you think a family making, say, $150k in San Francisco is middle class, it hurts them quite a lot since they likely spend quite a lot on mortgage interest, property taxes, and state taxes, the deductibility of which is all going away ore being reduced.
As a relatively high earning coastal urban liberal, I’m honestly mostly in favor of the reduced deductions, even though they’re going to hurt me personally. They’re mostly good ideas economically. I’m comfortable, and I think that those deductions have caused some distortions that we’re better off without. And if we were going to get rid of those and reduce the debt over time, great. I don’t mind paying my share for fiscal responsibility.
I’m pissed as hell that they’re mostly going to go to tax breaks for people even richer than me. Fuck that.
There are also small tax breaks for many poorer and lower-middle class families, but, well, they’re pretty small on average. And of course the devil is in the details. If, for example, you’re a (relatively poor) graduate student, your tax rate just went way the hell up, because you have to pay on the cost of your forgiven tuition (which you never actually saw as income). If you have one or two kids, you’re probably doing pretty well with the increased standard deduction. If you have lots of kids, then the lost personal exemption is going to dominate. Etc.
This seems like a blatantly untrue statement… is there any statistics on the poor not filing for their deductions?
Yeah, there are, and thelurkinghorror is correct. Take a look at the chart here for the short answer.
Err… “the poor” take deductions, they just take the standard deduction. Unless your itemized deductions are more than 6300/12600, or more potentially under the new plan, you might as well take the standard.
This is because the tax system is rigged in favor of the wealthy. The poor are too incompetent to file their own taxes, and too poor to pay someone else to do them for them.
Why
It sounds like you should spend more time educating yourself about the tax system rather than making claims about it being “rigged”.
I recommend starting here: What Are Itemized Tax Deductions?
Because it’s a larger deduction.
Assuming this guy is for real with these questions and I’m not missing the whoosh:
Not that anyone needs to pay someone to take the most common deductions, assuming luke-warm intelligence and fluency in English. It does however offer convenience and access to refund “loans”.
Raising the standard deduction removes much of the incentive for charitable donations. Expect charities to scale back their services or disappear all together.
This is going to hit poor people very hard. And it will have a cascading effect on the non-poor, since local taxes will have to increase to pick up the slack (assuming we haven’t completely lost our sense of decency). I fail to see why anyone should rejoice about a lower federal tax rate when they will be faced with increased state and city taxes…that they won’t be able to deduct.
Sales tax has not been deductible for a long time, so there is no change there.
Last I checked you had the option to itemize either sales tax or income tax. This has changed?
I expect a big boost now to get donations in during TY2017, followed by a dip. But I don’t know how sensitive donations for actual charitable work (which IMO doesn’t cover all deductable donations) are to deductibility. Yours is a perfectly reasonable hypothesis; I just don’t have evidence one way or another to test it. We may get a real world experiment shortly.
Maybe I’m misunderstanding your point, but one can deduct state and local sales taxes via itemized deductions:
As a Texas resident who itemizes, I’ve taken the sales tax deduction for the past several years.
Did you used to be able to claim both? I remember claiming sales tax years and years ago, but then I stopped. I guess I’ve lived in a high property tax state for so long I missed that you had the option. Thanks for the correction!!
We’ll have to see what the final bill does, because right now the whole SALT thing is different between the House and Senate bill. I’m guessing if the deduction stays in, they will change the max amount from $10K (the amount in the Senate bill) to something lower.
Right here
http://thehill.com/homenews/house/363642-ryan-pledges-entitlement-reform-in-2018
House speaker Paul Ryan on Wednesday said House Republicans will aim to cut spending on Medicare, Medicaid and welfare programs next year as a way to trim the federal deficit.
The whole thing’s a scam, you know. Unless you’re incredibly wealthy, no one in power cares about you or what happens to you. The driving force behind these tax cuts for the wealthy is the “starve the beast” theory of government. This wild-eyed opposition to state taxes proves it. Because when your answer to everything that promotes a secure healthy populace is “ We think it’s a great idea, it’s just that it should be done at the state level”…then maybe you shouldn’t propose a tax plan guaranteed to punish the residents of states that actually put these programs in place.
People that believe that if you give money to the rich they’ll give some back to you are not very smart.
It failed in Kansas. It faile spectacularly in Puerto Rico
The same people that believe this believe that spending your life savings on a degree from Trump University is a sure-fire path to Trumpisn wealth. It’s a con job, just like Trump U. It’s like I’m watching my country give Nigerian scammers the key to the Treasury.
From Nonprofits Fear House Republican Tax Bill Would Hurt Charitable Giving : NPR
While it is true people donate to charity without deducting those donations from their taxes, I’m guessing those donations (the nickels and dime one might drop into the Salvation Army kettle) are piddly compared to the checks people write with tax deductions in mind. People don’t give the big bucks unless there is something in it for them. I think non-profits have a very good reason to be worried, especially the smaller ones that don’t have big name recognition.