How hard would it be to create a program that takes an individual’s/business’ 2016 numbers and calculates what they would have paid under the new plan? I understand that the proposed plan is not what will finally be voted on but is it even feasible to create such a program and “game out” the potential impact? If so, couldn’t the IRS then run everyones numbers and determine who the winners and losers would be?
Not terribly difficult. The Congressional Budget Office basically does that with any proposed revenue legislation and writes a report. But it takes some time from when proposed budget legislation is finalized.
It really depends. I would say it is reasonably difficult to do. The tax bracket jiggering would be super simply to figure out. But tax complexity comes from determining taxable income. For people with simple finances like they have a job, live in a particular state and maybe have a mortgage it is simple. For people with income coming from investments or a small business it the non headline details are what maters. Another really big thing is that if the tax code changes it will affect what people do. Some investments are currently better than others because of how they are taxed. When the tax law changes people will change what they are doing to maximize their return based on the new rules.
I created a spreadsheet to see how I’d be affected. I really wish I hadn’t. There is essentially nothing in the bill to reduce my taxes.
I get hurt by:
- elimination of the state and local tax deduction
- moving the income tax brackets
- eliminating the personal exemptions
I get helped by the increase in the standard deduction but only because the state and local income tax deduction is eliminated. I suppose this amounts to simplification, but because my deductions are right on the bubble otherwise, I’d still have to track my deductions each year.
Using estimated 2017 tax numbers as a base shows shows that my income taxes would increase 54%, with my effective tax rate increasing from 17.6% to 27.0%.
My wife now works as a contractor. If we can push her income into a pass-through entity next year we would save a bit. In my case, based on my wife’s expected income next year, we could push our effective tax rate down to 23.1%. There will be real incentives for lots of high-income professionals to do this. That was exactly what happened when Kansas tried this.
The funny thing is, I’m not opposed to my income taxes increasing a bit but I would prefer if my income taxes went up to support government services rather than to provide tax breaks to people far richer than me. Guess what this bill does instead?
Yeah, but every extra dollar a superrich earns goes to make jobs for ordinary people, people like Georgios, a humble tax shelter worker in the Caribbean.
There’s also a few “unofficial” versions online already. Google Republican tax plan calculator.
I guarantee you that employees at Intuit are frantically working on doing exactly that at this moment.
Sure, the law isn’t finalized and will change, but they want to have as much of the basic framework in place as possible, and apply the changes to them just as the lawmakers apply them to the bill.
The real question here is, “can I use this tool with my own taxes?”. I don’t know the answer to that.
The State/Local tax deduction being removed is going to produce very different results from people in different States, so that’s one challenge.
I also saw this tweet earlier today: x.com which claims that the new rules *severely *penalize married couples, it’s hard to imagine that quirk is intentional.
For an individual, it’s easy. I haven’t bothered looking at changes in business, so I don;t know how difficult it would be, easy for some, hard for others.
There’s definitely fewer calculations involved.
I did mine in my head as soon as the [current] details came out yesterday and confirmed in a spreadsheet. On $95,000 gross income, I’ll net lose $2,000 in deductions but my tax will be $164 lower because of how the brackets are drawn. If they had (or end up) reduced the 401 limit to $10,200, my tax would be $1,656 higher and if they had reduced it to $2,400, it would have been $2,592 higher.
WHOOHOO MAW, GRAB THE YOUNGINS WE’RE GOIN TA APPLEBEES ON TRUMP!
Not like it was complicated to begin with, but this is the before and after:
Gross: 95,000
“Above the line” deductions:
401(k) 24,000
2 personal exemptions 8,100 (gone in the new bill)
total 32,100
Sch A Deductions
Mortgage Interest 9,000
Property Tax 4,500
State Income Tax 3,400 (gone in the new bill)
Standard Sales Tax 645 (gone in the new bill)
Vehicle Excise Tax 75 (gone in the new bill)
Charitable Contributions 461
total 18,081
Total “adjustments”: 50,181
Taxable Income 44,819
Tax (some at 10%, some at 15%): 5,804
New Way:
Gross 95,000
Above the line:
401k 24,000
Below the line:
Standard Deduction 24,000 (You’d only itemize now if the total of Mortgage Interest, Property Tax, and Charitable Contributions was more than 24,000)
Total Deductions 48,000
Taxable Income 47,000
Tax (12%): 5,640
In your spreadsheet to calc the new way for individuals, mostly all you need for deductions is lines for 401k, Mortgage Interest, Property Tax, and Charitable Contributions - if it’s more than the standard deduction, you use them, if it’s not, you use the Standard Deduction. Add another row for the child tax credit or whatever the fuck that is, and you’re basically done calculating taxable income. Apply the new brackets, that’s it.
Simpler? I guess. If you think the old method is complicated, you probably can’t dress yourself either.
Couldn’t it be done quickly and easily using sampling? Nielsen doesn’t have to ask everybody what TV show they watched.
An organization that wants to preserve the state & local tax deduction had one that was based on certain medians for your zip code and allowed you to put in a couple of custom variables. It’s currently offline due to the last minute changes. I don’t know if they will rejigger and bring it back or not, I suspect they will, because the SALT deduction is still 1/2 gone. In my case, it ended up being pretty accurate, but that’s because my own numbers were close to the fixed medians they used.
Here’s the url in case they bring it back.
http://news.americansagainstdoubletaxation.org/salt-tax-calculator/
It’s definitely intentional. They purposefully didn’t have a marriage penalty for couples making over $500,000 (now proposed at $1 million) a year. They kept it for those making $260,000 though.
It’s disgusting.