The 2017/2018 Trump/GOP tax plan

[John_Mace]

Ok, just so we’re all on the same page, here is the transcript of that Judy Woodruff interview with Buffet, and the relevant “cleaning lady” part is:

JUDY WOODRUFF: The reason I bring that up, Warren Buffett, is that that’s your wealth, your worth. And yet, on your tax return, you earned $19 million-something.

WARREN BUFFETT: Right.

JUDY WOODRUFF: Nineteen-and-a-half million last year.
Your effective tax rate was 16.3 percent, which — we looked it up. This is what an average couple, a married couple, no children, taking the standard deduction would pay on an income of $136,000. In other words, a couple who earned — you earn 143 times more than they do, but your tax rate is the same as theirs.

WARREN BUFFETT: Yes, I have pointed that out in past, in the past.

And it’s even worse than you say, Judy, because you’re looking at what that couple would pay in federal income tax. But they are also paying payroll taxes, in overwhelming cases. And my cleaning lady has a 15 percent tax, you know, just from Social — just from the Social Security that she and her employer pay, but it’s kind of incredible.

[jshore]

@John_Mace

FICA is a different item, and it’s a sort of fee-for-service type thing since you generally get back something related to how much you put in.

It’s a bit more complicated than that, especially since the government has been using large surpluses in social security to fund the rest of government.

[Slash1972]

@jshore

It’s a bit more complicated than that, especially since the government has been using large surpluses in social security to fund the rest of government.

How’s that? I thought the Social Security fund simply bought US Treasury bonds.

[jshore]

@StrTrkr777

He talks about giving all the money to charity. Why not give each of the 367,700 employees of Birkshire Hathaway 200k into their 401k portfolios? That would still leave a few billion for his family or charitable causes.

It also goes to show that even with the extreme amount of money we are talking about (77 billion), it is not life changing money when you spread it out even over an entire company.

Well, I guess it depends on who you are and what your definition of “life changing” is. My guess is that there are quite a few people who would find 200k to be pretty life changing.

Anyway, I agree with what k9bfriender said. While unilaterally giving more money to the government may be a nice gesture, it ain’t going to do diddly-squat as compared to successfully advocating for policies that lead to higher taxes on all of the wealthy.

[adaher]

What’s up with eliminating dependent deductions? That’s gonna hit bigger families hard.

[adaher]

@Slash1972

How’s that? I thought the Social Security fund simply bought US Treasury bonds.

Assuming the government makes good on those bonds, SS can pay it’s bills until about 2035, then it pays out 75% of benefits.

The complication arises in that the government can choose to cut SS now to avoid having to pay the bonds.

[Slash1972]

@adaher

Assuming the government makes good on those bonds, SS can pay it’s bills until about 2035, then it pays out 75% of benefits.

The complication arises in that the government can choose to cut SS now to avoid having to pay the bonds.

How does cutting SS now avoid having to pay the bonds?

[jasg]

@jshore

It’s a bit more complicated than that, especially since the government has been using large surpluses in social security to fund the rest of government.

@Slash1972

How’s that? I thought the Social Security fund simply bought US Treasury bonds.

What do you think happened to the money used to purchase the bonds? It got spent and the bond is a promise to pay in the future.

[Slash1972]

@jasg

What do you think happened to the money used to purchase the bonds? It got spent and the bond is a promise to pay in the future.

But doesn’t the government sell bonds to lots of different organizations besides Social Security?

Is the government using large surpluses in China to fund the rest of government?

[Bone]

@adaher

What’s up with eliminating dependent deductions? That’s gonna hit bigger families hard.

They get overtaken by the higher child tax credit.

[D_Anconia]

@John_Mace

Yeah, the idea that “letting tax cuts expire is not a tax increase” is laughable. One might as well claim that it’s not a tax cut unless you reduce taxes to a point lower than the lowest point that ever existing in history.

What tax increase? For most people in 2027, it’s somewhere between slim and none, and slim left town.

Cite

[septimus]

([del]I’m sure[/del] I hope Dopers understood I was deliberately facetious at a couple of points in my summary of the Buffett interview — it was a way to call attention to the truths he was expressing.)

@StrTrkr777

[Buffett] is clearly taking advantage of tax laws to pay less money. … he did not say “I could have paid less in taxes due to the loopholes.” He basically said “I did pay less due to the loopholes.”

My point is, it is real easy to complain that the loopholes exist and that they should not when you know they are not going to change them. What is harder is saying “I am so principled, that I will pay more than required. I will not use the loopholes”

He talks about giving all the money to charity. Why not give each of the 367,700 employees of Birkshire Hathaway 200k into their 401k portfolios? That would still leave a few billion for his family or charitable causes.

It also goes to show that even with the extreme amount of money we are talking about (77 billion), it is not life changing money when you spread it out even over an entire company.

First of all, your example makes exactly the opposite point you hope to make. That Buffett could give each of the employees in that huge company $200,000 demonstrates the huge wealth the super-rich have. For many many millions of Americans (or many billions of people on this planet) $200,000 is “indeed life-changing money.”

But second, and more important, you commit what Chronos calls the “Monopoly Free Parking fallacy.” I see Dopers frequently buying into that fallacy and wish we could stamp it out! What is best for society is not necessarily best for every single individual in that society. (Whudda thunk it?) A Congressman who votes to bomb Syria is under no logic compulsion, if that resolution fails to get enough votes, to go to Syria and personally bomb the country. Google ‘Prisoner’s Dilemma’ (or wait for a more eloquent Doper) if this is not clear.

And whether to bundle SocSec income and outgo with other government taxes and spending is a false controversy, with many partisans counting income but not outgo (or vice versa) to bolster their partisan case. We can debate the details in another thread but (Spoiler alert) payroll taxes SHOULD be included among federal taxes paid.

[septimus]

@Slash1972

Is the government using large surpluses in China to fund the rest of government?

Yes. (Although you’re correct that a similar point about SocSec is used by politicians to bamboozle rather than to enlighten.)

[Alley_Dweller]

@Slash1972

How does cutting SS now avoid having to pay the bonds?

The SSA is not free to redeem the bonds in order to use the money on hookers and blow. The only things they can spend the money on is paying benefits and operational expenses.

If there are fewer benefits to pay, they will need to redeem fewer bonds to pay them. And if Congress reduces the benefits to match the current collections coming in from FICA taxes, there will be no need to redeem the bonds.

[septimus]

@septimus

… what Chronos calls the “Monopoly Free Parking fallacy.” I see Dopers frequently buying into that fallacy and wish we could stamp it out! …

@Chronos

The basic problem with the OP’s proposal is that the system should be fair.

To use an analogy that I think was originally due to Bricker: We’re playing Monopoly. I think that the common houserule of “get money for landing on Free Parking” is a bad idea that accomplishes nothing but slowing down the game. As we’re starting the game, therefore, I argue that we shouldn’t agree to use that houserule, but a lot of other folks like it. One of the proponents of the houserule says “Well, here’s a compromise: Whenever any of us land on Free Parking, we’ll get money, like we want, and whenever you land on Free Parking, you can choose not to get money, like you want.”. Would anyone consider this a reasonable compromise?

And now, suppose that we do play a game with the Free Parking money rule, and I go ahead and collect money whenever I land on it, like everyone else. The next game, I say “Well, you saw how long that game took-- Will you believe me now that that’s a bad rule?”. And one of the proponents says “You’re a hypocrite! You say you don’t like that rule, but last game you collected money anyway!”. Is this a reasonable criticism?

We want the rules to be changed, but until they are, we want what rules we have to apply the same to everyone.

Whenever someone says “If Buffett doesn’t think certain loopholes are good for society he shouldn’t use those loopholes himself” I want to … [checks forum: are we in the Pit? No] click Reply and say “You’re Wrong.”

[AI_Proofreader]

Out of curiosity, now that the Alternative Minimum Tax has been repealed, and the top tax rates for individuals and corporations has been lowered, as well as a few other loopholes added, does anyone see a way someone could pay an effective rate of 0% in taxes?

(Assuming of course no shenanigans with offshoring most profits in tax haven countries, and ignoring billions in subisidies - plenty of corps already pay 0 or have a negative tax rate with that in mind).

It would be interesting if any situations are found that allow all profits to be kept in the U.S., with no subsidies received, but still be able to pay no taxes.

[elucidator]

From what I gather, in an almost off-handed gesture, all that money various corporados were sheltering overseas is going to be welcomed home like the Prodigal Sum. All is forgiven, you little scamps, so welcome your money home and go buy something! No, no, its yours, we got plenty, don’t need much of anything…

[galen_ubal]

There’s a question I’ve been meaning to ask. It’s known that while the marginal tax rate the US officially charged was 35%, the rate they’ve actually been paying is something like half that, due to shelters and other tax loopholes.

Have those holes been largely closed, or can we look forward to corporations paying an effective tax rate of 10%?

[elucidator]

Also known as the Tax Lawyers Full Employment Bill.

[AI_Proofreader]

@galen_ubal

There’s a question I’ve been meaning to ask. It’s known that while the marginal tax rate the US officially charged was 35%, the rate they’ve actually been paying is something like half that, due to shelters and other tax loopholes.

Have those holes been largely closed, or can we look forward to corporations paying an effective tax rate of 10%?

Someone correct me if I’m wrong, but I’m pretty sure no loopholes have been removed for corporations, only added - as with the pass-through and real-estate exemption additions.