US Politics Mega-thread - Page 9177

On September 29 2017 00:01 KwarK wrote:
Tax plan is out.

Increasing standard deduction and eliminating the personal exemptions is a dick move to anyone with dependents and a bonus for anyone without. Basically what they're doing is giving you $5.65k more tax free roosm and taking away $4.05k tax free room for you and $4.05k per dependent you have.

Getting rid of AMT for "paperwork reduction" reasons is pretty laughable. AMT is alternative minimum tax. Basically what it does is, as the name suggests, establishes a floor tax rate that you won't pay less than if you're superrich. You do your best to maximize your deductions and come up with how much you want to pay, just like everyone else. The AMT is a single form that calculates a number based on limiting the exploitation of deductions. If the AMT number is > than the normal number, you pay the AMT. It's all automated and it's a single form designed as a "don't take the piss" limit on the superrich taking deductions. Literally no reason to get rid of it if you're not trying to help them. It doesn't cause any additional work, nobody it applies to is doing their own taxes and nobody doing the taxes for anyone it applies to is struggling with it.

Estate tax repeal doesn't need any explanation. Right now you can pass $11m to your kids tax free. Apparently $11m isn't enough to set them up in life and what we really need is a permanent aristocracy. Incidentally this isn't something that can easily be fixed later. These are wealth transfer taxes, if you transfer over $11m while alive you also pay taxes at the estate tax rate. What that means is that if this passes it'll create a window that allows tax free intergenerational wealth transfers that would then already be complete by the time the estate tax is restored.

Reducing number of tax brackets is whatever. Number of tax brackets isn't really a problem in my opinion. Getting to taxable income is the hard part of doing taxes. Once you have that number it's a pretty simple formula to find out what you owe.

Lowering top bracket is obviously kinda shitty but we all knew that.

The real fun happens in the corporate tax part though. Two big changes.

Depreciation gets to be a total fucking free for all. Here's the ELI5. Normally when you buy a thing it's either expensed or capitalized, depending upon what the thing is. If you buy a sandwich then you would call that an eating expense, you're now poorer, the amount of money you have consumed by eating goes up, the amount of dollars you have go down. Overall, you're poorer.
But if you were to, for example, buy some gold bars, that's not really an expense. You can't resell the sandwich when you're done but you can probably resell the gold bars. So instead of expensing the gold bars we capitalize them. What that means is the amount of dollars we have goes down but the amount of gold bars we have goes up and so we're roughly where we were.
If they get rid of capitalizing assets then suddenly we're in "I didn't make any money this year because my gold bar expense is too high and actually I made a loss" territory. It'll be a fun few years if that goes through.

Also he's fucking with medium size businesses and flow-through taxes. I'll ELI5 it. If you own a business and the business makes $100,000 then really you've made $100,000. For a lot of business structures how that works is that income passes directly for you, the business pays tax on $0, you pay tax on $100,000. If you're a small business owner that's fine because your rate of personal income tax probably isn't that high. But if you're in one of the higher personal tax brackets then that's not great.
Trump is throwing a 25% bracket into the middle of that. It's no use to small business owners but if you're making $300,000 or so of business income a year then suddenly you can start playing games with that shit and switch from a flow-through entity so that your business pays 25% tax and pays you a salary. And naturally you get to decide what that salary is. To make it even more fun anyone who is 1099 (contractors) can come up with their own business for which they are the employee and get that lower tax rate.

The incentives for domestic manufacturing already exist. Not really interesting.

It's a tax bill cobbled together by lunatics and special interests. Almost certainly won't pass but it'll be a fun few years for the accounting world if it does.