GOP Tax Proposal To Hit MU Boosters

[jsglow]

In before the lock

[GGGG]

Uninformed people say that the estate tax is easy to avoid. At certain levels that is true. As you can create trust structures to use each spousal exclusion. Currently that can get you around 11 million. The house and senate plan extend that to 22 million , with the house plan having a complete phase out in 6 years. Above the exclusion amounts it gets tricky as you have to do things like create Family limited partnerships to transfer ownership and spend a fortune on life insurance trusts etc. Of course you can create a foundation and completely avoid the estate tax as as well, but in that case your heirs are just controlling which charities your wealth goes to rather than govt directing it.

I think Herman can be full of it at times, but he is spot on here. Especially if your assets are tied up in something illiquid like a family business.

[GB Warrior]

This bill is likely to slam the upper (kinda sorta but not really wealthy) class*, and as others have said, it's no surprise that most of those folks (yours truly) live in urban and conveniently liberal areas.

*One of the hardest thing for Americans to agree on with tax reform is where the class demarcation point is. I would imagine we are in the upper middle if you consider top line income, but take out student loans and daycare that enables that income, and my wife and I are looking at a much different scenario. It continues to bother me that the tax code takes a rather backwards view of education expenses in that respect, and this bill makes it worse (don't even get started on the tuition benefits taxation changes)

This bill discentivizes a lot of what we've been taught to invest in by getting rid of student loan interest and education in general, housing (albeit mostly in very high tax areas only, or the truly wealthy in rural areas).

Getting rid of personal deductions slams families with more kids, since all you get is the 12k for filing single or 24k for MFJ. The reduction in deductions makes it very difficult for us itemize, unless we withhold donations to a lump sum every few years. There is the child tax credit, but I BELIEVE we'd continue to phase out of that. Failure to expand the childcare savings incentive makes me think that ivanka isn't actually doing anything.

I'm all for reducing the corporate tax rate  (28 seemed reasonable), but the hikes on the individual level should make it no secret who the beneficiaries are supposed to be. Reasonable, bipartisan tax cuts would have been possible without such an aggressive target that disregards the working class.

So I hope that the wealthy can enjoy all of their perks at the expense of people like me, both in life and in death (with stepped up basis!)

[forgetful]

This bill is likely to slam the upper (kinda sorta but not really wealthy) class*, and as others have said, it's no surprise that most of those folks (yours truly) live in urban and conveniently liberal areas.

*One of the hardest thing for Americans to agree on with tax reform is where the class demarcation point is. I would imagine we are in the upper middle if you consider top line income, but take out student loans and daycare that enables that income, and my wife and I are looking at a much different scenario. It continues to bother me that the tax code takes a rather backwards view of education expenses in that respect, and this bill makes it worse (don't even get started on the tuition benefits taxation changes)

This bill discentivizes a lot of what we've been taught to invest in by getting rid of student loan interest and education in general, housing (albeit mostly in very high tax areas only, or the truly wealthy in rural areas).

Getting rid of personal deductions slams families with more kids, since all you get is the 12k for filing single or 24k for MFJ. The reduction in deductions makes it very difficult for us itemize, unless we withhold donations to a lump sum every few years. There is the child tax credit, but I BELIEVE we'd continue to phase out of that. Failure to expand the childcare savings incentive makes me think that ivanka isn't actually doing anything.

I'm all for reducing the corporate tax rate  (28 seemed reasonable), but the hikes on the individual level should make it no secret who the beneficiaries are supposed to be. Reasonable, bipartisan tax cuts would have been possible without such an aggressive target that disregards the working class.

So I hope that the wealthy can enjoy all of their perks at the expense of people like me, both in life and in death (with stepped up basis!)

So if mr. 999 is correct, his taxes and the wealthy people's taxes go up.  I've ran the numbers for myself, and most of my friends that are middle, to middle-upper class all have their taxes going up.   Granted, most people I know live in high tax states. 

So who exactly are these people that are benefitting from this? 

Private Universities lose big time.  So do graduate students.  So do many of the poor.  Why are people supporting this bill?

[#UnleashSean]

Yup.

Shame I'll probably have to drop out of grad school when/if this bill comes into effect. I rely heavily on the tuition credits.

[forgetful]

Shame I'll probably have to drop out of grad school when/if this bill comes into effect. I rely heavily on the tuition credits.

Yeah, grad students taxes are going up an average of 300%.  Some I know will have there annual taxes almost equal their entire take home pay. 

Brilliant!

[Jockey]

So if mr. 999 is correct, his taxes and the wealthy people's taxes go up.  I've ran the numbers for myself, and most of my friends that are middle, to middle-upper class all have their taxes going up.   Granted, most people I know live in high tax states. 

So who exactly are these people that are benefitting from this? 

Private Universities lose big time.  So do graduate students.  So do many of the poor.  Why are people supporting this bill?

They're not.

[TSmith34, Inc.]

So if mr. 999 is correct, his taxes and the wealthy people's taxes go up.  I've ran the numbers for myself, and most of my friends that are middle, to middle-upper class all have their taxes going up.   Granted, most people I know live in high tax states. 

So who exactly are these people that are benefitting from this? 

Private Universities lose big time.  So do graduate students.  So do many of the poor.  Why are people supporting this bill?

It is easy to see who is supporting this bill -- just follow the money:

“My donors are basically saying, ‘Get it done or don’t ever call me again,’” Rep. Chris Collins (R-N.Y.), himself a millionaire, said on Tuesday.

“(Donors) would be mortified if we didn’t live up to what we’ve committed to on tax reform,” Steven Law, the head of Senate Leadership Fund, a super PAC affiliated with Senate Majority Leader Mitch McConnell (R-Ky.), told the New York Post.

Those big donors are already trying to push the tax cut legislation across the finish line by spending tens of millions of dollars on political advertising. Nonprofit groups that do not disclose their donors, like 45Committee, American Action Network, America First, Americans for Prosperity, and Freedom Partners, plan to spend at least $43 million on a campaign to pressure specific members of Congress to pass the bill, according to the The Wall Street Journal.

45Committee was founded by Sheldon Adelson, the billionaire casino oligarch, and Joe Ricketts, the billionaire owner of the Chicago Cubs who recently shuttered multiple news organizations he ran after the workers voted to unionize.

https://www.huffingtonpost.com/entry/gary-cohn-tax-cut-ceos-donors_us_5a049571e4b0f76b05c4249e?ncid=inblnkushpmg00000009

[LloydsLegs]

I think Herman can be full of it at times, but he is spot on here. Especially if your assets are tied up in something illiquid like a family business.

I disagree.  Insurance trusts do not cost a fortune to set up and maintain.  Tax avoidance planning for those with $20 million plus is not at all difficult.  And it is easier to avoid taxes with an operating family business than it is with a liquid investment portfolio. And for the "super rich" ($100 million plus, let's say), even easier.

It is simply a question of whether you want to play the game or not (and pay a relatively small amount to accountants and lawyers to do so).

The folks who tend to pay the most relative to their net worth are those who are in the $5 (if unmarried) to $20 million range.  Harder to plan with these "small" estates - people are less willing to give up putative control etc.

The lesser known concern I have with the House version is that it eliminates the Estate Tax AND keeps in place the step up in basis on death.  Prior versions of bills eliminating the Estate Tax have generally either eliminated the step up in basis or treated death like a realization event and caused a tax on the "gain" at death. Say Herman Cain dies with a $100 million portfolio of highly appreciated stocks, with a cost basis of just $10 million. There would be no estate tax, and his heirs could sell the stock right after his death and owe no capital gains taxes on the $90 million gain.

 

[MU Fan in Connecticut]

Not going to make it through the senate.  Who cares.

So we hope.

[MU Fan in Connecticut]

If the tax proposals go through my tax bill will increase by approximately a net of $80,000. The state and local tax will hit hard and more than offset any benefit from rate changes.

Also I get hosed if I sell my residence as I will no longer benefit from the 500,000 cap gains exclusion.

Some day my kids will benefit from the estate tax changes .

My tax bill will go up also, and no where even remotely close this, but it will go up mostly due to SALT elimination.  Kill this bill!

[MU Fan in Connecticut]

They're not.

Was just going to say this.  The plans floated have like a 22% approval.  I saw a poll that said like 68% people think corporations and the super-wealthy already pay too little taxes.

[MUBurrow]

UNPOPULAR OPINION PUFFIN ALERT

Though Trump's motivations for eliminating the SALT deduction are gross, the SALT deduction at best excuses and at worst encourages fiscal irresponsibility in local government and should be eliminated to force us to have a more honest conversation about the connection between tax rates and standards of living.

[MU82]

This poll, released last week (most recent I could find), says 52% of Americans disapprove while 25% approve of GOP tax plans:

http://time.com/5026846/gop-tax-reform-plan-poll-disapproval/

The biggest surprise for me was that only 60% of Republicans polled approve; I would have thought it would have been much higher.

This poll says vast majority believe Trump is lying when he claims that he and his family would not be major beneficiaries of the tax proposals:

https://www.usnews.com/news/politics/articles/2017-11-15/poll-shows-voters-think-tax-reform-would-benefit-trump

I have played with the numbers and I actually think I'd come out a little ahead if most of the stuff proposed in both the House and Senate passes. (I do not have student loans, I have a decent amount of investment income, I would get great benefit from the doubling of the standard deduction because I don't itemize.) But like the majority of Americans, I think it's a bad plan for America, one that would hurt those who can least afford it and push us ever closer to being a plutocracy.

So, trying to be an optimist, I'm looking it this way: If it doesn't pass, good for America (and good for me, by extension, as a patriotic American); and if it does pass, I'll do fine personally.

I'd rather do a little less fine personally, however, than see so many of my fellow Americans get hurt by horrible, deficit-growing policy driven by political donors.

[#UnleashSean]

This poll, released last week (most recent I could find), says 52% of Americans disapprove while 25% approve of GOP tax plans:

The biggest surprise for me was that only 60% of Republicans polled approve; I would have thought it would have been much higher.

I think a lot of those republicans are middle~upper middle class who have kids going into graduate studies and it will absolutely trash the children forcing the parents to pay.

[forgetful]

Had Brunch with a family that were strong Trump supporters.  They are very against this plan.  Mostly because of a combination of SALT and property tax changes (one of them works in the real estate industry).

Was very interesting to hear them tear this bill to shreds. 

[Herman Cain]

I disagree.  Insurance trusts do not cost a fortune to set up and maintain.  Tax avoidance planning for those with $20 million plus is not at all difficult.  And it is easier to avoid taxes with an operating family business than it is with a liquid investment portfolio. And for the "super rich" ($100 million plus, let's say), even easier.

It is simply a question of whether you want to play the game or not (and pay a relatively small amount to accountants and lawyers to do so).

The folks who tend to pay the most relative to their net worth are those who are in the $5 (if unmarried) to $20 million range.  Harder to plan with these "small" estates - people are less willing to give up putative control etc.

The lesser known concern I have with the House version is that it eliminates the Estate Tax AND keeps in place the step up in basis on death.  Prior versions of bills eliminating the Estate Tax have generally either eliminated the step up in basis or treated death like a realization event and caused a tax on the "gain" at death. Say Herman Cain dies with a $100 million portfolio of highly appreciated stocks, with a cost basis of just $10 million. There would be no estate tax, and his heirs could sell the stock right after his death and owe no capital gains taxes on the $90 million gain.

You have a good point it's the willingness to play the game . Price of admission is lawyers accountants and insurance.  Then relocating to no state estate tax domicile.

You are correct it's the losing of control of a good asset that makes it tricky.  The step up issue is also a big one. That is one of the good aspects of the house bill.

One of the reason the estate tax is onerous is it disencentives long term thinking in businessman of a certain age and wealth . Why take the chance , and invest not only money but time on a transformational deal or Big project when the govt takes most upside and you are saddled with downside? At a certain stage you run out of years.

[MU82]

According to a 2015 report from Congress's Joint Committee on Taxation, 4,700 estate tax returns reporting tax liability were filed in 2013, out of 2.6 million total deaths in the United States. That means the estate tax hits roughly 0.2% of Americans.

[Chili]

You have a good point it's the willingness to play the game . Price of admission is lawyers accountants and insurance.  Then relocating to no state estate tax domicile.

You are correct it's the losing of control of a good asset that makes it tricky.  The step up issue is also a big one. That is one of the good aspects of the house bill.

One of the reason the estate tax is onerous is it disencentives long term thinking in businessman of a certain age and wealth . Why take the chance , and invest not only money but time on a transformational deal or Big project when the govt takes most upside and you are saddled with downside? At a certain stage you run out of years.

Why? The estate tax doesn't hit the person making the money it but rather the person receiving money without working for it (usually). It's a misconception. The person would be better off spending every last penny because then the money is actually used in the economy rather than hoarded by a few.

[MU82]

Why? The estate tax doesn't hit the person making the money it but rather the person receiving money without working for it (usually). It's a misconception. The person would be better off spending every last penny because then the money is actually used in the economy rather than hoarded by a few.

Excellent point!

Do what Buffett, Gates and a few other billionaires are doing: Designate charities that will receive most of the money upon death, all the while donating significant capital while alive.

That's how the 0.2% can leave a real legacy for America and the human race.

It's no easier to feel sorry for recipients of a $15 million estate who will get taxed on a few million of their haul than it is to feel sorry for lottery winners who get taxed on their windfalls. At least the lottery winners had to drive to the Quik Trip and plunk down a few of their own hard-earned bucks for the ticket!

[Juan Anderson's Mixtape]

I don't quite understand why big donors spend so much money on donations, lobbying, and political ads.  Wouldn't it be more efficient to just hold onto that money in the first place? I guess not since otherwise why do it.

[TSmith34, Inc.]

I don't quite understand why big donors spend so much money on donations, lobbying, and political ads.  Wouldn't it be more efficient to just hold onto that money in the first place? I guess not since otherwise why do it.

No, not at all.  They are expecting HUGE payoffs on their investments.  A few million up front for literally billions as a result?  Easy decision.

[forgetful]

I don't quite understand why big donors spend so much money on donations, lobbying, and political ads.  Wouldn't it be more efficient to just hold onto that money in the first place? I guess not since otherwise why do it.

I think your question is your answer.  It is not more efficient to hold onto that money.  They get way richer through lobbying.  It is one of the many reasons the rich get richer in this country...they control policy and make sure it benefits them.

[Golden Avalanche]

Had Brunch with a family that were strong Trump supporters.  They are very against this plan.  Mostly because of a combination of SALT and property tax changes (one of them works in the real estate industry).

Was very interesting to hear them tear this bill to shreds.

Voting for trump was an implicit endorsement of Paul Ryan's tax beliefs which have been widely known for nearly a decade. He has always disliked NJ/NY subsidizing their state tax burden on the back of the Federal Government.

The guy in White House only asked that golf club ownership and commercial real estate retain their break. Every other break was in line to be chopped. This corporate tax cut legislation being drafted was common knowledge if you've paid some attention to the only reason Paul Ryan wakes up in the morning.

This is what they voted for last November.

[forgetful]

Though Trump's motivations for eliminating the SALT deduction are gross, the SALT deduction at best excuses and at worst encourages fiscal irresponsibility in local government and should be eliminated to force us to have a more honest conversation about the connection between tax rates and standards of living.

This just doesn't make sense.  The states that have high local and state taxes offer more services, and are net payers into the federal tax system.  Those states get less money back than they put in. 

The states with low local and state taxes offer fewer services, that are largely financed by federal tax dollars.  Meaning the people in high-tax states are funding the low tax states. 

That would make the low tax states less fiscally responsible as they are taking money from others just to get by.  This rewards them even more for doing that.  Your's is not an unpopular opinion, its just a very inaccurate one.