Republicans agree to raise bottom tax rate, double standard deduction

Top White House and GOP leaders have agreed to raise the lowest individual tax rate from 10 to 12 percent, paired with doubling the standard deduction, 5 senior Republicans tell us.

Why this matters: Trump intends to sell the proposal tomorrow as a populist "tax cut." But as recently as yesterday top Republicans on Capitol Hill were nervous as they got word that Trump wasn't entirely thrilled with the product that had been hashed out in immense secrecy for weeks (with two members of his administration, Gary Cohn and Steven Mnuchin, working with GOP leaders.)

Late last night Republicans close to the process felt more confident that Trump had come around to supporting the framework — despite his misgivings about the corporate rate not being low enough and about the political risks of raising the lowest rate (even though many more people will now pay no tax because of the increased deduction, meaning they can accurately call it a tax cut for the middle class as well as for the wealthy.)

Big picture details: Republicans plan to collapse the number of brackets from seven to three. The standard deduction would almost double to $12,000 for a single filer and $24,000 for married couples, meaning Trump can accurately argue that many more low income earners would pay no tax under his plan. As we previously reported, the top tax bracket would fall from 39.6% to 35%.

Yes, but: Trump won't go into great detail when he talks about the tax plan tomorrow in Indiana, leaving plenty of negotiating room for the tax-writing committees in the House and Senate. As of yesterday morning Trump hadn't signed off on the final product, and as with all policy announcements involving Trump, Republican Hill leaders will be holding their breaths to some extent until the president actually utters the words. Speaking with conservative groups at the White House yesterday Trump, reassured them of his commitment when he gushed about the "tax cut" he was planning to unveil.

https://www.axios.com/republic...tion-2489774626.html

The U.S. federal budget deficit for fiscal year 2018 is $440 billion. FY 2018 covers October 1, 2017 through September 30, 2018. The deficit occurs because the U.S. government spending of $4.094 trillion is higher than its revenue of $3.654 trillion. (Source: "2018 Budget. Table 2," Office of Management and Budget, March 16, 2017.
https://obamawhitehouse.archives.gov/omb/budget/MSR

fairtax.org will answer most questions you have about a consumption tax. I'm all for it.

The Gospel this weekend was Mt 22:15-21:

The Pharisees went off and plotted how they might entrap Jesus in speech.
They sent their disciples to him, with the Herodians, saying, "Teacher, we know that you are a truthful man and that you teach the way of God in accordance with the truth. And you are not concerned with anyone's opinion,
for you do not regard a person's status.
Tell us, then, what is your opinion: Is it lawful to pay the census tax to Caesar or not?"
Knowing their malice, Jesus said, "Why are you testing me, you hypocrites?
Show me the coin that pays the census tax."
Then they handed him the Roman coin.
He said to them, "Whose image is this and whose inscription?"
They replied, "Caesar's."
At that he said to them, "Then repay to Caesar what belongs to Caesar and to God what belongs to God."

The priest used this to argue that Jesus tells us to both pay our taxes and support the Church and that the Church can't care for all of the poor people.... blah... blah... blah....

But I got to thinking about the tax code and reform and this gospel.....

Maybe the Romans had it right? A Census tax. Pay by the head.... just like the Romans.

What could be more fair than everyone pays the same amount?

Just take the $4 trillion federal budget... divide by the number of people.... about 330 million, and send everyone the same bill.
What does that come to?
$12,121.21 per person.

Are they coming after your 401(k) contributions?

Why the GOP Wants to Cut Your 401(k) Retirement Savings

The plan to cut Americans' 401(k) contributions is also known as "Rothification" and helps offset what the government loses in tax revenue. Maybe it's just misunderstood.

Republicans hoping to pass a tax reform bill this year are searching for ways to offset trillions of dollars in potential corporate and individual tax cuts. And one such way, which has been floated since at least April, is something called "Rothification."

Under current law, some 132 million workers contribute to a 401(k) or similar plan on a pre-tax basis. These deferred wages, or what the IRS calls elective deferrals, are generally not subject to federal income tax withholding at the time of deferral. But distributions are taxed as ordinary income.

Now, truth be told, this tax deferral costs the government money in the short term. In fact, defined contribution plans will cost $583.6 billion in forgone tax revenue between 2016 and 2020 and traditional IRAs will cost $85.8 billion, according to the most recent numbers from the non-partisan Joint Committee on Taxation.

If, however, the government caps the amount workers can save on a pre-tax basis but lets them continue to save with after-tax dollars, it will recoup some of that foregone tax revenue.

Or at least that's the idea behind the House Republicans latest plan to limit the amount workers can save in their 401(k) to $2,400, from its current level of $18,000, or $24,000 for those age 50 and older.

https://www.thestreet.com/stor...ven=YAHOO&yptr=yahoo

OMB: Top 20% pay 95% of taxes, middle class 'single digits'

Budget director Mick Mulvaney on tax reform

Any tax cut for middle income earners will also provide a benefit for those further up the income scale, including the top 20 percent who pay 95 percent of all income taxes, according to the director of the Office of Management and Budget.

In explaining the complicated tax system the administration and congressional Republicans are trying to simplify, Mick Mulvaney played the role of professor at Georgetown University Wednesday night and dished the eye-popping numbers and impact of a middle class tax cut.

It came in a discussion before students of the school's Institute of Politics and Public Service at the McCourt School of Public Policy. The discussion was directed by Cathy Koch, a tax expert and former Senate aide.

When the two turned to the taxes the rich pay, Mulvaney declared, "The top 20 percent of folks who file a tax return, the top 20 percent, pay 95 percent of the taxes."

That may be the highest ever. Just two years ago, it was 84 percent, according to the Wall Street Journal.

He then explained:

If you break the income tax universe into what we call quintiles, so equal sized 20 percent columns, the first two columns, the first quintile and the lower quintile, don't pay any taxes at all. In fact they net positive. We pay them when they file a tax return.

That middle quintile, which you might describe, some people do, as middle class, pays an effective rate in the low single digits. And all of the taxes are paid by folks in the top two quintiles, and that last quintile pays almost fully, 95 percent I think, of the taxes.

People always ask all the time, ‘Why do you want to give a tax cut to the rich?' Here's the math. We have a progressive tax system, which means that if you make $1 million and I make $50,000, we both pay the exact same rate on the first, let's say, $20,000. And then, from the next $20,000 up to my $50,000, and her next $20,000 to her next $50,000, we pay the same, I think it's 12 percent of 15 percent, I can't remember where the brackets are right now. And then she goes on to pay her higher rate on the stuff that she makes and I stop.

Well, if you want to give me, the middle class, a cut, take my 15 percent rate down to say 10 percent, and that gives the middle class a cut. Guess who else benefits from that, she does. She pays that same rate on the way up the brackets.

His conclusion, "You could sit there and do nothing but lower the rates on the middle class, and all other things being equal, you're giving the rich a tax cut.

http://www.washingtonexaminer....gits/article/2638746

If they could just stop spending so much GD money, this process would be far less complicated.

^^^ Yes....
But also.... if (under Bush) they hadn't removed half the population from paying anything at all this process would be far less complicated.
When half the people are removed from the tax rolls, they will always demand more of government because they aren't paying for it.

What we really need is MORE taxpayers, but lower rates. But once they are paying NOTHING it's hard to sell a TAX INCREASE on the POOR!

Trump Tax Reform Calculator

The Trump tax reform proposal will be "the biggest tax cut and largest tax reform in history of this country," announced Treasury Secretary Steven Mnuchin on April 26th.

Although there is much more detail yet to be released, some of the highlights of the Trump proposal are as follows. Reduce the number of tax brackets from seven down to three; namely 10%, 25% and 35%. Small business owners who are setup as S-Corporations or Limited Liability companies and receive pass-through income via a K-1 or form 1065, will see their top rate reduced from 39.6% down to 15% on earnings distributions. Other features will be to double the standard deduction, eliminate the marriage penalty, the Alternative Minimum Tax (AMT) and the 3.8% Medicare surtax on net investment income introduced by the Affordable Care Act (Obamacare). For purposes of this calculator, and until we hear otherwise, we will assume that the child tax credit and personal exemption phaseouts will remain in place.

Use this tax calculator tool to help estimate your potential 2017 tax liability. We will continually refine the calculator as more information becomes available.


https://www.calcxml.com/calcul...ax-reform-calculator

November 1, 2017
GOP postpones tax bill rollout; future uncertain

Republicans in Congress are postponing the roll out of their tax reform bill until at least Thursday. Kevin Brady, Chairman of the House Ways and Means Committee, says there are too many issues that need to be resolved before details of the plan can be discussed.

Politico:

Some details of the bill started leaking out Tuesday after Speaker Paul Ryan briefed conservative leaders on text that had been finalized. The proposal, sources in the meeting said, would lower the corporate tax rate to 20 percent, meeting their initial goal. They’ve also decided to keep the current top 39.6 percent tax rate on the wealthiest individuals — though they have not settled on which incomes would be hit by that rate.

Ryan told conservative group leaders Thursday that the income threshold for the top rate would likely be higher than it currently is, likely between $750,000 and $1 million. He said the estate tax would likewise be repealed but may have to be phased out to save money in the short term.

But it's the unresolved issues that caused Ways and Means members the most heartburn this week — and ultimately led to the delay. Those include: how to win over GOP lawmakers from high-tax states that are balking over curbing the state and local tax deduction, which their constituents rely on. There are also question about how to ensure that wealthy individuals don’t take advantage of the lower 25 percent small business or “pass-through” rate.

Many of the unresolved items are hot-button issues, including what to do with 401(k) retirement plans.

Trump asked Brady in a phone conversation last week to drop his plans to curb such tax preferred savings. And some senior House Republicans who believe that doing so would incite severe pushback have been urging Brady to leave the matter alone.

But Brady has refused to ditch the idea of imposing some limitation on the popular retirement plans. The reason comes down to basic math: Republicans want to lower the corporate tax rate to 20 percent, and collapse and lower individual rates into four brackets — and targeting 401(k) plans could help pay for those cuts.

The plan is not likely to be revenue neutral, although there will probably be some smoke and mirror savings that will make it appear that the bill will not raise the deficit significantly. But finding offsets is a real problem and some of the ideas that have been presented so far would be deal breakers for too many Republicans.

Finding a way through the various impasses on offsets will take the wisdom of Solomon. You can't split the difference on every remaining issue, especially when it comes to taxing 401K accounts and allowing for less than full state tax deductions. These are game stoppers for many Republicans and would almost certainly condemn the bill to oblivion before it has a chance to be voted on.

But there is one thing working in favor of the leadership; the prospect of having no bill at all to take to the voters. This Republican Congress has been a "do nothing" Congress, failing to keep almost every promise made to the voters in 2016. Trump has done his part, trying to scrap many Obama era regulations that were anti-business and anti-competitive.

Without tax reform, the prospects of a Democratic takeover of the House in 2018 rise significantly. The GOP base, already angry for the Congress's failure to repeal Obamacare, could choose to stay home on election day in significant numbers. So it behooves the GOP leadership to get tax reform done - and get it done before the end of the year.

The Thursday deadline for the roll out will probably slip again, but expect some version of the bill to be made public by early next week.

http://www.americanthinker.com...uture_uncertain.html

Honestly I am of the belief that both sides of congress do not want to pass any real legislation in an effort to thwart Trump. They just want him gone and are hoping they can label his administration "a failure" next election.

I find it interesting, though not surprising, that the representatives from the highest property tax states are fighting tooth and nail to not eliminate that deduction.

How is it fair for the rest of the country to have to pick up the federal tax tab because NY and CA have sky high property taxes.

To hell with them. Maybe not being able to deduct it anymore will give them some impetus to change how shit is done in their states.

Any cocksucker that votes to lower my 401k pre-tax limit, I will do all I can to vote their ass out at the first opportunity.

Why can they not leave things the F alone? Greedy bastards. Screw up Social Security, screw up healthcare, why not just screw up our private retirement money while they are on a roll?

quote:

Originally posted by chongosuerte:Why can they not leave things the F alone?

Leaving it alone doesn't give them a chance to pick the winners and losers. That's also why a flat tax will NEVER pass.

Enough with the flat tax and tha VAT tax. Ain't gonna happen.

quote:

Any cocksucker that votes to lower my 401k pre-tax limit, I will do all I can to vote their ass out at the first opportunity.

Why can they not leave things the F alone?

Because It's not FAIR! that some people should be smart enough to set money aside on a tax-deferred basis, preparing for their own retirement. Not everyone participates, don't you know?

quote:

Brady has refused to ditch the idea of imposing some limitation on the popular retirement plans. The reason comes down to basic math: Republicans want to lower the corporate tax rate to 20 percent, and collapse and lower individual rates into four brackets — and targeting 401(k) plans could help pay for those cuts.

Targeting 401(k) plans would be a huge mistake.

The ability to save for retirement, in a tax-deferred account, is the one tax "benefit" middle to upper middle class folks really benefit from. Take that away, and you kill what's left of the middle class.

An article posted above (Oct 25) referred to "Rothification". A cut to the 401k limit could be a good thing IF they make the contributions like a Roth 401k. Pay taxes now with the promise of no tax on the gain. Lucky for me my employer gives us both options, and I take advantage of both, pre and post tax dollars.

The only thing that keeps me up at night is the rat bastards in Congress could, at some point, decide to change the tax law so Roth withdrawals become taxable. Then I would truly be screwed, getting taxed at both ends.

Both my wife and I make the max annual contributions per year per IRS limits. It sucks at paycheck time, but at some point, when I stop working, it will pay...hopefully! If they ever decide to means test SS, I will truly be fucked.

quote:

Originally posted by 1967Goat:
An article posted above (Oct 25) referred to "Rothification". A cut to the 401k limit could be a good thing IF they make the contributions like a Roth 401k. Pay taxes now with the promise of no tax on the gain. Lucky for me my employer gives us both options, and I take advantage of both, pre and post tax dollars.

The only thing that keeps me up at night is the rat bastards in Congress could, at some point, decide to change the tax law so Roth withdrawals become taxable. Then I would truly be screwed, getting taxed at both ends.

I feel quite certain that they will.

Our government at all levels has an extraordinary amount of waste, and a nearly incalculable number of things we shouldn't be spending money on at all, with no end in sight. In short, we have a spending and waste problem of otherworldly proportions, and it dwarfs the rest of the problems including the tax code by multiple orders of magnitude.

And until that's addressed, most of the rest is pointless shell games and circular bullshit.

Cut the budget, significantly (double digit percentages), and balance the fucking thing.

End social security, starting now. Tighten military spending, demanding greater efficiency. Reduce the scope of government, in 200 ways. And, implement a much simpler tax system (a single paragraph of text, less than 1/3 of a page, ought to be more than adequate. Anything else is probably overly complicated nonsense, like now).

quote:

Our government at all levels has an extraordinary amount of waste, and a nearly incalculable number of things we shouldn't be spending money on at all, with no end in sight. In short, we have a spending and waste problem of otherworldly proportions, and it dwarfs the rest of the problems including the tax code by multiple orders of magnitude.

And until that's addressed, most of the rest is pointless shell games and circular bullshit.

Cut the budget, significantly (double digit percentages), and balance the fucking thing.

Ya, but no one wants to even talk about cutting spending or balancing the budget.
Other than Rand Paul and a few in the House, have you even heard any Republicans talk about it?