The Winds of Change!

[Yardley CPA]

https://www.nytimes.com/2017/04/26/us/politics/trump-tax-cut-plan.html?emc=eta1

WASHINGTON — President Trump on Wednesday proposed sharp reductions in both individual and corporate income tax rates, reducing the number of individual income tax brackets to three — 10 percent, 25 percent and 35 percent — and easing the tax burden on most Americans, including the rich.

The Trump administration would double the standard deduction, essentially eliminating taxes on the first $24,000 of a couple’s earnings. It also called for the elimination of most itemized tax deductions but would leave in place the popular deductions for mortgage interest and charitable contributions. The estate tax and the alternative minimum tax, which Mr. Trump has railed against for years, would be repealed under his plan.

As expected, the White House did not include in its plan the border adjustment tax on imports that was prized by House Republicans. However, it did express broad support for switching to a so-called territorial tax system that would exempt company earnings abroad from taxation but would encourage companies to maintain their headquarters in the United States.

The plan would include a special one-time tax to entice companies to repatriate cash that they are parking overseas.

Mr. Trump also signaled support for changes to the tax code that would help families with child-care costs. His plan also would end the 3.8 percent tax on investment income that was imposed by the Affordable Care Act.

Trump administration officials called the blueprint one of the largest tax cut and broadest revamp of the tax system in history.

“We want to move as fast as we can,” Steven T. Mnuchin, the Treasury secretary, said at an event in Washington as the White House planned an afternoon rollout of its principles for what it bills as the first overhaul of the tax code in three decades. “This bill is about creating economic growth and jobs.”

He vowed it would be “the biggest tax cut and the largest tax reform in the history of our country,” in line with Mr. Trump’s grandiose portrayal. But there was no expectation that the White House would elucidate how the deep cuts would be financed, and administration officials are cognizant of the challenges of pushing through a proposal that could dramatically add to the national debt.

If, in fact, the proposal cuts taxes but fails to close loopholes or raise some other taxes, it would not be a true reform of the tax code. It would be a tax cut along the lines of President George W. Bush’s tax measure in 2001 and 2003. Nor is it clear that it would be the largest in history. Tax cutters from Warren G. Harding and Calvin Coolidge to John F. Kennedy and Ronald Reagan vie for that title.

Mr. Mnuchin offered few specifics about the blueprint, other than confirming that its centerpiece will be a 15 percent business tax rate, which would apply not only to corporations, but also to small businesses and other large owner-operated conglomerates, such as Mr. Trump’s real estate empire. He also said the White House is not on board with the border-adjustment tax that is central to House Republicans’ tax plan “in its current form,” setting up an intraparty struggle over the elements of the plan and how to offset the deep reductions envisioned.

Mr. Trump also wants to increase the standard deduction for individuals, according to people briefed on the plan, an attempt to fulfill his promises to provide tax cuts for middle-income people and simplify the process of filing returns. That proposal is likely to engender strong resistance from home builders and real estate agents, who fear it would diminish the importance of the mortgage interest deduction, as well as other sectors that could see the tax benefits associated with their businesses curbed or eliminated.

And Democrats are gearing up for a fight. “Trump’s latest proposal is another gift to corporations and billionaires like himself,” said Tom Perez, the Democratic Party chairman. “Trump must release his tax returns, as millions of Americans are demanding, before Congress can consider any Trump tax plan. We must know how much Trump would personally financially benefit from his own proposal.”

Mr. Trump also signaled support for changes to the tax code that would help families with child-care costs. His plan also would end the 3.8 percent tax on investment income that was imposed by the Affordable Care Act.

Trump administration officials called the blueprint one of the largest tax cut and broadest revamp of the tax system in history.

“We want to move as fast as we can,” Steven T. Mnuchin, the Treasury secretary, said at an event in Washington as the White House planned an afternoon rollout of its principles for what it bills as the first overhaul of the tax code in three decades. “This bill is about creating economic growth and jobs.”

He vowed it would be “the biggest tax cut and the largest tax reform in the history of our country,” in line with Mr. Trump’s grandiose portrayal. But there was no expectation that the White House would elucidate how the deep cuts would be financed, and administration officials are cognizant of the challenges of pushing through a proposal that could dramatically add to the national debt.

If, in fact, the proposal cuts taxes but fails to close loopholes or raise some other taxes, it would not be a true reform of the tax code. It would be a tax cut along the lines of President George W. Bush’s tax measure in 2001 and 2003. Nor is it clear that it would be the largest in history. Tax cutters from Warren G. Harding and Calvin Coolidge to John F. Kennedy and Ronald Reagan vie for that title.

Mr. Mnuchin offered few specifics about the blueprint, other than confirming that its centerpiece will be a 15 percent business tax rate, which would apply not only to corporations, but also to small businesses and other large owner-operated conglomerates, such as Mr. Trump’s real estate empire. He also said the White House is not on board with the border-adjustment tax that is central to House Republicans’ tax plan “in its current form,” setting up an intraparty struggle over the elements of the plan and how to offset the deep reductions envisioned.

Mr. Trump also wants to increase the standard deduction for individuals, according to people briefed on the plan, an attempt to fulfill his promises to provide tax cuts for middle-income people and simplify the process of filing returns. That proposal is likely to engender strong resistance from home builders and real estate agents, who fear it would diminish the importance of the mortgage interest deduction, as well as other sectors that could see the tax benefits associated with their businesses curbed or eliminated.

And Democrats are gearing up for a fight. “Trump’s latest proposal is another gift to corporations and billionaires like himself,” said Tom Perez, the Democratic Party chairman. “Trump must release his tax returns, as millions of Americans are demanding, before Congress can consider any Trump tax plan. We must know how much Trump would personally financially benefit from his own proposal.”

The long-awaited White House blueprint is intended to formally begin the push to get a tax overhaul done before the end of the year.

Officials have cautioned that the announcement will be light on detail and should not be viewed as the final word in what is likely to be a mammoth negotiation. While Mr. Trump has portrayed the effort as a top priority, he had no plans to appear publicly on Wednesday to roll it out, leaving that task to Mr. Mnuchin and Gary Cohn, the director of the National Economic Council, who are to brief reporters at the White House in the afternoon.

The plan contrasts starkly with one that has been championed by House Republicans, who had proposed paying for their tax cuts in part with the new tax on imports, an effort to ensure that the measure would not swell the deficit.

But on Wednesday, many Republicans — even leading proponents of that plan — insisted they were in broad agreement with the White House on the contours of a tax rewrite.

“I think there’s 80 percent or more common ground here — we’ve got some work to do,” said Representative Kevin Brady, Republican of Texas and the chairman of the Ways and Means Committee. “I think the president is going bold here.”

Mr. Mnuchin said this week that the tax changes would spur the economy to grow by 3 percent, which he said would pay for the vast cuts in federal revenues. But even Republicans privately concede that stronger growth would not entirely offset the cost. Democrats scoffed at the notion on Wednesday.

“America is a great nation,” said Representative Ted Lieu, Democrat of California, “but we haven’t yet discovered magic.” He called Mr. Trump’s tax proposal “mathematically impossible.”

Republicans have long called for comprehensive permanent changes to the tax code, but lately they have shown increasing openness to the possibility of tax cuts with an expiration date. If they embark on a plan to move legislation that adds to the deficit and cannot be filibustered by Democrats, Senate budget rules dictate that the tax cuts would expire after a decade.

 “The goal is to make it permanent, but there’s lots of levers here,” Mr. Mnuchin said. “If we have them for 10 years, that’s better than nothing.”

[SaraEA]

I'd like to think this proposal is a rough draft.  The last time rates were cut and corps allowed to repatriate their profits with reduced tax rates, the money saved went into the bonuses of the CEOs and never did "trickle down."  Studies have proved that G W Bush's repatriation effort did not have the intended effect but just allowed the rich to get richer and the income gap to widen.  So how will this plan be any different?  Didn't Einstein define idiocy as doing the same thing over again and expecting a different result?  I thought about that saying recently when the IRS was ordered to use private debt collectors...tried that TWICE before and lost huge sums each time.  A very thoughtful, bipartisan tax reform plan has been waiting in the wings now for a couple of years at least.  Why suddenly start from scratch?  Did anyone ever think through what will happen if all business income, including Sch C, is to be taxed at low rates?  Heck, I'm telling my employer I want to be paid on a 1099.

I believe once the economic impacts are calculated and reality becomes apparent, none of us will have to fear for our livelihoods.

[Lee B]

There is a reason that the last major tax reform bill occurred 31 years ago after 2 years of hearings, negotiation and compromise.

This really isn't a bill, it's a wish list, that already has made some major players very unhappy.

[Jack from Ohio]

I will just wait till the laws are passed.  I have more important things to spend my time on.

[Pacun]

That will be sweet if that law passes.

Do you own a house? NO

Do you have a letter from your church for donations? NO.

"Then you will get the standard deductions... please put away that CVS bag full of receipts"

[BHoffman]

It will be a race to the bottom if graduated tax rates go away.  Can you imagine the reaction of someone whose entire income is taxed at 25% instead of 10% because she earned $1 too much?  I would like to see a lot of the social engineering rewards and punishments be taken out of our tax code, though.  

[Abby Normal]

I would be happy to see the lower tax rates for 'qualified' dividends and capital gains taxes go away. Maybe we could get brokerage 1099s in early February instead of late March, like the good ole days.

[ILLMAS]

I cannot wait to start paying for luxuries I use to enjoy for free (parks, highway, street lighting, public shools etc...)

[Abby Normal]

Uh oh! We're getting dangerously close to a politics thread! Danger, Will Robinson, danger!

[taxxcpa]

3 hours ago, Abby Normal said:

. Maybe we could get brokerage 1099s in early February instead of late March, like the good ole days.

I got my forms early, filed and then I got a corrected 1099 reducing "qualified" dividends and got a K-1 form for a small amount.  The additional tax due is so small I think I'll just wait and see if they bill me

[BHoffman]

3 hours ago, ILLMAS said:

I cannot wait to start paying for luxuries I use to enjoy for free (parks, highway, street lighting, public shools etc...)

There is no "free lunch".  Except for Wimpy....

 

[jklcpa]

55 minutes ago, Abby Normal said:

Uh oh! We're getting dangerously close to a politics thread! Danger, Will Robinson, danger!

 

 

Yes, I've been leaving it as long as the topic stayed with taxes.

"Don't make me pull this car over..."

[Jack from Ohio]

Tell me how to separate tax LAW being changed can be separated form Politics?  Has everyone become the ultra-sensitive snowflake?

Politicians are the ones to make the tax law changes.

 

[Catherine]

Here's one we can all probably agree on:  lock all the legis-vermin (state and federal) in separate rooms, with sharp pencils, LOTS of erasers, and NO calculators.  Keep 'em in there (oh, all right, we can feed them) until they prepare their OWN tax return correctly.  Teach them how complicated it is and how many gyrations real people have to go through to "voluntarily comply."  Plus, all the time they are locked away, they can't make anything *worse*.  Looks to me like a win all 'round.

[BHoffman]

Funny story.  AZ legisvermin decided to add a line on the state income tax form to report use tax for internet purchases.  Evidently, when the lawmakers were confronted with having to list all of THEIR OWN amazon and eBay purchases, they changed the reporting requirement retroactively in the middle of the tax season, claiming it was too much of a burden to look up all those receipts.  I think Catherine is on the right track

[Margaret CPA in OH]

This use tax line has been on the Ohio returns for many years.  A few years ago the then tax commissioner said the Dept. of Tax was hiring additional agents just to audit returns for this added (or omitted) tax.  So I have my clients state yes or no using the verbiage on the return.  And you cannot efile Ohio without marking yes or no.  But I will not make that choice for my clients.  Yes, it is a royal pain to keep track but I manage.

[Catherine]

Mass had that law on the books since the original sales tax law was passed back when I was a toddler or something.  No one bothered.  So they put it on the Form 1, and have a "safe harbor" calculation.  We used to use that a lot before Amazon started charging sales tax.  We've gone back to mainly leaving it blank - because people DON'T track, and the safe harbor figure is wildly skewed in favor of the state.  One of my persnickety clients who used to owe $75+ a year in use tax (pre-Amazon tax collection) went through last year and came up with less than $3 in tax due.  

We still ask - but don't worry about it as much when we get the blank stares and "I dunno" as answers.

[Abby Normal]

I keep waiting for the other shoe to drop on personal property taxes, now that we're expensing everything 2,500 or less. The MD form asks for 'expensed' personal property. Hold on while I find that list. I'm sure it's here somewhere.

[Eric]

On 4/27/2017 at 11:55 PM, Jack from Ohio said:

Tell me how to separate tax LAW being changed can be separated form Politics?  Has everyone become the ultra-sensitive snowflake?

Politicians are the ones to make the tax law changes.

It's very simple.  Focus on the law itself, and do your best not to make it about the people who are making the law.  This has nothing to do with sensitivity, and everything to do with staying on topic.

If you are unable to tell the difference between bean-counter law discussion, and snowflake libtards vs the evil cheese doodle president, for example, then I don't know what to tell you.