Nice tool, but a lot of the market is being altered in a way that blows out these savings. For example, I run my business and my overall tax rate last year was 28%. However, when I account for healthcare premiums and hitting my out of pocket max, I was over 40%. According to the calculator, my tax burden is reduced slightly under the plan. That said, my health costs for next year went up 37% and I'm receiving worse coverage. As such, I will be at a net loss for 2018 and it looks like it will become worse in 2019 if the individual mandate is eliminated.
So, no, I don't expect a calculator to be perfect, but I can't help but stress how important the changes in healthcare costs for self-employed are under this plan.
My view is that if the individual mandate is eliminated then other insurers will come into the market with cheaper plans that don't include everything (Eg mental health) so health costs for healthy self-employed folks will go down. The thing I've always hated about Obamacare was how healthy self employed folks are subsiding the unhealthy people, this happens because most people in their 20's or 30s are covered by work plans which have a better risk pool.
> My view is that if the individual mandate is eliminated then other insurers will come into the market
That's absolutely incorrect. The individual mandate requires people purchase health insurance or face a penalty. This will do absolutely nothing to introduce additional insurers. The only thing it will achieve is increased premiums.
> The thing I've always hated about Obamacare was how healthy self employed folks are subsiding the unhealthy people
That's the core principle of insurance, taxes, and functional governments. Everyone contributes to the same pool even if they don't directly benefit from nor utilize every aspect.
The issue with this system is how the pools are created. Most people use a work pool, leaving those outside it in a lower quality pool. I'd be fine with it if the risk was spread across everyone, not if it's just certain types of employees.
"The thing I've always hated about Obamacare was how healthy self employed folks are subsiding the unhealthy people"
Is that not how this all is supposed to work? the young and healthy help the old and sick, or the rich living in coastal cities help the poor living in rural areas.
The problem is that they didn’t get rid of group plans when introducing the individual mandate, as they did in Switzerland. Group plans siphon off all the lowest risk, leaving the individual market a huge mess.
They are making a subtler claim, that the individual marketplaces are expensive to insure compared to other insurance (and thus people receiving lower subsidies pay a lot for marketplace insurance).
I'm sure it will for some people. That said when I was 21, I was diagnosed and treated for stage 3 melanoma and I can assure you the drugs that I took during that year were not cheap. At this point, it's been more than a decade and I'm wonderfully healthy, but I'm considered a high-risk because of my past with cancer.
Now, there's a very valid moral question as to whether or not I'm entitled to have my healthcare subsidized by others in a pool and I'm fine having that conversation. From an economic point of view, I'm just shy of my mid-thirties with an advanced degree, been in the black with a self-funded business for the last 4-5 years, and have the potential to release products in the near future that could return millions in tax dollars. However, I may be robbed of that opportunity if I'm unable to purchase health insurance that covers cancer. Certainly, that's a frustrating proposition given that the only major misstep that I had was being unfortunate enough to become afflicted with a disease not under my control.
And, just in case someone is curious about high-risk pools, I actually currently carry insurance from one because the ACA marketplace in my state does not offer PPOs and I have one regular appointment out of state. Anyway, the coverage and cost of high-risk pools varied wildly from state to state. As an example, since I'm familiar with TX, prior to disbanding the pool, the law allowed high-risk individuals to purchase insurance at twice the prevailing rate from the pool. If I recall correctly, its pool used a PPO, which is no longer found on the exchange, so we'll use a gold plan EPO to approximate. In Harris county, the current premium for that rate is $429/month with an out of pocket max of $6350. If we went back to the old model of twice the prevailing rate, I'd have to budget $16,646/year, which isn't all that far off from what it used to be. Now, that's just TX and different states had different rules. In the state I'm currently in, the 2018 premium will be $514/month with a $5000 out of pocket max. And, to be clear, there is cheaper health insurance available, but my perspective of coverage and costs changed dramatically after my illness. Health insurance doesn't mean much if it doesn't cover the doctors you trust for a price you can afford.
Anyway, my point is that just because someone is in their 30's and healthy doesn't mean that their coverage will become cheaper or even attainable. Further, this has broad economic implications because it will quite simply force many of us out of the self-employed market because it's not responsible to carry an insurance plan that does not provide comprehensive coverage. This tax plan has been touted as helping small businesses, but it may end mine depending on what happens to the market in 2019.
My situation was crazy. I was denied insurance right before the ACA took effect because of a "preexisting condition" that I never thought about. I have what for all intents and purposes is very mild cerebral palsy. As an adult, I've never had any complications, I was in excellent shape - I had been a part time fitness instructor for years and ran two half marathons the year before. The only noticeable effect of my CP is one of my hands.
I'm in the same situation. Fairly healthy until 4 years ago when I discovered my kidneys were failing due to a autoimmune condition. Something that is not discovered early because you feel totally fine until things go really bad. Now I've reached the point I need dialysis and a kidney transplant. Yet I continue to work, pay taxes and would like to continue having affordable health care for my family and I.
Also people don't think about two other high risk pools... women of childbearing age and very young children. If the heath care market is broken up many groups of people will be affected.
Just wanted to say that I appreciate your candidness and well trained and level headed perspective on an issue that many of our peers opt for hysterics over.
Concern about the individual mandate's effect on the market is curious. It's was waived by Obama until 2016. Trump waived it for 2016 and now the tax plan will eliminate it permanently. Seems status quo.
No, expected future events are part of the status quo and they have been changed. Would you expect the market not to react if the government announced social security payments would all stop in 2018?
Sure, my taxes will go down, but I have grad student friends that may have to drop out because they now have to treat waived tuition as income, and pay ~10k tax on it somehow with their 20k-30k stipend they get. And I've got friends with kids that are going to see their tax burden go up by thousands.
Meanwhile with all of this 'simplification' and 'getting rid of subsidies', we're not doing the same for corporate or high income 'subsidies'.
I have grad student friends that may have to drop out because they now have to treat waived tuition as income
If this happens, this will be a huge failure on their institution part. The only reason their tax bill might be affected is due to creative accounting practices of universities, who use the tuition waiver as a way to skim more money from the grants. Universities will just start offering education for free instead of waiving the tuition, and will find a new accounting trick to take money from federal science grants in "overhead".
1) Why does the tax bill assume that treating waived tuition as income will raise revenue, then, if all universities will just switch to different accounting methods? Or is this one of the many parts of the tax bill that will actually increase the deficit but needs some kind of plausible cover until the buck can be passed?
2) "creative accounting" and "skim more money" are pretty ridiculous ways to describe how research grants work. It's a system like any other. Disrupting it for no particular reason is anything but conservative.
As for 1), I don't think it's about raising revenue. Even if accounting methods didn't change, and grad students actually had to pay a few extra grands in taxes, this would be minuscule amounts of money in the grand scheme of things anyway. It's rather about making more money from the grants be spend on doing actual science. See e.g.: https://www.sciencemag.org/news/2017/03/trump-wants-2018-nih...
For 2), "creative accounting" is exactly what it is. Research grants are for research. The money can be spent on various things, which include salaries of researchers, the cost of lab equipment and supplies, and there's even a special category for "overhead", which is the money that goes straight to the mother institution to keep the lights on. The trick is to allocate $55k per grad student in the grant, and instantly take $20k from it to pay for the "tuition". In practice, the science labs, and the grad students are bringing income to the universities through the grants they get, and the universities additionally charge them for the privilege to do so.
It's because the tax bill needed to pass through reconciliation (which has special rules related to the deficit). Generating artificial savings on paper allowed the GOP to increase the size of the tax cut on paper.
Largely agree. Part of the problem is the murkiness in which wealthy, private universities operate. We need much more transparency to justify institutions like Stanford to continue receiving a taxpayer subsidy of $63,000 per student compared to only $10,000 at UC-Berkeley and $4,000 at CSU-Fullerton [1]. Where is the federal grant money going and how is it divvied up? Maybe a graduate degree in dentistry provides a greater public good, even if there isn't a lot of ongoing research funding in that field. Here are some suggestions:
- A publicly searchable database, showing projects that derive as a result of public grants.
- Non-profit universities disclose administrative and faculty salaries like the UC and other states systems do, even if anonymized.
- Provide an explanation of why the size of their student bodies have stayed the same over the years while their endowments and operating income have ballooned, assuming their mission is to provide education as a public good [2].
> Universities will just start offering education for free instead of waiving the tuition
Aren't you supposed to be taxed on the value of a good/service/gift received even if it was given to you for free? What is the "true value" of tuition?
I don't think waiving tuition will work, assuming tuition is taxed like most other things.
If a university is charging tens of thousands of dollars to some students and waiving those charges for other students because of the work they are doing for the university then that's a value being provided in trade for work. Why shouldn't it be taxed?
Contrariwise if no one is really paying these tens of thousands of dollars in tuition, with the university just eating the "tuition bill" in the case of e.g. an English grad student, then why should a grantor have to pay that tuition bill for a microbiologist grad student on top of her stipend?
I get that this sucks for people caught up in it but I don't see a lot of stepping back and thinking about what makes sense.
Yep, I was down voted in another thread for pointing out the the same thing. 20 years ago, I had to pay tax on all my employer provided tuition assistance for graduate level classes. Even if my employer cuts a check directly to the university, it's still counted as my income.
So why should it be any different for a university as the employer? This is just a loophole being closed. Just get rid of the damned "dissertation credits" and problem solved.
> If they keep charging everyone else and make education free for employees, the tuition they would have paid becomes taxable income.
Is this really true though? Some universities charge in-state and out-of-state students different tuition rates, but the in-state students aren't liable for paying taxes on the difference between the tuition rates. It seems like those are just different degrees of the same thing so the same rules should apply. Perhaps the distinction is that the schools who differentiate between in-state and out-of-state students are state schools and thus play by slightly different rules?
The biggest high income subsidy is the favorable treatment of investment income. That'll probably be supplanted in the new tax regime by the passthrough discount.
This doesn't apply to all college students. This is specifically to PhD programs at each state's best research universities. The kind where we'd want our brightest students to attend, no matter what their financial situation.
Currently, these students are paid a small salary to attend these programs ($20-$30k per year), and their tuition is waived. Under the new tax rules, the tuition waiver counts as income. So for example, a student at MIT who makes ~28k/yr is going to be taxed like they earn $80k/yr.
Because they want to receive the full $80k from the grant - often federal - and pay the student $25-30k. The right answer is to fix the accounting measures. For a PhD student primarily doing research which benefits the university and grantor, and taking no or few classes, why are they paying tuition? If it’s for facilities or university staff salaries, then just send the full grant to the university directly, and let the university pay the students whatever both parties see as fair.
> If it’s for facilities or university staff salaries, then just send the full grant to the university directly, and let the university pay the students whatever both parties see as fair.
This requires a change to grant structure and cannot be done unilaterally by universities.
The universities prefer to give the discount because it let's them do stupid accounting tricks that let them get more money in grants and stuff. Universities should just adjust the tuition for these students instead of giving a discount.
Then don't tie the tuition waiver to employment as a graduate assistant. The university can certainly choose to charge students with demonstrated need less so long as it's not tied to employment.
If they make the income threshold low enough that graduate assistants would qualify, say $25k a year, then pretty much everyone is going to qualify.
How many graduate students (outside of a few par time programs) make more than $25k a year? It doesn't make sense to consider parents income since graduate students are generally considered independent (even if they are being financially supported by their parents).
How do you stop everyone from qualifying for tuition waiver? Even rich parents will just make sure their kids don't have any assets if they plan on going to grad school.
You can’t have your cake and eat it too. If you’re not giving out waivers to those with the need, then you’re actually treating the waiver as part of the compensation for being a graduate assistant, and it should be taxed.
You're arguing in circles. I know it's compensation, and I'm not the one who proposed we make it need based. I'm pointing out why your solution wouldn't work.
>it should be taxed
We tax what we want to tax, and we offer deductions to encourage behavior that we think is beneficial. Scholarship income used for tuition isn't taxed. We tax capital gains differently from ordinary income. We offer mortgage interest deductions.
Should is subjective. There is no inherent reason to tax tuition waivers the same as employment income, apart from that's the way the IRS does it now (absent this specific deduction).
At the risk of being labeled as an elite as a derogatory statement, because college graduates provide more social utility to the nation and tax revenue over the long term. So figuring out a tax policy that encourages that behavior is absolutely in the collective interest of every American.
What are you basing your contention that people with kids are going to see their taxes going up on? All evidence I've seen has them significantly expanding the child tax credit.
The senate bill does not have the change which counts tuition waivers as income, so at least on the senate side of the things, this site really isn't missing that.
This makes no sense. Of course the University has to waive the tuition fee to avoid their grad students leaving en masse. If they don't, then another University will offer waived tuition.
I'm going to gain ~$3k, they're going to lose ~$10k each. So the math doesn't work out, even if that were a viable option without getting into gift taxes.
That’s whataboutism. And why should grad students get special treatment? Most other people making $20-30k (ones that aren’t privileged enough to be in grad school) will get a tax cut.
> Most other people making $20-30k (ones that aren’t privileged enough to be in grad school) will get a tax cut.
As will people with estates in the 11 plus million range, large corporations, and pass through entities. It's very easy to cherry pick to set one struggling group (grad students) against another (people making 20-30k), but that ignores who the primary beneficiaries of the bill are.
> that ignores who the primary beneficiaries of the bill are.
The outrage about rich people getting taxes breaks is uninteresting because it's impossible to give a tax break to someone who doesn't pay taxes. As the US has a fairly progressive tax structure, any changes to the system will primarily affect the rich.
> That's, of course, completely untrue in a world where refundable credits are a thing. Tax bills are not limited to non-negative numbers.
I'm pretty sure that is actually the case in the US tax system. A US taxpayer's tax burden cannot be less than 0. It doesn't have to be that way, but to make it so requires a more fundamental change to the US tax system.
Nope, there are several refundable tax credits which can take total income liability below $0; the Earned Income Tax Credit is the best known , but there are several others.
>That's, of course, completely untrue in a world where refundable credits are a thing. Tax bills are not limited to non-negative numbers.
Tax breaks and one's total tax obligation are two different things.
>(Also, lots of non-rich people pay taxes, even if you only mean personal income tax.)
A lot of people think they pay taxes, but they don't. And we'd need to define rich to really reach an agreement on the truthfulness of that statement. According to the CBO [1] (table 1 on page 31), households in the lower three quintiles of income are not net tax payers at the federal level. The gap in what they pay and what they receive in services is large enough that it offsets state and local taxes.
Reviewing the table I referenced above, I would agree that lots of non-rich people pay taxes. But the majority of non-rich people do not.
Let's say a person makes most of their income from exporting equipment to Europe. Are you going to subtract the value they receive from the US Navy protecting shipping lanes?
What about the value the owner of a retail store gets from the interstate system?
Only counting direct benefits in this calculation is absurd.
This is too simplistic to be real. Would you say the same if the tax break was "anyone earning over $500k pays no taxes of any kind"? After all, it primarily affects the rich, and that's to be expected.
Of course I'd not say the same, that's a very different situation than across the board reductions.
In a country where 47-50% of tax returns have zero income tax liability, and 60% are not net tax payers, a new policy that lowers the tax rates across the board, but has a floor of zero, will obviously only affect those who have actually pay taxes.
Another question I would be interested in hearing an answer to is why is everyone so concerned about tax breaks for the rich? Since the federal government doesn't operate on a balanced budget, the only motivations I can see are greed or spite. Greed because people are afraid they will not get services paid for by someone else, or spite because they think it's unfair that someone has more than them.
In case you haven't been following the news, the recent tax bill was passed under a rule that limited the impact it was allowed to have on the deficit. Therefore, in order to make tax cuts for the rich not cost too much for the bill, they've included changes that remove funding from services or that raise taxes from the not rich. It doesn't matter whether the government as an abstract operates on a balanced budget or not, this particular bill is a (roughly) zero sum one. If you didn't know that, you should really do some more background reading.
What are you talking about? Lower class people are only able to afford grad school because of tuition waivers. By taxing them as income, only people who are able to pay out of pocket will have access to postsecondary degrees that grant higher incomes.
Only a small minority of lower class people ever go to grad school. Overwhelmingly, it’s a tax break that benefits the kids of upper middle class and wealthy families.
> Only a small minority of lower class people ever go to grad school.
But so is this one (mine):
> A vast majority of graduate students are from low-income backgrounds.
However, this statement is totally false (yours):
> it’s a tax break that benefits the kids of upper middle class and wealthy families.
Many graduate students, especially those in STEM fields (80 - 90%), are poor international students. Their families are already taking on generations of debt in order to give their children a mere chance to emigrate to this country.
The schools don't want to/won't pay the higher stipends required to offset the tuition waiver taxes (for the minority of graduate students who get them), and they don't want to/won't give up the massive cash infusion coming from these students (who don't have waivers) already.
Given the choice between the two, they'll choose the latter (the cash cow) and throw the former (the best and brightest) out with the bathwater, if you'll permit me to mix my metaphors. In the long run, this outcome will be bad for the schools, and bad for the businesses who hire these students once they graduate.
You're simply wrong. Higher-income college students are far more likely to go to graduate school than lower-income students.
> The percentage of students enrolling in graduate school increases with family income. Among dependent 2007–08 four-year college graduates, 39 percent of those from families in the lowest income quartile, 42 percent from middle-income families, and 45 percent from the highest income quartile had enrolled in graduate school within four years of college graduation. [0]
It's also misleading for you to look only at figures for STEM fields, in which international students are much more highly represented than other fields. I'm not sure why you're using looking at STEM only and using that to prove your point. The NYTimes article you linked says it best:
> "in arts and humanities, the figure [of students which are international] was about 16 percent; in business, a little more than 18 percent."
Providing tax breaks for graduate school does disproportionately benefit the upper middle class and the wealthy.
Depends on the field. Students from developing countries are usually not lower class, but, compared to Americans, have much lower income. In many fields, especially STEM ones that actually provide tutition waivers, these students make up significant chunk of the students. There is liberal arts, but tuition waivers are much more rare there.
I’m sure this is what the Trumpists were really after. He is not very friendly to immigrants, after all. And STEM doesn’t really mesh with make America great again mantra of bringing back low skilled manufacturing jobs.
Not to wade into the discussion about who makes what money (we need data, full stop) - but in humanities, students largely do not get the type of tuition waivers that are under discussion.
By ignoring STEM students, you're overlooking the people who would primarily be affected.
A vast majority of graduate students are not from low income backgrounds. Graduate students by definition already have a college degree, and statistically college graduates come from families that make substantially more than he average income.
Sure. But aren't they even more likely to be well-off? Are people who can afford to forgo getting a job for 4-5 years after getting their college degree more or less likely to be from a lower-income household?
I'm not certain, but to offer a counter argument, aren't the more wealthy students likely to be content to get a Bachelor's degree of an MBA and move into the workplace? Possibly using their connections to supplement their other qualifications?
Sorry to clarify, the poor assumption is that the fact that the people going to college being generally wealthier means that the people going to graduate school are generally wealthier. A uniform randomness would be required to determine which students choose to continue advancing which is not the case as those choosing to pursue a graduate degree are being influenced by other factors - how fast they need to begin acquiring income, how lucrative they think immediate employment may be, interests...
I always got the impression that the international students were from fairly well off families by the standards of their home country. After all, they can afford to pay full tuition, even after the exchange rate from currencies like the Chinese RMB.
Yup. The most likely outcome of the grad student changes in the House tax bill would be an even greater shift towards international students from well-off families.
Do you know what "overwhelmingly" means? Your anecdote about a single person (you) being able to or not being able to afford college doesn't mean anything.
The other commenter's unsourced "overwhelmingly" claim is silly but so is yours.
Think of my comment as two separate statements. First, "overwhelmingly" is silly. Second, and more or less unrelated, it would have personally affected me. The second wasn't intended as support for the first.
No, it's not. You have a fundamental misunderstanding of that word. And you're really asking why we should focus and prepare citizens with higher education?
I'm guessing this covers just 2018/19 and not the lead up to 2027. A lot of these individual income tax cuts not permanent, and are set to expire in stages towards 2027. The bill is going through reconciliation with senate rules restricting deficits increases after 10 years (the bill is deficit financed to the tune of $1.5 trillion - which is insanity).
Pretty much the only permanent features of the bill are the corporate rate, the pass through shenanigans, removal of estate tax, and removal of a number of deductions such as SALT, etc... also sabotaging the ACA marketplaces by repealing the individual mandate.
This is a prominent criticism, but it strikes me as fundamentally weird to say, yeah, you're right that these are tax cuts, but the cuts expire in 10 years. This is government. Who knows what the world will look like in 10 years? Would, say, 20 years be better? Sure, I guess. But 10 years is a pretty long time. It's pretty difficult to plan most personal finances out that far, anyway. Who knows what your own life will be like in 10 years?
Isn't the complaint that the cuts don't last longer tacit approval of the cuts?
As another commentator said, its not really tacit approval of the cuts. The point I and others are making is that these cuts are clearly designed to be a political smokescreen for midterm elections. These cuts are deficit financed giveaways that in most cases will disappear, and in many cases income tax payers will see tax increases on income in later years to finance the permanent cuts elsewhere.
The actual goal of the bill are the changes the congress choose to be permanent, which are the cuts on corporate rates, pass-through rates, and estate tax, which benefit a very small group of tax payers.
I think I’d want to argue that in tax policy, anything nominally permanent isn’t and anything set to expire in 10 years likely won’t.
I’d be worried if this were the last ever tax bill, but since it isn’t, and since 10 years is a pretty long time, I don’t think it’s so bad (even if I agree with you about some portions (e.g. the elimination of the estate tax)).
I think the issue is that one set of tax cuts is set to expire while another is not. And it looks a lot like using these expiring cuts to distract average taxpayers from the non-expiring tax cuts for the wealthier class.
I love calculators. What I haven't seen yet is a calculator that shows you where the money originated from. How much of my tax deduction is new debt, vs money stripped from Medicare, Social Security, College Graduate deductions, etc. It's not enough to know how much more I am getting, but where the money originated from.
It doesn't matter and for the most part will all be newly issued debt. To explain: For the first few years it will be approx 100% new debt... You can exclude college graduate deductions since that's basically a small amount compared overall spending on medicare and social security etc... THEN wait a few years for the republicans to gut SS, medicare/medicaid etc.. under the guise of shrinking the debt/deficit with maybe a balanced budget argument. At that point you could argue that they've paid for these tax cuts by making those spending cuts. However, the republicans actually really like to issue debt when it pays their backers so you won't necessarily hear the balanced budget argument unless the democrats make substantial gains (e.g. take the House or the Senate).. They may try to push spending cuts through in 2018 but they may very well wait until after the election because as an election issue it might be polarizing. 2018 will be the year of campaigns that say "hey we cut your taxes", "we stuck it to the coastal and academic liberals". We also fixed Obama care as we removed the individual mandate (which is really all that non-wealthy people hurt by the ACA care about)... so vote for us!!! And without that mandate ACA costs will rise b/c insurance co's get paid on the backend to make up the shortfalls already, so that will just increase and need to be "funded", most likely by new debt. For all of these plans, if Trump is impeached it won't matter as Pence (or Ryan if it's a 2 for 1) will continue similarly.
I only see one way out of this and that's that we need to appeal to Trump to save us. Since he desperately wants to be loved and respected by the people. The only issue is that Trump has to play ball with the Republicans or else they will impeach him, at least until Russia is out of the way. The only way to prevent that is to take back seats in the 2018 election.. but this is a tough task due to all of the gerrymandering that's gone on. If Pence or Ryan are President after the 2018 election with a democratic house basically nothing will happen. If Trump is in there might be a small chance of saving democracy. He'd have to go nuclear on the remaining republicans and may convert his base over to the more liberal populist platform to get re-elected. That's a stretch but not unimaginable.
I think the best you could get is a comparison of the per-capita debt incurred under some economic models, vs tax change realized individually, and possibly who/what accrues the benefits of the difference between those numbers.
That's pure pessimism. You can compare the previous-year government budget and next-year government budget and work out the gaps. Sure, the money might have all sloshed together in the general fund, but the average values are all matter for analysis on an individual level.
Hey, I built this in my spare time over the past few days to calculate some of the basic implications of the new House and Senate Tax Bills on personal income taxes.
This doesn't count AMT, everyone in the state who itemizes and makes more than $200k has to pay the amt essentially making deductions completely useless. A NYT article showed how elites in Cali and NY will lose money but I calculated various incomes and the only people who would lose money are the ones making $1M plus. The article completely excluded that fact. Steph curry for instance will lose over a million in this new bill because he doesn't pay AMT currently and deducts $2M stats taxes. Not being able to deduct that plus only a minor drop in income tax brackets screws him.
This is not a bad bill. Very few people wil have to pay more and those that do are making $1M + and they'd slightly see a decrease while people with $5M+ will see a more significant decrease, so I'm not concerned. That being said, I think there should be even a bigger tax cut on the middle class and greater deductions for disabled seniors. Family making $50k with 2 kids barely saves more than a family $35k with 2 kids especially if they have Medicaid while the other family has insane premiums and deductibles.
They claim it will come from a huge economic boom which will be unleashed by cutting corporate tax rates.
However, a proposal to automatically undo some of the changes if the "guaranteed to pay for itself" plan fails was scrapped. I'd rather have challenged those claiming the cuts would pay for themselves to put up or shut up: force retirement if the growth didn't appear.
That was political grandstanding. Imagine if some war broke out or something like the financial crisis happened in 3 years. Already poor economic growth, 401k crashing, job cutting, businesses losing money and all of a sudden taxes go up 15%? It would sink the economy and force govt to pay trillions. It was a comically absurd idea that becomes easily refuted with 5 seconds of thought. Unfortunately, 99% of politics is grandstanding, just hope that things that pass into actual law are rational.
CBO relatively bipartisan analysis says $500B from economic growth, but we can't be sure as it doesn't account for a lot of things. Republicans say it's a lot more, Democrats say it's a lot less.
Tax havens that everyone complains about have been taken out which I feel like should be discussed more. Global 10% minimum tax no matter where you make money. If Ireland you pay 1.3% you now pay 8.7% to the US, China 15% you pay 0% to the US. That is going to change the global structure completely and the IP changes haven't been analyzed either.
A lot of redundant tax breaks and loopholes are now gone like allowing deductions for executive pay etc, and no more needing to pay crazy taxes to bring overseas profits back, 0% so investment should be high. These 2 were very very important for US and both bipartisan but the politics of "reducing corporate taxes" is awful. No more hiding IP, storing assets without using them.
Bush ballooned the debt with stupid wars. Democrats doubled the national debt adding like 11 trillion over 8 years, completely botching up the healthcare allowing the 6 biggest insurance companies to sextuple profits, premiums and deductibles to go sky high and the deficit getting screwed next year. Cabinet budgets went up like crazy. Departments that had 30-50k employees for decades suddenly get 75k full time, bigger budgets approved every year.
Spending cuts are next on the docket, but the budget plan is supposed to cut 50B+ a year.
Basically I'd take $1T over 10 years over Democrats $11T waste over 8, Bush $8T mess over 8 though like Clinton, hope budget can be balanced. Obviously I wish it was revenue neutral and if it were up to me, I would cut corporate tax to 25%, foreign global minimum to 11%, individual top tax bracket to 45% for $2M+ (doesn't even target top cardiologist couples, just athletes and the very top). That should be revenue neutral and the best way to use a trillion dollars would be to invest it in research and new technologies. That has been the best catalyst for economic growth, increase in QOL, and driver of less poverty.
I'd take this over free college and admin making up 75% of faculty and tax dollars drowning in pensions
The CBO estimated the $1.5 trillion with all those loopholes and boost forecasts. All that is factored in.
Bush ballooned the debt not only with his wars but also with a massive tax cut. That tax cut led to a period of weak growth and culminated in the biggest recession of our generation. Obama inherited that collapsed economy. His deficits were caused by the recession's drooping tax revenues, extensions of Bush's tax cuts, the stimulus (which also cut taxes), and continuing Bush's increased military budgets. This produced another period of weak growth but left the economy in relatively decent shape which Trump is now taking credit for without having passed his first budget or major law yet.
All we've had over the past generation is tax cuts. And. They. Don't. Work.
They increase the deficit, don't boost the economy, increase inequality, and make our institutions weaker. But here we are going for another round of the same medicine: tax cuts and increased military spending.
I would love this even more if you could input your itemization total. This tool is so much better than the ones I’ve seen previously, and actually it’s kind of ridiculous that congress can’t create this tool. Being educated about the personal effects of this bill is just good governance.
EDIT: I'm skeptical this is right. I'm in a high tax state, with high property and mortgage interest. Yet this shows me between 1% and 12% better off despite every report I've read and www.republicantaxcalculator.com showing me much, much worse off.
Not taking property and mortgage interest into account, this tool is misleading at best! I just did my projections. This calculator shows our family will benefit slightly, when in fact our taxes will increase approx. 25K or 40% per year.
That's what I was expecting too. How did you do those calculations, if you don't mind sharing? With an accountant, the hard way with a spreadsheet, or (please!) some magical accurate online calculator with 5 fields and a big button?
Well, first I used the new brackets to calculate the tax and found us slightly in the black. Then I dug out my last year tax return, added four numbers -- income tax, property tax, mortgage and donations -- subtracted proposed 24K standard deduction and applied our new bracket (35%) to the difference. Subtracted the first number. Felt robbed.
That said, I'm waiting for my CPA to get back to me with the projections for 2017 along with the tax reform impact estimate.
Indeed, the source code only considers tax brackets, the personal exemption, and the standard deduction. I've read of an increase of $650 in the per-child tax credit combined with the loss of the per-dependent personal exemption and an increase in the standard deduction. If your last $4333 of annual income is going to be taxed at rate of 15%, then a $650 credit is just as valuable as a $4333 deduction or exemption and thus slightly more valuable than the current $4050 personal exemption. Thus, contrary to this calculator, middle-class families with lots of kids will not get big tax increases.
Can someone help me out here? Last year I paid 5-figure state income taxes (CA) which, as far as I understand, is no longer deductible from my federal income. So if my federal income taxes are ~30% then I'd expect to have a $3000+ tax increase from the loss of that deduction.
Yet this tool implies I will get a tax cut.
What elements of the new bills will result in a tax cut large enough to offset the loss of the SALT deduction? I am single, living in CA, no dependents. I do not own a business.
As a sibling noted, your standard deduction will double. That likely isn't enough, so I would guess that juggling the income limits in the different brackets is what made up for the difference.
My state income tax paid is more than even the new standard deduction amount, and it showed a tax cut for me as well, so I can only assume the bracket reorg is what did that.
In the end, my income & tax situation is more complicated than the simple single slider this calculator gives, so it doesn't really tell me much that is useful.
This is interesting, but it needs more data input for a more accurate picture for those who own a house, or hope to own one soon. Particularly those in the Bay Area, where the 10k SALT cap wouldn't be too difficult to run into.
It's not a 10K SALT cap, its a 10k property tax deduction cap, the itemized deduction for state and local income taxes are eliminated in both House and Senate versions as far as I understand.
Would be nice to include a field for long-term capital gains. Removal of the state income-tax deduction changes the effective tax rate for those gains, which would help someone decide whether to realize those gains in the remaining weeks of 2017 or else to keep holding.
I will be itemizing this year, it would be nice if I could add some of those writroffs in with this calculator. In my case, it's the difference between my taxes going down or up
>This seems to imply that families with 2 kids and a median household income of $60k will owe a extra $5k in taxes?
Yep. This plan will throw peanuts to His desperate impoverished base of low income voters, while simultaneously fleecing the middle class and enriching the .01% (Himself). Just as planned.
I think it is because the exemptions are eliminated. Of course I don't know how accurate this calculator is but if you enter my assumptions above for a typical middle class family of 2 kids and $60k income, nearly every state has higher taxes.
Take A married couple with 2 kids with $60k AGI, all W2.
Filing in 2017, standard deduction:
60k - 12.7k deduction - 16.2k exemption = 31.1 taxable income, with ladder rates that's $3,733 - $2,000 in child tax credits for $1,733.
Filing in 2017 with a 24,000 (!! out of 60k!) itemized deduction to match the new standard deduction:
60k - 24k deduction - 16.2k exemption = 19.8k taxable income, ladder rates make it $2,038 - $2,000 in tax credits for a grand total of $38 in taxes owed.
Current Senate proposal:
60k - 24k standard deduction = 36k taxable income, with proposed ladder rates that's $3,939 - $4,000 child tax credits, you owe $0.
Hard to see a scenario where: a) a 60k family is itemizing that much, and b) the child tax credit doesn't significantly increase.
Nice UI, not very useful / actionable in terms of actual insights.
We've had a couple of threads about Excel lately and the power/beauty of Excel is that it'll be butt ugly but someone with zero programming knowledge but extensive tax knowledge can build a model for you that'll give you great actionable insights with decently quick turnaround.
ditto, it would be nice to show the intermediate calculations in MathML or something. Let us see the flow of money, that is more interesting than anything else.
But let's be clear, US median household income is $59,039, so the $50K you cite is not actually "very little money" but rather a normal income for a household. Agreed that in reality, it is very little money when we take into account CoL, household debt, etc. This bill, combined with the ongoing burden of health care expenses, will continue to cripple the typical US household.
These tax bills are hilarious. For the majority of us, it is like moving money from your left pocket to the right pocket. There is no savings whatsoever besides bad healthcare for all. This bill should really be called "Corporations are people too, my friends" bill as it really gives away money for rich companies who honestly do not need more money given Apple, Amazon, Facebook and Google are becoming trillion dollar companies.
short term = small benefit for most
medium term = benefits expire, national debt is huge, "we have to cut social security and medicare that you paid into all these years"
This calculator is deceptive as it shows the initial change which is everyone gets a little bit of money and rich people get huge gobs of money. After a few years it all changes and we have to make huge cutbacks since "we" were so fiscally irresponsible.
Most people will. What most people are getting mad about is that a lot of the personal deductions will expire in the future, and that the ultra-wealthy are getting a tax discount as well as the average person.
Who is this most people? Most people on HN, being white collar professional types might benefit in the short term from this bill, but most people across the country are in that under-$30K category that is going to get screwed. I'd be interested in hearing the personal accounts of grad students about to get taxed on their tuition breaks as well. This bill is bad news all the way around.
Is the site broken for anyone else? I see {{ STATE }} when I get into the page and a bunch of template variables in the page. None of the controls work and I have disabled my adblock, https everywhere, etc.
Nice work. You should consider making the state field optional. There is a large expat community who still need to file US taxes (but not state taxes).
1) These are the first year income tax cuts, but most of these income tax cuts are getting phased out over time after the first year. By 2027 some of these income groups may see tax increases, and most won't see much benefit at all.
2) The temporary income tax cuts are peanuts compared to what is happening with the corporate rate, pass-throughs, capital gains, and estate tax (all permanent), which benefit people that own companies and/or inherit wealth - which is predominately the richest people. The richest people in the country don't get their wealth from their income, but rather from returns on capital.
The tax bill is a boon for billionaires because of (1) estate tax repeal (house) and (2) corporate tax cuts that will benefit the capital class that holds corporate equity.
This shows only a small portion of the impact of the bill - the SALT and child/marriage/standard deductions increase for earned income, but none of the passthrough changes, changes to the way unearned income (stock market investing, e.g.) is taxed, corporate changes. M/Billionaires don't file a 1040-ez, but that's what this page is showing (before said deduction increases expire)
Would be great if this supported my situation, single member LLC (pass-through). Though probably not popular here on HN, the bill's goal is to reduce the burden of taxes on small business and corporations to promote repatriotization of capital back to the US.
How would that work exactly? They're not breaking the law. Apple probably has IRS agents on its campus at all times for what amounts to an ongoing audit to ensure that they're not breaking the law.
Apple makes legal business decisions to shift profits to lower tax jurisdictions and lower their tax burden. And you're going to fine them for that?
Not only would that not hold up in court, it's crazy unfair. That's like fining someone who moves from CA to FL or buys a house or saves for retirement to save on their taxes. How DARE YOU make a decision to reduce your tax burden??!??!
It's not about fairness, it's about pragmatics. We have higher taxes on corporations (actual taxes, not just paper rates) than countries like Canada, Germany, France, the U.K., and Switzerland. France's corporate tax burden is half of ours. Meanwhile, Europe has over the last 20-30 years dramatically liberalized its economies, and as a result is a pretty compelling place to do business.
It's one thing to have higher tax rates than some desperate third-world tax haven. It's another to have higher rates than highly developed countries with strong business environments (i.e. our competitors on the international stage). Many companies are happily shipping jobs over to the U.K., Canada, etc., to lower their tax burden.
It's not a sweetheart deal. US corporate tax rates are some of the highest in the entire world. It is just smart by Apple to ship capital off until it makes business sense. I suspect we are not going to agree about this though.
Did you even read the article you linked? There is a reason all the bay area tech companies have offices in Dublin Ireland... 12.5% corporate rate.
> The long answer: The U.S. has the highest top corporate tax rate at least among advanced economies. Compared with nations in the OECD — the Organization for Economic Cooperation and Development, a group of highly developed countries — the U.S. has the highest top corporate tax rate in the world.
Didn't the House version support pass through entities but the Senate version threw it out to reduce the deficit (to avoid filibuster)? Still waiting to see what the rectified version looks like.
Well, the rectified version will be finished at 11:30PM some long Friday night and passed at 11PM the same evening, so you really won't have much a chance to look at it beforehand.
Nope. The House version is fairly complicated, but amounts to most non-service businesses treating 30% of the income as "capital return" and being taxed at 25%.
The Senate plan started out as being a 17% deduction of pass-through income on 1040, and then got ramped up to 23% before being passed. It is limited to 50% of W2 wages paid by the pass-through and excludes a bunch of service industry categories, but both of those limitations only apply to businesses where taxable income is below $250k single / $500k married.
I'm pretty aggressive on tax avoidance and even I'm surprised by how crazy this is.
So in a hypothetical example, I'm married and earn $600k from a consulting business. After retirement contributions to a solo 401k, maybe some charitable / mortgage / property tax deductions, etc, I get my taxable income to $500k. Which means I get to deduct another 23% of the business income (23% x $600k = $138k), dropping my taxable income to $362. And the Federal income tax on that is $80k. Plus another $40k or so for SE tax. So $120k in Federal tax on $600k in income, or 20%. If you live in a no-tax state, then that's all you pay. That's pretty crazy.
Make sure you use incognito mode! I hate looking at sites like these. I'm sure this one is probably OK but most aren't to be trusted.
Not only are you giving away personal financial info to an unknown site, you're pairing that with your browser so making yourself a target to every advertiser and scammer in the future.
Very interesting. Unsure how reliable the source is, but when you play with salary indicator.. at $250k everything slowly starts turning gray and then red. So this bill truly hits into top % of these that make more than 25k or 125k per spouse.
Only question remains what will the rich do with these savings. Administration says people will hire more and buy more goods that will obviously turn into more jobs and better economy. Let's hope for that!
Say what you want about the tax bill on net, the elimination of the SALT deduction is very good for the country.
There is zero reason for the Feds to subsidize and distort incentivize to encourage states to increase their tax burdens. SALT has always been one of the most corrupt tax breaks (mortgage interest being another).
> Say what you want about the tax bill on net, the elimination of the SALT deduction is very good for the country.
No, it's very bad.
> There is zero reason for the Feds to subsidize and distort incentivize to encourage states to increase their tax burdens.
That seems like a reasonable position, but SALT doesn't do that; quite the opposite, it keeps federal taxation neutral in terms of incentives for state and local taxes. Not deducting state and local taxes distorts incentives by creating a federal tax disincentive to state/local tax-funded programs that produce a net economic gain. I've written up a simplified scenario illustrating this in a recent prior discussion on HN:
Could you go into more detail here? Corrupt in what way? I haven't really heard this claim before, and the general idea that you shouldn't be taxed on non-discretionary income (e.g. buying milk, clothing, and paying taxes that make your schools and roads work) seems sound on the face of it.
This website literally just loads another page, IP address, over raw HTTP. There's no way in hell I would trust it in any way, shape, or form. You really should build your website better before showing it off.
Edit:
It looks like the page does not just load an iframe to an IP address any more. I'll take back what I said.
I'm curious as to why you even used a server at all. From the looks of it, you could have shipped the server code with the frontend and saved some bandwidth.
So, no, I don't expect a calculator to be perfect, but I can't help but stress how important the changes in healthcare costs for self-employed are under this plan.