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.
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.
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.
So do you just hate health insurance in general then? Because all health insurance works like this.
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.
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.
If you're right, then the IRS owes me a refund.
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'.
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".
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.
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.
- 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 .
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.
Also, what was the point of the tax bill if you expect everyone to just rearrange the deck chairs so they don't have to pay any new taxes?
If they keep charging everyone else and make education free for employees, the tuition they would have paid becomes taxable income.
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.
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.
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?
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.
This requires a change to grant structure and cannot be done unilaterally by universities.
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.
>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).
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.
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.
(Also, lots of non-rich people pay taxes, even if you only mean personal income tax.)
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.
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  (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.
What about the value the owner of a retail store gets from the interstate system?
Only counting direct benefits in this calculation is absurd.
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.
Friedman was really into negative income taxes.
> 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.
> 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. 
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.
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.
By ignoring STEM students, you're overlooking the people who would primarily be affected.
The other commenter's unsourced "overwhelmingly" claim is silly but so is yours.
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.
Isn't the complaint that the cuts don't last longer tacit approval of the cuts?
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’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)).
We don't know that yet, that discussion will happen next year.
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.
This is open source and available on GitHub here:
If you have any questions or issues, you can open them on GitHub or contact me at: firstname.lastname@example.org
You are not properly changing the deduction for married people. You have a single static value that gets used and is the "single" setting..
That ore I read the code completely wrong (which is always a possibility) =)
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.
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.
What about the $1.5 trillion cost?
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.
But, you should add the state tax as well as the FICO and social security tax/ medicare tax, to show a more complete picture.
What about mortgage interest and property tax?
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.
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.
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.
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.
How in the heck do you run it?
Edit: misread it. Not $5k more but 15-20% more.
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.
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.
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.
they'll only be able to deduct 10k of the prop taxes too
I dragged the sliders around for a minute, and my browser history was completely decimated by identically-named entries.
Maybe replace the existing state rather than pushing the new one?
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.
Additionally, the House plan raises the tax burden in those making less than 30k.
EDIT: Never mind, false alarm
Which one is more close to the fact?
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.
If I can feature request, would love to see city/local taxes accounted for, especially with the SALT deduction removed.
The horror of giving a fair share to the country that supports your corporation.
I think we should fine companies like Apple who bilk the US and refuse to bring back hundreds of billions until they get a sweetheart deal.
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 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.
> 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.
> Factor In Deductions And Other Expenditures, And The U.S. Corporate Tax Rate Isn’t So High
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.
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.
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!
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).
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:
It looks like the page does not just load an iframe to an IP address any more. I'll take back what I said.