Tax changes and college kids

[emzhengjiu]

Stay on topic please. I have hidden several posts and edited others due to personal attacks. No partisan  politics and no personal attacks

[Haiku]

It's a massive giveaway to the rich because they get a hugely higher tax break in proportion to the middle and lower classes. It's not about absolute dollars. It's about percentages. Given that it was touted and promised as a middle class tax cut, it's not only not what was promised but also is a ridiculous deficit-buster. I'm not sure how that's hard to understand. People I know all along the political spectrum are unhappy with it.

 

Our taxes are going up (and we are not wealthy), but even if they were going down, I wouldn't want the break given what it's costing both in increasing the deficit and in other respects.

[OnMyOwn]

quote deleted by moderator

 

 

With the top line, I think you've missed a few threads over the past years if you think most folks (both sides of the aisle) are only upset with the deficit now. Many of those threads end up deleted due to politics getting into them - or bashing - or whatever causes it, but I can't think of anyone who is only upset about it now. What's happening now is it's taking another major step in the wrong direction - for no solid reason (the economy is strong at the moment) - and mostly giving the benefits to the upper crust.

 

How is it mostly going to the upper crust? If there's a tax cut, it would be nice if it were a fair tax cut, not a weekend holiday to the masses while the wealthy (esp those above 500K) get a car.

 

I'm saving time quoting from Poppy (Post 358) in this thread:

 

http://forums.welltrainedmind.com/topic/664946-effect-of-tax-reform-on-large-families/page-8?do=findComment&comment=7929701

If you make $50,000/year you will save around $870 annually.

If you make $100,000/year you will save $2250.

If you make $250,000/year you will save $6,500

If you make $500,000/year you will save $21,000

And it goes up from there.

If it were proportional, the person making $500,000 would be saving $8700, not more than double that.

Here's the thing. I've read so much about this being a tax hike on the middle class when it is clearly not that. The little table you just quoted shows what I've seen in that every bracket will be getting a tax cut, not just the wealthy. I've heard all the complaints about the corporate cuts, but, imo, those corporate cuts are necessary to keep businesses in the US. I am hoping very much it will stimulate the economy. The stock market has been doing very well just with the promise of these policies, but even that seems to bring mostly negative press, which is pretty stunning.

 

You are right in that the middle class is getting more like a 2% tax cut and those on the top will get closer to 4%, but I do not know all the reasons why it is reflected that way. I don't trust the politicians, but I've learned that the media is now just another branch of politicians, so it is difficult to get information that reflects the truth. Because, here is the thing. If 80% of people are getting a tax cut, that would normally make a lot of people happy about the bill, deficit or not. You and I might be concerned about the deficit, but for many people, that is not even on their radar. So, the fact that so many people are unhappy about this bill, leads me to feel it is being grossly misrepresented for political purposes.

 

As far as the impact on parents with college-aged students, we will see. I have a college aged student and all the calculators I've used show a tax cut in the amount I would expect based on what I've read at the Tax Policy Center. I have a very simple tax return so I'm not sure what could be hidden there, but we will see.

 

I've also looked at the charts at the Tax Policy Center to see the longer term effects, and even in 2025, higher after tax income is being shown across the board. Not quite as high as this year, but still substantial.

[Frances]

Here's the thing. I've read so much about this being a tax hike on the middle class when it is clearly not that. The little table you just quoted shows what I've seen in that every bracket will be getting a tax cut, not just the wealthy. I've heard all the complaints about the corporate cuts, but, imo, those corporate cuts are necessary to keep businesses in the US. I am hoping very much it will stimulate the economy. The stock market has been doing very well just with the promise of these policies, but even that seems to bring mostly negative press, which is pretty stunning.

 

You are right in that the middle class is getting more like a 2% tax cut and those on the top will get closer to 4%, but I do not know all the reasons why it is reflected that way. I don't trust the politicians, but I've learned that the media is now just another branch of politicians, so it is difficult to get information that reflects the truth. Because, here is the thing. If 80% of people are getting a tax cut, that would normally make a lot of people happy about the bill, deficit or not. You and I might be concerned about the deficit, but for many people, that is not even on their radar. So, the fact that so many people are unhappy about this bill, leads me to feel it is being grossly misrepresented for political purposes.

 

As far as the impact on parents with college-aged students, we will see. I have a college aged student and all the calculators I've used show a tax cut in the amount I would expect based on what I've read at the Tax Policy Center. I have a very simple tax return so I'm not sure what could be hidden there, but we will see.

 

I've also looked at the charts at the Tax Policy Center to see the longer term effects, and even in 2025, higher after tax income is being shown across the board. Not quite as high as this year, but still substantial.

I think a lot of the confusion has come about for several reasons. First, because everything happened so quickly with the process that there was very little time for independent analysis and real information to reach the public. Second, first there was a House version, then a Senate version, and then the final bill, all in a very short period of time. And lots of things changed pretty dramatically from one version to the next. Third, there are lots of interacting provisions in the bill which means that two people with the same income could pay very different tax amounts. It now matters much more which state you live in, the ages of your children, and whether you receive your income from wages or a business, for example.

 

Also, when different sources release distributional tables, they are not all doing it the same way. Some show percent change in federal tax while others show percentage change in after tax income. Some are attempting to model all provisions of the bill while others are leaving some out. Some model only two years while others model multiple years. And while some provisions in the bill are fairly straightforward to model (e.g. changing the tax brackets), others are quite a bit more complicated and require assumptions to be made. Major players, including the Joint Committee on Taxation, the Tax Policy Center, and the Tax Foundation, have all put out different tables.

 

And just to briefly address your question about why the top are seeing a higher percentage change in after tax income, besides the brackets changing there were also changes to the alternative minimum tax and in general, it's now far more favorable to receive pass through income rather than wage income. And currently, the bulk of pass through income $ wise goes to the wealthy. I'm not completely sure because there is some interaction with the AMT, but the wealthy still itemizing might also come into play.

 

I personally have several issues with the bill. First, it breaks almost all the rules of good tax policy. Second, it increases our deficit at a time when the economy is doing well and the unemployment rate is very low. Third, it was touted as a middle class tax cut and at times the administration promised the wealthy would not benefit at all. We see now that the bulk of the savings on the personal side go to the wealthy. And finally, I'm concerned that the cuts to follow will have a very disproportional effect on those who need the most help.

 

For me, it's a lot like advocating for some sort of universal healthcare. My husband and I are very fortunate to have amazing double employer coverage for health, dental, and vision care for which we pay very little (less than $50 per month) with very low deductibles. So despite the fact that we would likely pay substantially more in taxes to fund such a program and possibly get worse coverage (I'm not really sure how it could get better than what we have), we still support it because we are more concerned about the greater good for our country, now and in the future. (That's not to imply that those who think differently aren't also concerned.)

 

And just a final note about the corporate rate cuts. Like you, I hope the corporate changes will help keep and grow jobs here. But, the numerous interacting changes to the corporate code in the bill make understanding the personal side look like child's play. I've really just started to look into it, but from what I've read so far, there may unfortunately be incentives for some industries to do the opposite and some of the industries most favored by the bill aren't the ones creating the good, middle class jobs for those without college that are often discussed by politicians.

Edited December 24, 2017 by Frances

[OnMyOwn]

I think a lot of the confusion has come about for several reasons. First, because everything happened so quickly with the process that there was very little time for independent analysis and real information to reach the public. Second, first there was a House version, then a Senate version, and then the final bill, all in a very short period of time. And lots of things changed pretty dramatically from one version to the next. Third, there are lots of interacting provisions in the bill which means that two people with the same income could pay very different tax amounts. It now matters much more which state you live in, the ages of your children, and whether you receive your income from wages or a business, for example.

 

Also, when different sources release distributional tables, they are not all doing it the same way. Some show percent change in federal tax while others show percentage change in after tax income. Some are attempting to model all provisions of the bill while others are leaving some out. Some model only two years while others model multiple years. And while some provisions in the bill are fairly straightforward to model (e.g. changing the tax brackets), others are quite a bit more complicated and require assumptions to be made. Major players, including the Joint Committee on Taxation, the Tax Policy Center, and the Tax Foundation, have all put out different tables.

 

And just to briefly address your question about why the top are seeing a higher percentage change in after tax income, besides the brackets changing there were also changes to the alternative minimum tax and in general, it's now far more favorable to receive pass through income rather than wage income. And currently, the bulk of pass through income $ wise goes to the wealthy. I'm not completely sure because there is some interaction with the AMT, but the wealthy still itemizing might also come into play.

 

I personally have several issues with the bill. First, it breaks almost all the rules of good tax policy. Second, it increases our deficit at a time when the economy is doing well and the unemployment rate is very low. Third, it was touted as a middle class tax cut and at times the administration promised the wealthy would not benefit at all. We see now that the bulk of the savings on the personal side go to the wealthy. And finally, I'm concerned that the cuts to follow will have a very disproportional effect on those who need the most help.

 

For me, it's a lot like advocating for some sort of universal healthcare. My husband and I are very fortunate to have amazing double employer coverage for health, dental, and vision care for which we pay very little (less than $50 per month) with very low deductibles. So despite the fact that we would likely pay substantially more in taxes to fund such a program and possibly get worse coverage (I'm not really sure how it could get better than what we have), we still support it because we are more concerned about the greater good for our country, now and in the future. (That's not to imply that those who think differently aren't also concerned.)

 

And just a final note about the corporate rate cuts. Like you, I hope the corporate changes will help keep and grow jobs here. But, the numerous interacting changes to the corporate code in the bill make understanding the personal side look like child's play. I've really just started to look into it, but from what I've read so far, there may unfortunately be incentives for some industries to do the opposite and some of the industries most favored by the bill aren't the ones creating the good, middle class jobs for those without college that are often discussed by politicians.

Frances, I appreciate you sharing your viewpoint on the changes in this way. I am continuing to read about the bill. Thank you.

[Frances]

I would also add that besides increasing the deficit, I'm very concerned that this bill combined with upcoming cuts will only make worse the ever increasing wealth inequality in this country. And for me, that is a risk to our stability, democracy, and economy.

[creekland]

Here's the thing. I've read so much about this being a tax hike on the middle class when it is clearly not that. The little table you just quoted shows what I've seen in that every bracket will be getting a tax cut, not just the wealthy. I've heard all the complaints about the corporate cuts, but, imo, those corporate cuts are necessary to keep businesses in the US. I am hoping very much it will stimulate the economy. The stock market has been doing very well just with the promise of these policies, but even that seems to bring mostly negative press, which is pretty stunning.

 

You are right in that the middle class is getting more like a 2% tax cut and those on the top will get closer to 4%, but I do not know all the reasons why it is reflected that way. I don't trust the politicians, but I've learned that the media is now just another branch of politicians, so it is difficult to get information that reflects the truth. Because, here is the thing. If 80% of people are getting a tax cut, that would normally make a lot of people happy about the bill, deficit or not. You and I might be concerned about the deficit, but for many people, that is not even on their radar. So, the fact that so many people are unhappy about this bill, leads me to feel it is being grossly misrepresented for political purposes.

 

As far as the impact on parents with college-aged students, we will see. I have a college aged student and all the calculators I've used show a tax cut in the amount I would expect based on what I've read at the Tax Policy Center. I have a very simple tax return so I'm not sure what could be hidden there, but we will see.

 

I've also looked at the charts at the Tax Policy Center to see the longer term effects, and even in 2025, higher after tax income is being shown across the board. Not quite as high as this year, but still substantial.

You are thinking people should be solely looking at their bank account thrilled there is more in there.

 

I am experiencing many people looking at what is actually happening and being quite angry that it isn't fair - that the wealthy have essentially voted themselves a good chunk of the treasury while giving a basic amount to the commoner. It doesn't matter what their political thought is.

 

I am not going to be able to get much more feedback over the holidays since school is not in session, but the number of people (or their kids, who usually reflect their parents) who are much angrier at the wealthy and folks in power now is far higher than I would have guessed. Like you, I expected them to have been easily bought off by the lure of a little more money monthly.

 

They certainly aren't rejecting the money, but they are pissed at the unfairness of its distribution. Very pissed.

Edited December 25, 2017 by creekland

[luuknam]

I think it's nowhere near enough money to make many middle class people excited. Looks like we'll be in the 12% bracket, and will probably save less than $100/month on taxes. I doubt we'll even really notice (we don't have a budget, just spend as we go with a decent size emergency fund), so, meh (obviously, money is money... but if I think we'll probably not notice the difference, it's not enough money to pacify me). That, combined with the unfairness of it, the bad timing (quite anti-Keynesian to cut taxes and increase the deficit when the economy is doing well), the potential negative impact on social safety net things in years to come which could potentially hurt us more than we'll benefit (life with a bipolar spouse and a special needs kid can be, uh, interesting, and we've qualified for food stamps etc in the past)... nope, not easily bought off.

[KarenNC]

Last year I came across a publication from the International Monetary Fund that is relevant titled  "Causes and Consequences of Income Inequality: a global perspective." The authors looked at income inequality across many countries and, from the summary, " We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down."

 

https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2016/12/31/Causes-and-Consequences-of-Income-Inequality-A-Global-Perspective-42986

 

I would have been much more impressed with this if the corporate tax benefits had been tied to actual measurable outcomes in terms of bringing wealth back to the country and creating jobs on a large scale.