Republicans Introduce Their Tax Cut Plan

Republicans have introduced their own tax cut bill. Is anyone surprised the cuts help businesses and the wealthy?

House Republicans on Thursday unveiled a tax cut plan that would slash the corporate rate and lower the personal taxes of most Americans but also limit a cherished deduction for homeowners, as President Donald Trump and the GOP seek to deliver on the first tax revamp in three decades.

Another false Trump bragging claim, according to Reuters: that his cuts would be the largest in history for corporate rates and individuals. It's only true for corporate rates. [More...]

The proposal would add $1.5 trillion to the nation's debt over the next decade as Republicans largely abandoned fiscal discipline in a plan that could secure a legislative achievement for Trump and score a political win ahead of next year's midterm elections.

But on individual taxes, Trump's claim does not hold up, according to data on top personal income tax rates collected by the Tax Foundation, a Washington think tank.

Some Republicans in Congress are backing away from cutting the top individual tax rate, now 39.6 percent. But even if they did cut it as low as Trump wants, to 35 percent, the president would not even come close to winning bragging rights.

The Reagan cuts lowered the top rate to 28 percent from 70 percent. That was an impressive 60 percent drop.

< Monday Open Thread | Ivanka Visits Japan >
  • The Online Magazine with Liberal coverage of crime-related political and injustice news

  • Contribute To TalkLeft

  • Display: Sort:
    There is zero justification (5.00 / 6) (#2)
    by CST on Thu Nov 02, 2017 at 01:36:01 PM EST
    To eliminate the estate tax.

    Isn't it taxing money that's already been taxed? (none / 0) (#3)
    by McBain on Thu Nov 02, 2017 at 01:49:06 PM EST
    Well, let's start with the fact that (5.00 / 5) (#4)
    by Anne on Thu Nov 02, 2017 at 02:10:39 PM EST
    currently, each individual can pass $5.49 million to heirs without triggering any estate tax.  Any exemption not used in the estate of the first spouse to die can be passed on to the surviving spouse, such that, if no exemption is needed in the first estate, the second estate has an almost-$11 million exemption.

    Moving on, assets are valued as of date of death, so that IBM stock or Exxon stock bought for cheap, gets stepped-up to its value at death.  The estate can sell it the next day and pay no capital gains tax on any of the appreciation that has built up.  Same with real estate or any other asset.  Like a small business or family farm.

    So, no, it isn't taxing money that has already been taxed; in most cases, it is sheltering appreciation from income tax.

    And then there's the gift tax side.  You can give $14,000 annually to as many individuals as you like, and there is no tax to pay, no exemption to use, and no income tax in the hands of the recipient.  Husbands and wives can split their gifts, so if they have, say, a daughter, son-in-law and 4 grandchildren, they can each give $84,000, or $168,000 tax free on all sides.

    You can buy high dollar life insurance, put it in an irrevocable trust, and not even have to include it in your estate for estate tax purposes.

    There are any number of ways to shelter assets from tax, and trust me when I tell you that most people with significant wealth take full advantage of it.  And these are people who have already taken advantage of the many ways to shelter income from taxation.


    Isn't taxing state, local (5.00 / 4) (#5)
    by KeysDan on Thu Nov 02, 2017 at 02:45:51 PM EST
    and real estate taxes, taxing money that's already been taxed?

    Yep (5.00 / 1) (#8)
    by Yman on Thu Nov 02, 2017 at 08:42:15 PM EST
    Not to mention a wage earner who invests their money and earns interest or other income from it.

    so are capital gains taxes (none / 0) (#10)
    by CST on Fri Nov 03, 2017 at 07:40:40 AM EST
    what's your point?

    Actually, capital gains taxes (none / 0) (#13)
    by Anne on Fri Nov 03, 2017 at 09:06:08 AM EST
    are assessed on the appreciation in value, the difference between the proceeds of sale and the cost basis.

    The gains are not taxed as ordinary income, though, which is a little bit of a break, and of course, you can offset gains with losses to the extent you incurred them, but capital gains taxes are not being assessed on income that's already been taxed.


    yea I get that (none / 0) (#14)
    by CST on Fri Nov 03, 2017 at 09:26:15 AM EST
    I just was seeing it more as a comparison to the estate tax because you don't get to just keep all the earnings tax free because you once paid taxes on the money invested.  It's not a revolutionary concept.

    No, and even with that, there have (5.00 / 1) (#15)
    by Anne on Fri Nov 03, 2017 at 10:44:19 AM EST
    been efforts in the past to eliminate the capital gains tax, because you know, jobs...

    The other problems with eliminating the estate tax have to do with how the cost basis of the assets will be tracked.  Do they get a step-up to date of death, or is the basis the original cost in the hands of the now-deceased person?  If they do get the step-up, the IRS is going to need to know the new basis, as are the beneficiaries.  If they don't get the step-up, the nightmare of determining the decedent's original cost basis will begin.

    If the capital gains tax is eliminated, I guess that solves those reporting requirements.

    What I can tell you is that these things that seem so simple on the surface almost never are, and there doesn't seem to be much of an effort to plot the consequences of these decisions past the all-important "tax cuts" metric.

    Has anyone looked at Kansas lately?  That should be an object lesson but my guess is Kansas will be deemed "different."  Or we will be told that, done on a larger scale, we wouldn't see those same disastrous results.


    Well, we now know the answer to (5.00 / 1) (#27)
    by Anne on Tue Nov 07, 2017 at 11:24:58 AM EST
    the capital gains on inherited assets question, and it's mind-boggling.

    From Kevin Drum:

    Here's the latest: the Republican bill eliminates the estate tax. That's not news. But it retains the step-up in capital gains. That is news. It hasn't been a part of previous attempts to kill off the estate tax.

    Here's an example. Suppose you're uber-rich and you buy $1 billion in Apple Stock. By the time you die it's worth $3 billion. Your heirs, lucky ducks that they are, don't have to pay estate tax on that $3 billion. But they do have to pay normal capital gains on the $2 billion appreciation in the Apple stock. At 20 percent that comes to $400 million.

    However, the Republican bill eliminates that too. Not only does it eliminate the estate tax completely, but it allows you to "step up" the value of the estate and avoid capital gains taxes entirely. In our example, you literally get $3 billion free and clear, and you owe taxes in the future only on the appreciation above $3 billion.

    This is breathtaking. In the past, even hardcore Republicans have agreed that you need to have one or the other: either an estate tax or a normal capital gains tax on investments that you pass along to your heirs. No more. When the super-rich die, their capital gains liabilities are wiped out and their heirs pay no estate tax. This all but eliminates income tax of any kind on the mega-wealthy.

    I'm dumbfounded.

    This needs to go far and wide, because it is unacceptable for these kinds of benefits to be going to the wealthy, paid for on the backs of the rest of us.


    and this (5.00 / 1) (#6)
    by linea on Thu Nov 02, 2017 at 07:28:06 PM EST
    Embedded within the bill's more than 400 pages is a small provision that would change an aspect of the so-called "Johnson Amendment," a provision of the tax codes that prohibits churches, faith communities, and other non-profits from outright endorsing political candidates.

    wont pass in anything like the (5.00 / 1) (#11)
    by CaptHowdy on Fri Nov 03, 2017 at 07:52:00 AM EST
    current form.  they are so desperate it seems unbelievable they wont pass something, tho my money is firmly on the possibility they will not.

    Why are we (5.00 / 1) (#16)
    by KeysDan on Fri Nov 03, 2017 at 03:33:29 PM EST
    talking about tax cuts?   We have deficits (not surpluses), debt (to service), unmet domestic needs (health care, CHIP, infrastructure), foreign and military/security/wars responsibilities (with plans to increase spending).  

    If the tax cuts are being sold as the grand generator of economic growth, where is the historical evidence or, even, predictions based on a wide spectrum of experts?  There have been no hearings and none are planned.  And, this is a tax cut program, not a "reform" for purposes of making the tax code more fair...indeed, it is not revenue neutral, it projects a massive deficit. Where are all those Republican deficit hawks, anyway?

    The framework of the tax cut, cut, cut proposal is a windfall for the wealthiest investors, a substantial portion of whom are foreign investors. Of the $l.5 trillion (over 10 years), $1 trillion is primarily for corporate interests, $200 billion for elimination of the inheritance tax, and the rest, $300 billion is for the rest of the citizenry.

    The tax cut proposal is likely to inflict serious damage on the economy, if problems in the housing market and the interrelationships with the economy (as we saw during the great recession) are created.  The new cap on deductions of interest on mortgage loans ($500,000 from $1 M) will echo loudly, throughout higher priced areas, with less incentive to build,and less incentive to buy. And, the bill has no phase-in period.  The effective date (if passed) is yesterday, the day the bill was introduced.  This raises the price of a home and carrying costs (with a $10,000 cap on property tax).  

    The bill also retains the existing deductions for current homeowners, reducing the likelihood of Americans to move, for purposes of upgrading houses or accepting job opportunities in another area of the country.  This is but one example, while not directly affecting most homeowners or renters, does impact the overall economy in which we all live. And, of course, what about making America Great Again..with ownership, or its dream, a reality.

    Wells Fargo (5.00 / 1) (#22)
    by jmacWA on Sun Nov 05, 2017 at 05:59:17 AM EST
    According to Sen. Warren:

    Number one recipient is estimated to be Wells Fargo, who will walk away with billions of dollars. You do remember Wells Fargo, the company that opened the fake accounts to cheat its own customers.

    This needs to be broadcast far an wide.  These crooks go and screw the poor (likely many Trump supporters), they get minimal punishment for it, and now they reap the big reward.

    Why wasn't I born a corporation?

    Looks like it would be good for the middle class (none / 0) (#1)
    by McBain on Thu Nov 02, 2017 at 01:13:20 PM EST
    From Jeralyn's link...
    Middle-income families would pay less, thanks to doubling of the standard deduction and an increase in the child tax credit.

    Looks like my tax rate would go down a bit.  I don't know what the long term effect will be on the economy but I'm OK with this so far.  The mortgat

    Appreciate the candor but. (5.00 / 1) (#9)
    by Erehwon on Thu Nov 02, 2017 at 11:39:30 PM EST
    you could have simply written FYIGM. Succinct, though not sweet.

    Also, the doubling of the standard deduction for couples may not  quite match the loss of personal exemptions. Plus there are the issues that Yman mentioned.

    Still it will be fun to see Republicans in blue states (and there's Texas too) twisting in the wind ...


    How are they defining middle income? (5.00 / 1) (#18)
    by ruffian on Fri Nov 03, 2017 at 10:57:11 PM EST
    The true median, which last time I checked was around 50k annual?

    Homeowners who deduct mortgage interest,  state and local taxes and charitable deductions will be limited. And if home ownership is not as attractive, values fall (again). This is not going to go over all in many states.

    Now this might be a legitimate policy goal if it is discussed as that, but it is not. It is just a trade off to give tax cuts to the super rich.


    I don't know.... there's a big difference (none / 0) (#19)
    by McBain on Sat Nov 04, 2017 at 10:48:58 AM EST
    between earning 50K in some parts of the country compared to others.

    The Mortgage interest change should only effect those who own fairly expensive homes.... the limitation would be 500K.  


    Well, surely you know (none / 0) (#20)
    by MKS on Sat Nov 04, 2017 at 02:30:29 PM EST
    you can rarely buy a home for under 500k in California.....

    This is a plan to screw California, New York, etc.   But no surprise, Trump is vindictive.   And, those GOP members of the House in California will have some explaining to do.


    Peter King is already on record opposed... (none / 0) (#21)
    by kdog on Sat Nov 04, 2017 at 04:15:41 PM EST
    from the NY GOP House syndicate. He said flat out it would raise his constituents taxes.

    It will shatter the DC area housing market too (none / 0) (#24)
    by Militarytracy on Sun Nov 05, 2017 at 08:05:31 AM EST
    Housing is costly here, but the deductions were making it all work. It will be instantly explosive to the housing market.

    We have begun house shopping, so I'm learning the market dynamics here right now.


    "Looks like" (none / 0) (#7)
    by Yman on Thu Nov 02, 2017 at 08:40:24 PM EST
    Sure.  As long as you don't have a sizeable SALT deduction or medical bills - and don't mind the massive debt that will be passed down to your kids, you'll get a little reduction while the wealthy and corporations get huge reductions.

    Or live in a state... (5.00 / 3) (#12)
    by kdog on Fri Nov 03, 2017 at 08:14:11 AM EST
    with an income tax, then you're on the working/middle class getting screwed list.

    I personally would probably do well...I'm a "1040-EZ just tell me what I owe because I loathe this sh*t" kinda guy who doesn't take any deductions outside the standard deduction.  But I don't really need a tax cut...what I could use more is tax increases in the form of legalized marijuana taxes and a federal tax increase to fund a single-payer health care system that includes vision and dental.


    Just saw this (none / 0) (#17)
    by CaptHowdy on Fri Nov 03, 2017 at 07:13:24 PM EST
    Taxpayers would no longer be able to deduct medical expenses after the 2017 tax year under the proposed Republican tax overhaul plan, introduced in the House yesterday.

    Right now, taxpayers who itemize their deductions on their 2017 return can deduct medical and dental expenses that exceed 10% of their adjusted gross income.

    It's said this is mostly for people in nursing homes.


    If you have a catastrophic health event occur (none / 0) (#23)
    by Militarytracy on Sun Nov 05, 2017 at 08:01:56 AM EST
    It can help your family get back on its financial feet again too afterwards.

    Things on the loser list: (none / 0) (#25)
    by CST on Mon Nov 06, 2017 at 09:04:42 AM EST
    Medical expenses, student loan interest, state and local taxes.

    Things on the winner list:
    People whose parents own estates worth more than $5million.

    What a great plan for the middle class...

    And yea, this is a direct hit to blue voters.  Young, educated people don't vote Republican - better raise their taxes.  People who live in expensive cities don't vote Republican - better raise their taxes (oh btw, the median home price in Boston is now >$550,000).  People who pay state income taxes tend to not vote Republican - better raise their taxes.  

    Oh, and let's f*ck over really sick people just for good measure, because that's what we do best, so there is enough money left over for Ivanka and Don Jr to inheret.  After all, we wouldn't want them to end up with only 100 million each instead of 130 million, that would be sooo sad.  Sincerely, your republican congress.

    Deductions I have taken: (none / 0) (#26)
    by Chuck0 on Mon Nov 06, 2017 at 02:28:41 PM EST
    Medical expenses, state and local taxes.

    Deductions unavailable to me:

    People whose parents own estates worth more than $5million


    and (none / 0) (#28)
    by FlJoe on Fri Nov 10, 2017 at 11:48:01 AM EST
    of course we must protect the golfs
    But there's one deduction they kept: a "conservation easement" for owners of golf courses. I know that sounds like something from SNL or The Onion, but it's not. It's really something Republicans decided not to touch.
    and keep the correct people happy  
    Cohn: The most excited group out there are big CEOs, about our tax plan.