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Comment by shmerl | Hacker News Reader

> 409B does not appear to impact the taxation of incentive stock options (ISOs), which in conjunction with the repeal of the alternative minimum tax, would make ISOs more valuable

So AMT is being repealed now?

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Yes, which is sort of a shame. Frankly if you were serious about simplifying the tax code and reducing unfairness and asymmetry, you'd keep the AMT and throw out the existing income tax.

But whatever: the AMT is an issue for upper middle class taxpayers, and particularly ones (like tech employees, and most particularly startup employees) who see lots of their income in big chunks like stock grants and option exercises. Helping these people is sort of dumb, as they (we) are hardly hurting to begin with. But it won't break the economy either.

Honestly, the Senate plan is... not at all insane (and the House plan only slightly insane). These are relatively modest tax cut bills arriving at a time where the economy is growing and deficits are shrinking, which is exactly where you'd want them. [Edit, hoo boy did this statement the trigger the economics folks. This isn't a growth point, the metric here, which I thought I'd made clear, is "when they are least likely to mess things up". Passing this bill won't break the bank or make progressive reforms in other areas more difficult in the near term.]

After the last year... it's like a breath of fresh air. I still don't think this is Good Policy per se, but the very fact that our government isn't actively trying to make things worse is hopeful.

why would you want any tax cut when the economy is growing? what about the massive debt we took on when the economy was shrinking?

> exactly where you'd want them

Is that so? Counter-cyclic policy is generally the right choice for stability. If we lower taxes now, when the economy is doing fine at current tax levels, we give up an opportunity to simulate the economy through tax reduction later, when the inevitable recession hits.

you're right that it would be more fair to keep AMT, but that's only because of the complexity of the tax code with all of its deductions and loopholes.

but i disagree that the tax plan is not designed to be dstructive. the bill is tax gerrymandering at it's finest--designed primarily to boost the republican party, it's cronies, and especcially trump himself, while punishing all others, including the poor and powerless. it saddles the federal government with massive debt while providing tax breaks to those who least need it. there is simply no intent anywhere in this "tax reform" to actually improve our economy through good policy; it's rather designed to achieve purely political aims, destructiveness be damned.

but more to the point, the proposed 409b section is about restricting when we can recognize income for tax purposes. while fictitious corporate "persons" are allowed to shift income and losses at will forward and backward along the timeline to avoid taxes, we humans, i.e. real people, cannot. this is simply the exact opposite of how the system should be designed. we should favor real people over fake people (especially over fake entities designed solely to completely shield already-advantaged owners from their failings and mistakes).

even better, let's entirely remove the ability to move income and loss recognition through time for tax purposes. it's simpler and less prone to gamesmanship (i know that's more complicated than it sounds, but it's surely much less complicated than the current rules).

> let's entirely remove the ability to move income and loss recognition through time for tax purposes

That would be incredibly stupid. It would mean that two companies could pay different amounts of tax over a given period simply based on whether they ran losses some years or booked consistent profits. Loss recognition through time isn't a crazy "loophole"--it's the mathematical byproduct of the fact that you're sampling a continuous variable at discrete intervals.

Likewise for moving income. There is no special loophole that allows you to "move income." It's a byproduct of the fact that the income tax taxes income, and not revenues.

you move revenue and expenses around in time to arrive at the income level you desire for a given time period using a variety of mechanisms: revenue recognition, IP transfer, capitalization, cost accounting, bonuses, transfer pricing, accelerated depreciation, etc. that's the whole point of tax advisors/accountants.

you'll need to explain how it's "incredibly stupid". you allude to one of the potential consequences being differential taxation (which you didn't explain very well; but yes, losses in some taxing periods could mean you pay more in overall tax for the same total income over many tax periods). that's part of the "more complicated than it sounds" caveat in my prior post.

but unlike you, i don't think it's all bad. for one, it would disincentivize excessive risk-taking (which lead to losses). and it would better align incentives between managers, owners and employees: it would be harder for executives to inflate income in one quarter and recognize the losses in another for the purpose of realizing undeserved bonuses for themselves. would that be so bad?

(besides, it's already the norm that companies have variable income and pay different amounts of tax over a given period of time for the same overall income--e.g., the apple imbroglio).

AMT is completely not fair. It was not indexed to inflation which means that it has started to affect middle class taxes. Go look at why it was created. The fact is if you are rich you can work around it. If you are mid to upper middle class you to not have enough money to structure things to work around it. AMT penalizes the middle class in the more expensive states to live as the salaries are higher. It is 100% unfair.

> the economy is growing and deficits are shrinking, which is exactly where you'd want them.

Would really love to hear your theory on this. Tax cuts are always sold as economy boosters, and the fed is raising rates now to try to be countercyclical. So your idea doesn't match most economic theories I've heard of.

> These are relatively modest tax cut bills arriving at a time where the economy is growing and deficits are shrinking, which is exactly where you'd want them.

So you want to cut taxes and increase deficits during growth times? This is, of course, not just different but exactly the opposite of Keynesianism. What is it that you plan to do during recessions? Cut spending and increase taxes to close your deficit?

This is insanity.

Keynesian economics is insanity. Disproven by Milton Friedman and others.

Milton Friedman was a monetarist which is a belief in controlling the supply of money. That's a different instrument but actually quite similar to Keynes: they are both feedback control mechanisms. That said, monetarism is most definitely NOT cut taxes and increase spending in good times. Keynes and Friedman would both call that insanity.

Taxes on fiat currency are away to distribute expenses, not a way to raise funds. A fiat currency government can print money whenever it wants, which is taxation via inflation. (For more, see: Modern Monetsr Theory.)

We've already seen one of Friedman's greatest (in terms of influence) disciples -- Greenspan -- openly question whether his faith in "proven" economics was well-founded. One wonders what Friedman would've thought if he'd lived longer.

(my money is on "he'd have found some way to blame someone else and claim he was still right", but one can hope)

Deficits are always necessary. The size of the deficit needs to very. Since we are nowhere near full productive capacity, there is no danger in too many dollars chasing too few resources. The deficit needs to be reduced when economy is at full capacity to avoid inflation.

Saying that deficits are always necessary does not absolve the cut taxes and increase deficits during growth times nonsense.

Cutting taxes and increasing deficits during good times is just populist feel goodism. Yes, it's easy to cut taxes and it's easy to increase spending. Heck, trickle down even says this will increase tax revenues (except that we've tried that and it doesn't.) But not to worry because the people who are responsible for the mess will not have to clean up the mess. No, this doesn't work. We've tried it and it doesn't work.

Keynesianism is a quite conservative approach, actually.

I enjoy your thorough lack of strong emotions, and I agree that these drafts are special in that they are not obviously intended to harm anyone who isn't WASP.

But the opportunity costs of this futile exercise in trickle-down would seem to make this one of the worse policies from a utilitarian perspective.

$1.5 Trillion dollars (the self-imposed cost limit of the tax plan) divided by $40,000 (what givewell.org estimates to be the marginal cost of saving a life) = 37,000,000 lives.

That's obviously calculation, because those marginal costs would start to rise after the low-hanging fruits are picked, and you may want to think of some other ideas that could be realized with that sum.

But even if I'm off by an order of magnitude...wow.

I believe AMT repeal is a part of BOTH the House and Senate plans.

Yea, it's talked about very negatively by the president because it creates a lot of extra work, both for the IRS and tax attorneys.

I would think tax attorneys would appreciate more billable hours.

The 'postcard sized tax form' touted by the GOP left me wondering what the makers of TurboTax and other tax preparation software think about that specific proposal.

The "postcard sized tax form" is essentially the same level of complexity as the 1040EZ, which already exists. See:

https://www.vox.com/policy-and-politics/2017/8/30/16219906/p...

The standard deduction doubling will mean that most people will be able to use a simple form rather than itemizing.

Regardless of what the standard deduction is, don't you still have to first itemize in order to figure out whether you should itemize?

If you have itemized before and no material changes have occurred in your tax situation then you don’t have to itemize again.

> If you have itemized before and no material changes have occurred in your tax situation then you don’t have to itemize again.

Explain this a bit more? I mean, it's technically true for most taxpayers that they aren't forced to itemize, but I doubt that's what you meant.

I think several people on this thread as using "itemized" as shorthand for "did the paperwork to figure out their total deductions and discovered it was less than the standard deduction."

Eh, once you work through the big ticket deductions (like home mortgage interest), it's usually easy to tell.

If your income is less than the standard deduction, you don't need to itemize. If you're living off of stock dividends, or other capital gains, the threshold is when income minus standard deduction hits the top of the bracket for 0% on cap gains.

If you have a general idea of what's itemizable, and an approximate amount for those, and it's much less than the standard deduction, you don't need to find all the receipts and do the work.

Not necessarily. You could just take the standard deduction without regard to whether or not it was good for you to do so.

Many people are in the situation where they just know that there's no point in itemizing, and more will be in that boat when state/local income taxes are excluded and the standard deduction is raised.

TurboTax et al absolutely hate it, of course, and work hard lobbying Congress to ensure it doesn't happen. https://www.propublica.org/article/filing-taxes-could-be-fre...

Quite disgusting to lobby for keeping the process complicated, to justify the middleman.

I'm not using Intuit. TaxAct doesn't seem to do such stunts.

Surely, the fact that $31M of the $38M of tax he paid in 2005 was AMT had nothing whatsoever to do with it...

https://www.marketwatch.com/story/read-this-to-see-if-you-ow...

AMT has always been seen as poor solution/compromise and is also in both house and senate versions of this bill

who cares about this populist president's past experience with it

mayyyybe if he made the AMT repeal a part of a red line for him not to veto the bill congress sends him, then you could pull out that article

but making everything about Trump? ehhh its hard to defend

He would pay more with the AMT being repealed, as the higher marginal tax rate would apply rather than the AMT rate.

This trend of going "whaa, but Trump!!!!!!" every time anything happens in government makes for lazy debating.

Per https://en.wikipedia.org/wiki/Alternative_minimum_tax, "Each year a taxpayer must calculate and then pay the greater of an alternative minimum tax (AMT) or regular tax."

If Trump paid AMT, his regular taxes were lower, which means he stands to gain. Is there something I'm missing here?

It's "Alternative Minimum Tax", not "Alternative Maximum Tax".

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