Hacker News Reader

Comment by perl4ever | Hacker News Reader

What I find conspicuous by its absence in the author's list is that the tax bill removes the $4,050 exemption for dependents. It seems like that would be a major tax increase for large families. It's very peculiar that Republicans would be mounting an assault on families with children, presumably a core constituency, and also odd that people opposed to the GOP aren't emphasizing it more.

View on HN

Perhaps that's what the Senate bill was like, but last time I checked the House bill did the opposite by expanding the child tax credit. Based on what we've seen them advocating for within the last decade or so, I would expect the end result will include a bigger deduction/credit for children.

The House bill seems to expand the child tax credit and add a family tax credit, but it also removes the personal exemption, so it's unclear to me how that nets out. But it sure creates uncertainty if nothing else.

https://www.nytimes.com/interactive/2017/11/15/us/politics/e...

The credits and the expanded standard deduction outweigh the removal of the personal exemption, especially with the rate changes. The House bill is fairly straightforward in regards to low to middle income families.

From the NY Times link I provided, I see the following: +1.6 trillion repealing personal exemption -0.64 trillion adding child and family credits -0.92 trillion increasing standard deduction

So it does not seem as though the new credits and standard deduction outweigh the personal exemption overall. The net for these things is a small tax increase. And then there are the other deductions that are going away, so it seems like a net increase for average people, to provide AMT cuts, corporate cuts, and estate tax cuts.

Thats not the full picture though. You've got the rate changes and the increased standard deduction. Most of the changes you've mentioned are bad for upper middle income people who are going to benefit the most from the lower rates in the new tax brackets. Plus, lowered corporate tax rates are likely to drive prices on goods down as well. It seems that very few if any people will end up with a net tax increase. Seems graduate students at prestigious universities won't do well in the short run. But I have a feeling they'll probably be fine when they graduate and get six figure salaries.

Overall, I'm still not a huge fan of the proposal though. Too many cuts for the rich and not enough for everyone else.

I mentioned the increased standard deduction. That's a major factor in making it almost break-even.

I'm not sure any reputable economist would tell you that cutting corporate tax rates will necessarily drive prices of goods down.

If a business gets more money, there are a bunch of things they can spend it on besides lowering prices - they can invest, they can raise wages, they can put the money into dividends and buybacks. It seems like the way the stock market has been appreciating recently, that dividends and buybacks are what the smart people are banking on.

The most direct way to cut the price of goods would be to cut sales tax - that isn't federal, but perhaps the federal government could induce states and localities to reduce or eliminate sales tax. If that could be done, then it would be an enormous boon to interstate commerce too. But of course the revenue would have to be made up through increasing income taxes. Anyway, if there was a political movement for this, I would like to join it - kind of the opposite of the flat tax, national sales tax, or VAT advocates.

Eh?

Take a Married couple, no kids, $70,000 AGI, all W2.

If they take a standard deduction today, that's $12,200 for the deduction ($500 more with kids) + $8,100 in exemptions, so their taxable income is $49,700. At current tax rates that's $7,198.

Even if they itemized at the new proposed standard deduction of $24,400 (!!! One-third of their gross income, highly unlikely), that's a tax bill of $4,693.

Add in 2 kids ($8,100 more in exemptions) and their tax bill becomes $2,208 ($4,288 - 2 $1,000 child tax credits)

Under the proposed plan, same people:

$70,000 minus $24,400 standard deduction = $45,600 taxable income, that's $5,472 in taxes, minus $600 family tax credit, for a tax bill of $4,872. So net savings of $2,326 vs. standard deduction and a slight increase of $177 vs an itemized deduction of similar size to the new proposed standard.

The GOP plan calls for an increase in the child tax credit from $1,000 to $2,000. If we do the same, we see that the two kids will reduce their total tax bill to $872, an improvement over both prior scenarios. (Again ... $872 out of $70,000 AGI.)

And Marco Rubio's amendment is asking to make the child tax credit refundable against payroll taxes (so instead of just paying $0 if you were in the net negative you'd actually get the overage back.)

So changing the couples' income to $40,000:

* Current SD, no kids = $1,948

* $24,400 Itemized Deduction, no kids = $750

* New SD, no kids = $1,272

* Current Standard Deduction, 2 kids = $0

* New SD, 2 kids = $0

* New SD, 2 kids, Rubio amendment = you get $2,728 back from the government

I look at the efforts my Marco Rubio (Florida) and Mike Lee (Utah) to increase the child tax credit further as efforts to redistribute to said large families. It's currently at $2000/child and they're pushing for a larger number via an amendment.

Republicans have become walking and talking contradictions, it really shouldn't be surprising in 2017.

It's an op-ed piece by a highly biased individual in washingtonpost. It's meant to push a particular position, not to espouse truths or facts.

Reply on news.ycombinator.com