Pass-Through Businesses Are Rethinking Their Status in Wake of Tax Law
wsj.com
wsj.com
Apparently working for your income, rather than rent-seeking or capital investment, is something to be discouraged in the modern economy.
Damned uppity folks that thought they could get an education, become professionals, and work their way to a better life than their forebears. Where do they think they are, America?
And it's a question of fairness too. Should the federal tax code give high-tax State residents a break? Why should it? Or why should it not? These questions have reasonable answers, and reasonable people can disagree.
It's not a break, it's mathematically necessary to prevent federal taxation from artificially negating what would otherwise be beneficial social action. Without local tax deductibility, local tax funded programs have artificially reduced net local benefit, which impact is greater the higher the federal income tax rate which is paid by the payers of the state taxes. The result is that, absent full deductibility, there is an artificial incentive (given progressive federal income taxes) not only for lower state taxes and spending even where a tax-funded program would be economically efficient before federal taxation was taken into account, but also for less progressive state taxes than would otherwise be adopted.
In federal terms, Kansas is, in fact, heavily subsidized by the states hurt by the SALT change even before the change. The question is why those in California and similar states should have to subsidize their deliberately failed state even more for it's decision not to pay for its own citizens’ needs.
:)
And, of course, more and more people will fall into the "paying more" camp as time goes on thanks to the temporary nature of the recently-passed tax plan, so it makes sense to plan ahead.
The tax code was already pretty regressive, with regular wage-earners paying Social Security and Medicare taxes on the first dollar they earn, while hedge fund guys pay a very small percentage of their income in taxes.
The new tax "reform" now adds more carve-outs that specifically target people who work for their income.
If your pass-through entity is for passive income like investments and real estate, the pass-through deduction is unlimited, and the hedge-fund "carried interest" loophole is preserved.
But if your pass-through is for your own labor like consulting, you're penalized with the deduction phase-out stating at $157k for individuals and $315k for joint filers.
For joint filers, it's $315,000, with phase-outs to $415,000.
Do you own a house and live in New York or Caifornia?
So for some earning beyond a certain income threshold, yeah, they will get taxed a lot more.
Interestingly, I think I saw that engineering and architecture services are exempt.
>deserves to be screwed to benefit rich folks
Hate to break it to you but if you own a home in NY or CA your probably one of the rich folks.
In California, the heir to the house is arguably better off because they would likely inherit the proposition 13 tax basis and pay very little in property taxes.
Why? State income taxes apply to you no matter where in the state you live.
Imagine if your property taxes quintupled because it turns out your governor misallocated tax revenue and now they need to make up the shortfall. Well, serves you right for moving to TN, right?
Wrong.
All the information on underfunded state pensions is public, and has been for some time.
I don't know why anyone would move to fiscally-troubled states like Illinois or Kentucky, for example, and expect their taxes not to substantially increase over the next couple decades. Some states are simply better fiscally run than others.
In fact, it's the other way around: high SALT states tend to rely less on federal aid and so are actually subsidizing the other states.
So, yeah...maybe we should all move there. Oh, wait.
And, this. Just within the last week or so there was discussion here about income inequality. I didn't bother chiming in. The same folks that sit around scratching their heads about this "intractable" inequality problem will defend to the death the rationale behind tax policy that favors capital over labor, busting unions, and other forms of trickle-down economics.
The rationale for these deductions was grounded in the acknowledgment of real expenses that can affect one's ability to pay. And, also fairness: that is, not taxing people on taxes.
These expenses don't just magically disappear because a political party decided to favor other groups and needed to pay for it.
Don't understand how it's Constitutional either. For instance, it's no secret that regions with the highest SALTs tend to be Democratic strongholds. Picking winners and losers along those lines is outrageous.
Examples of the 'rent seeking' that you despise so much?
https://www.pscpa.com/professional-services-new-20-pass-thru...
LLCs also require the equivalent of board meetings (aka, member meetings) to avoid veil-piercing, and indeed for veil-piercing purposes have all the same requirements as corporations. (I wrote a law review article on veil-piercing for LLCs, so I'm very familiar with how it works).
Are there SaaS providers to streamline the compliance process?
Either view in "Reader Mode" in a popular browser or remove the Javascript before viewing with something like
1. curl -4o 1.htm https://www.wsj.com/amp/articles/tax-law-leaves-business-owners-with-big-decision-to-c-or-not-to-c-1519295401?tesla=y
2. sed -i -n '/<title>/,/<\/title>/p;/<p>/,/<\/p>/p' 1.htm
3. open file:///1.htm in browser javascript:window.location.href='https://m.facebook.com/l.php?u='+encodeURIComponent(window.location.href);The paywalls suck, of course. But HN without all those articles would suck much worse, so we live with the workarounds.
Do the marketers really somehow realize that the word "weird" makes the speaker seem like an impartial reporter, or makes people more curious about the trick?
Because it's freaking "weird"! I wouldn't think such a word would work like gangbusters but it keeps being used. And it's almost always spammy marketers.
"One weird trick to do that thing you always wanted to do."