Trump's Idiotic Tax Plan

[Elixir]

Who benefits most?

the people*

*the people is a trademark of the 1% everyone else are lazy leeches.

Yup. Cheato's brazen arrogance pisses me off "I'll pay a lot more taxes under this plan" says the liar in chief.
Okay. LET'S SEE YOUR FUCKING TAX RETURNS.
You don't really expect anyone outside your 42% to believe you, do you?

 

[Treedbear]

Actually the alleged problem with tax brackets actually exists today and is very real for anyone receiving an ACA subsidy. Once your adjusted gross income exceeds whatever amount applies to your particular situation (age, place of residence, etc), even by $1, you lose your entire subsidy. It decreases gradually up to that point. As an example, someone could lose $100 per $1000 increase until their AGI gets to say $42k. Then their subsidy might go from $6k to $0. So people can definitely get stuck in a situation where they have to tell their boss they prefer not to get a raise. Or just stop working as hard. It could eventually create a permanent underclass. I'm all for the ACA in lieu of no UHC, but this has got to be fixed so it's more progressive.

 

[Malintent]

To add to what Jonatha said, only the dollars in the bracket is taxed at the other rate.

For example, let's say $1 to $20,000 is taxed at 10% and 20,001 to $50,000 is taxed at 25%.

If you make $19,000 and get a $2,000 raise, you now have $20,000 taxed at 10% and 1,000 taxed at 25%.--not $21,000 taxed at 25%

Right, it always amazes me that some people don't understand how tax brackets work.

I'm confused. I calculate my personal income tax every year using the worksheet (I am not allowed to use the tax table for my family income). Every year it has been the same process... "If you earn over x dollars and under y dollars, then multiply that amount by z, and subtract n dollars from the result. That is your tax to report on line <whatever>"

Where is this bracketing happening? The instructions do not say to take the first x dollars and multiply by y, then the next y dollars and multiply by z.... and then add the results together to calculate your tax... etc.

 

[laughing dog]

Right, it always amazes me that some people don't understand how tax brackets work.

I'm confused. I calculate my personal income tax every year using the worksheet (I am not allowed to use the tax table for my family income). Every year it has been the same process... "If you earn over x dollars and under y dollars, then multiply that amount by z, and subtract n dollars from the result. That is your tax to report on line <whatever>"

Where is this bracketing happening? The instructions do not say to take the first x dollars and multiply by y, then the next y dollars and multiply by z.... and then add the results together to calculate your tax... etc.

The IRS has determined that the general US tax-filing public is sufficiently logic and arithmetic impaired that the instructions about tax brackets are too confusing. Which is why they have tax tables that most people use.

The entire point of a tax bracket is that the rate for that bracker applies only to the income in that interval. In economic terms, it is the marginal tax rate of that bracket.

For example, currently the tax brackets for a couple filing a joint return are
ax Bracket Tax Rate
$0.00+ 10%
$18,650.00+ 15%
$75,900.00+ 25%
$153,100.00+ 28%
$233,350.00+ 33%
$416,700.00+ 35%
$470,700.00+ 39.6%
(source: https://www.tax-brackets.org/federaltaxtable).

Suppose a couple earns $42,700, takes the standard deduction of $12,700 is left with $30,000 of taxable income. Their federal tax liability (assuming no credits etc...) is found as
10% *10,000 + 25%*(30,000-18,650) = $3837.5. Their marginal rate is 25% because for any additional dollar earned, they would be 25% in taxes until they hit $75,900. Their average tax rate
$3837.5/$42,700 = 0.08987 or about 9%.

 

[Treedbear]

Right, it always amazes me that some people don't understand how tax brackets work.

I'm confused. I calculate my personal income tax every year using the worksheet (I am not allowed to use the tax table for my family income). Every year it has been the same process... "If you earn over x dollars and under y dollars, then multiply that amount by z, and subtract n dollars from the result. That is your tax to report on line <whatever>"

Where is this bracketing happening? The instructions do not say to take the first x dollars and multiply by y, then the next y dollars and multiply by z.... and then add the results together to calculate your tax... etc.

The amount it tells you to subtract compensates for the excess applied to the lower tax bracket income. As usual the instructions don't tell you why it has you do something. It's sort of like god.

 

[Loren Pechtel]

Actually the alleged problem with tax brackets actually exists today and is very real for anyone receiving an ACA subsidy. Once your adjusted gross income exceeds whatever amount applies to your particular situation (age, place of residence, etc), even by $1, you lose your entire subsidy. It decreases gradually up to that point. As an example, someone could lose $100 per $1000 increase until their AGI gets to say $42k. Then their subsidy might go from $6k to $0. So people can definitely get stuck in a situation where they have to tell their boss they prefer not to get a raise. Or just stop working as hard. It could eventually create a permanent underclass. I'm all for the ACA in lieu of no UHC, but this has got to be fixed so it's more progressive.

One thing they should do to remove a bunch of these edge cases in one swoop: One more line on the return, pre-tax $ to give the IRS. Completely optional, but if you find yourself just over one of these phase-out lines you can toss them a few bucks and get back under it.

It would not be of much use to a paper filer but anyone doing it by computer (and that's most people who would be in a position to benefit) the math would be automatic.

Doing it this way would ensure there never was an effective marginal rate over 100% no matter what stupidity politicians do in the future. The actual dollars involved are small but finding your tax go up $2 because of the extra $1 you earned bothers people quite disproportionately to the $1 involved.

 

[Loren Pechtel]

Right, it always amazes me that some people don't understand how tax brackets work.

I'm confused. I calculate my personal income tax every year using the worksheet (I am not allowed to use the tax table for my family income). Every year it has been the same process... "If you earn over x dollars and under y dollars, then multiply that amount by z, and subtract n dollars from the result. That is your tax to report on line <whatever>"

Where is this bracketing happening? The instructions do not say to take the first x dollars and multiply by y, then the next y dollars and multiply by z.... and then add the results together to calculate your tax... etc.

The brackets are folded into the table to make life easier for the paper filer.

 

[funinspace]

Paper, tables,

I'm confused. I calculate my personal income tax every year using the worksheet (I am not allowed to use the tax table for my family income). Every year it has been the same process... "If you earn over x dollars and under y dollars, then multiply that amount by z, and subtract n dollars from the result. That is your tax to report on line <whatever>"

Where is this bracketing happening? The instructions do not say to take the first x dollars and multiply by y, then the next y dollars and multiply by z.... and then add the results together to calculate your tax... etc.

The amount it tells you to subtract compensates for the excess applied to the lower tax bracket income. As usual the instructions don't tell you why it has you do something. It's sort of like god.

Then Turbo Tax must be my Jebus

 

[fast]

$0.00+ 10%
$18,650.00+ 15%
$75,900.00+ 25%
$153,100.00+ 28%
$233,350.00+ 33%
$416,700.00+ 35%
$470,700.00+ 39.6%

Just to add to this, suppose the taxable income is $100,000. Let's look at it one dollar at a time. The first dollar of your taxable income will yield a ten cent tax liability. Your second dollar too. And your third and so on up until you hit the next bracket. Your 18,649th dollar will cost you ten cents since it's below the beginning of the next bracket. They aren't going to keep taxing you ten cents on the dollar for the rest of your taxable dollars. Every dollar in the next bracket will cost 15 cents but just for those dollars, which isn't 75,900 of them but rather 75,900 minus 18,650 of them. Your 75,900th taxable dollar will cost you 25 cents and each dollar upwards of that. You won't have to pay anything past your 100,000th taxable dollar since that's all that was taxable.

 

[barbos]

American schools need better math education.

 

[hurtinbuckaroo]

Right, it always amazes me that some people don't understand how tax brackets work.

I'm confused. I calculate my personal income tax every year using the worksheet (I am not allowed to use the tax table for my family income). Every year it has been the same process... "If you earn over x dollars and under y dollars, then multiply that amount by z, and subtract n dollars from the result. That is your tax to report on line <whatever>"

Where is this bracketing happening? The instructions do not say to take the first x dollars and multiply by y, then the next y dollars and multiply by z.... and then add the results together to calculate your tax... etc.

If:
x=100,000
y=200,000
Tax rate for x and under = 10%
Tax rate between x and y = 20%

Then z= x * 10% (i.e., the lower bracket) = $10,000

If you make $110,000, tax can be calculated by brackets:

(100,000 * 10% + 10,000 * 20%) = (10,000 + 2,000) = $12,000

Or by the shortcut they have you use:

(110,000 * 20%) - 10,000 = (22,000 - 10,000) = $12,000

If there is more than one bracket below yours, the calculation of z would take them all into account and would be much easier for you than method #1.

 

[Malintent]

Thanks for the explanation, all... It is two brackets, which makes sense for a single subtraction value. The first bracket represents all of the "lower" brackets combined and the subtraction value represents the residual amount of the "highest" bracket that is not exceeded.

Since calculation is either a simple lookup, or a "two-bracket" simplified calculation, then how is it that changes to the total number of (pre-calculated) brackets can "simplify" tax preparation for the masses, as it is being toted as?

 

[laughing dog]

Thanks for the explanation, all... It is two brackets, which makes sense for a single subtraction value. The first bracket represents all of the "lower" brackets combined and the subtraction value represents the residual amount of the "highest" bracket that is not exceeded.

Since calculation is either a simple lookup, or a "two-bracket" simplified calculation, then how is it that changes to the total number of (pre-calculated) brackets can "simplify" tax preparation for the masses, as it is being toted as?

Intuitively, fewer tax brackets means easier calculations even if operationally it makes no difference.

Also, there are some credits that are phased out as income increases. It may be easier to calculate that phaseout if there are fewer brackets.

All in all, making it easier to calculate one's tax liability by reducing the number of brackets from seven to three is not a driving reason for tax reform.

 

[jonatha]

Since calculation is either a simple lookup, or a "two-bracket" simplified calculation, then how is it that changes to the total number of (pre-calculated) brackets can "simplify" tax preparation for the masses, as it is being toted as?

It can't.

The flat tax proponents' singleminded focus on the computation of tax is Trumpian in its stupidity. Computation of income is where all the complexity in the tax code is, and about the only way to fix that would be to replace the income tax with a tax on cash flow. Do you think lenders will lend 22% above the market value of a house, or that homebuyers will want to assume the debt, just to make it possible to file their taxes on a postcard?

 

[Malintent]

I think that the vast majority of people send their documents to an accountant who does their (individual) taxes for them for a flat fee, regardless of complexity. So no consumer of tax preparation services should care one bit.

As for the remainder of people (such as myself) who do their own taxes with a pen and a calculator (I am still not e-filing), if there is no procedural difference, then there is no difference (except for that bottom line dollar value).

 

[Loren Pechtel]

I think that the vast majority of people send their documents to an accountant who does their (individual) taxes for them for a flat fee, regardless of complexity. So no consumer of tax preparation services should care one bit.

As for the remainder of people (such as myself) who do their own taxes with a pen and a calculator (I am still not e-filing), if there is no procedural difference, then there is no difference (except for that bottom line dollar value).

28.5% is a vast majority??? (And another 8.3% that use a non-accountant tax place.)

https://www.gobankingrates.com/pers...ericans-file-taxes-comfort-home-survey-finds/

 

[funinspace]

I think that the vast majority of people send their documents to an accountant who does their (individual) taxes for them for a flat fee, regardless of complexity. So no consumer of tax preparation services should care one bit.

As for the remainder of people (such as myself) who do their own taxes with a pen and a calculator (I am still not e-filing), if there is no procedural difference, then there is no difference (except for that bottom line dollar value).

28.5% is a vast majority??? (And another 8.3% that use a non-accountant tax place.)

https://www.gobankingrates.com/pers...ericans-file-taxes-comfort-home-survey-finds/

Yup. I generally do my returns myself with TurboTax. However, about every 4-5 years I let a professional do it for me as a sanity check; and it sure as hell isn't a flat fee nor H&R Block...

 

[ZiprHead]

I got called in weekly to help our AP department at the hospital on bill pay day. Usually about 700+ checks needing to be matched with their documents and stuffed into envelopes. Found out the hospital bigwigs all have their personal taxes done on the company dime. Usually about $1,100 dollars a pop.