Tax Bill Analysis: Spend Your Extra $100 Wisely

In the Senate tax bill, someone making $100K gets an extra $100 to spend in 2027. Those making less than $75K lose money

Tax reform was supposed to be simpler, more fair, not add to the deficit. and lower taxes on the middle class. It did none of those things, but it did lower taxes on corporations to 20%.

Simpler - No

The Senate version kept the complicated and much despised Alternative Minimum Tax (AMT).

Senate Tax Brackets 7 vs House 4

Individual tax cuts expire after 2025

More Fair - No

Lower Taxes on Middle Class - No

By 2027, only those making more than $100,000 a year gain from reform.

Those making $100,000 to $500,000 get a benefit of 0.1% according to nonpartisan tax analysis.

Reduce the Deficit - No

The above chart is from the New York Times article on tax bill deficits.

The above image from the Wall Street Journal article Enough Votes to Pass Senate Tax Bill.

Who Benefits?

Me.

The Journal notes that pass-through firms, which pay their business taxes through individual returns rather than corporate returns, won major concessions. They would get a 23% deduction from individual rates. More than half of U.S. business income goes to pass-throughs, and more than half of that goes to the top 1% of households.

I am a pass-through firm. However, it is uncertain how this all gets reconciled.

Blame Corker

Looking for whom to blame?

I can help. The Bill passed the Senate Finance committee by a 11-10 margin. Senator Bob Corker of Tennessee was the deciding vote after he was given "assurances" that language would be added to reduce the deficit.

He should have known those assurances were not worth a damn. Arguably he did know but simply didn't care.

When the final vote came in the Senate, Corker was the only Republican dissenter.

Too late. The bill needed to be stopped in Committee.

More Assurances Not Worth a Damn

Sen. Susan Collins (R., Maine) scored a $10,000 deduction for property taxes, an expanded but temporary deduction for people with large medical expenses and a "promise of future bipartisan health-care legislation" to mitigate the effects of repealing the individual health insurance mandate.

It is uncertain how some of those promises survive reconciliation. But one thing is certain: The promise of future bipartisan health-care legislation is a complete joke.

Eight Percent Winners

As noted in the "More Fair" chart above, by 2027, only those making more than $100,000 a year receive any benefit. Anyone making under $75,000 is a loser.

The above chart from an interesting interactive Wall Street Journal graphic What Percent Are You?

Thus, the claim that only the top 1% benefits is false. The top 8% benefits according to 2014 income data.

That analysis is for individuals, not households. The percentage of winning households will be higher.

Other Beneficiaries

There are other beneficiaries in the bill. Here is one of my favorites.

As I type, another winner just came in. Surprise, surprise: Senate Tax Revisions Mostly Favorable to Venture-Capital Firms.

Carried interest and stock options get favorable treatment.

Average Household Benefit

If you make less than $100,000 you lose by 2027 at the latest.

Now let's calculate the average win for households making $100,000 in 2027.

Once again, referring to the "More Fair" graphic above, we see the average benefit for someone making $100,000 is 0.1%.

If that's what you make, congratulations! On average, you will have an extra $100 to spend. For that, the deficit will rise by $1,000,000,000,000.

Mike "Mish" Shedlock

Comments
No. 1-25
Stuki
Stuki

@Escierto:

3 reasons:
1) Women's suffrage was part of the progressive movement. Every single breath drawn of which has been noting but the greatest disaster ever heaped upon the planet, up and down every conceivable line imaginable, for all of history. Meteor strikes wiping out most life forms included. Resetting absolutely every law, rule, regulation, anything, to what it was immediately post Civil War, pre “progressive movement,” is clean, simple, straight forward and easy to understand.

2) The Founders. They may have had some blinders wrt people of color, but as a rule, they were so far advanced compared to denizens of our current idiotopia, that simply taking them up on their word, is a pretty sure bet.

3)The atomic productive, and reproductive hence sustainable, unit in society, is the household. It’s the household that interacts with the outside society where voting comes into play. Not individual members of a household unit. To society as a whole; at least to legitimate, civilized ones; the household is a black box. The only ones benefiting from breaking this black box boundary, are the ones benefiting from weakening households. By attempting to break their unity apart. IOW, one vote per household, is superior to one vote per mirror fogger; because a society of strong, united households, are superior to one where sleazy charlatans spend night and day attempting to break that unity apart; for their own benefit deriving from a less united population being easier to control and lord over; by inventing and scaring people with an ever increasing number of Mencken’s endless series of, always imaginary, hobgoblins.

Hell_Is_Like_Newark
Hell_Is_Like_Newark

This site claims to estimate your tax bill under the Senate and House plans.

Per the site, I save a few grand with the increased standard deduction (normally, I itemize), even though I am in a high tax state. The calc program though doesn't take in account tax deferred and tax free savings plans like IRAs or HSAs.

theplanningmotive
theplanningmotive

It is not about handing more cash to the 8% within which the 0.1%. The problem is that this top group has too much already, cannot spend it productively and will make a bad situation worse. The only time anything trickles down is when the rich piss on the poor.

Blacklisted
Blacklisted

If lower taxes for US corporations makes them more competitive and attracts foreign capital, how can that be bad for US workers? Also, eliminating the subsidy for irresponsible spending by States, by eliminating the deduction for state income tax and property taxes will force competition between all levels of govt. However, one should never expect true reform until short term limits are in place.

"Trump’s new reform plan will pose a new challenge for China. The plan will draw international capital to the US. At present, although China is also cutting taxes and fees, it cannot participate in tax competition due to its tax structure, scale, and system. If Trump reduces the corporate tax rate to 20%, enterprises around the world will invest in the US. Therefore, China should implement tax and market reform as early as possible."

Escierto
Escierto

@Stuki Eliminate women's suffrage? Now that was really amusing.

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