Posted On: Saturday - December 23rd 2017 2:30PM MST
In Topics:   Trump  Economics  US Feral Government
Kevin Brady presiding. As much as Peak Stupidity is interested in politics in America, I have NOT paid a whole lot of attention to the recently passed plan for a slight revison to the income tax system. I think the whole damn system has been a sick perversion of the American founders' beliefs over the last century, for starters. It's also that there's not anything I can do about whatever the plan turns out to be. I figured I may just barely notice something in the Spring of 2019, if I'm not doing my taxes at the bar, as I did for about 1 decade.
Well, I just got excited about an hour ago, when reading that the standard deduction (money off the top line) for a married couple will DOUBLE in the newly passed plan, starting with taxes calculated in early '19 for the '18
* NO, it turns out it would not. See, they like this kind of thing - nobody looks at the details. I wasn't gonna, right? As a curmudgeon, I just really couldn't believe that something was gonna change for the better, especially something emitted out of the ass-end - legislative branch of the US Feral Government. Guess what, right again. Because, I found it hard to believe I would save money next year, I got on-line to delve into this for only about 10 minutes. That's all it took to see the part about the "Exemptions" (called "exemption deductions", even more confusing, by the House Ways and Means Committee, Kevin Brady presiding) being ELIMINATED. The exemptions are about $4,000 per family member, so the break even point with the doubling of the standard deduction from just over $12,000 to just over $24,000 means that the break-even point is three family members, i.e. one kid. For more kids than 1, you come out behind with this change, all other things being equal for the year. For a family of four, instead of $12,000 standard deduction + 4 X $4,000 exemptions = $28,000 off of the topline, it'll be $24,000 off of the top line meaning a tax increase of about $1,000 for those with a reasonable income, putting them into the 25% bracket.
Let me explain the top-line/bottom-line thing now along with the concept of the marginal rates, which will be first though. Each higher tax rate is not applied on the whole amount of income even AFTER deductions. The lowest rate (going up from 10% to 12%, heh, THAT CAN'T BE GOOD!) is applied to money up to some amount, then the next rate, 15%, is applied after that up to a limit, at which the 25% rate starts. Get it? This is important because, as with the $4,000 exemption (top-line item) turning into ~ $1,000 in taxes, any additional money you made or any reduction of your "earned income" (IRS words there) is at whatever your highest rate is. That is right now 25 % for most people/families who are middle-middle class, making over $75,000 yearly.
OK, two paragraphs, my apologies... anyway, the top-line "deduction/exemption" amounts can be multiplied by that 25% ( only 15% if you're working/lower-class (in income, I'm not trying to call the reader names here) or 28/33% if you are, let's call it lower-upper-middle-class, not quite the ones sharing the Gray Poupon out of the Mercedes). That's how you can see how much your payable amount will go up or down. Bottom-line items are usually called "credits". The amounts for these are taken directly off the amount of tax owed. Let's not get confused with the whole refund thing - that's just giving you back your overpayment. I'm writing about your tax bill, notwithstanding whatever amount you got with-held by your
Back to this trumped-up Trump bill, I ended up directly at a US Gov't web site of the House Ways and Means Committe, with the details, probably not the details the lawyers get paid $500/hr to figure out, though. It had the details, enough for the big let-down, that there was not gonna be any big savings, probably the contrary. I don't want to be inaccurate here, as the info. I read elsewhere touts "Hey, no exemption, but the child-care credit goes up! Yippee!" Yes, it is a credit, off the bottom line, but it's a change from $1,000 to $1,600 with even some caveats. $600 extra off the bottom line is like $2,400 off the top line for families making over $75,000 (25% rate on the margin), or about an even $4,000 for those making $20,000 to $75,000 (15% rate on the margin). With two or more kids, then, if the total, reported** income is under $75,000, then, the whole thing is a wash, as the extra credit about covers the missing exemption. If that family makes over $75,000, there will be a net loss, or, in the Christmas spirit, a gain for the government.
That's about enough, I guess, though, I will say that the elimination of the Alternate Income Tax, originally a way to snare about 40 (no kidding) rich people, but now, due to the 95% cut in dollar value since then, a big pain in the ass for the middle-middle class, is a good thing. Oh, here's a gem from another article, (LP, so not linked): Also repealed: deductions for alimony payments and .... Sorry, estranged Dads getting screwed over by family court and feminist ex-wives, Uncle
Yeah, pretty wonky post here, huh? Hey, Peak Stupidity can DO wonky, but we mostly consider it stupid, as all these details don't mean squat in the midst of the general pervasive Global Financial Stupidity in today's world. Think about it, my 10 minutes looking into this, and 1 hour writing this did not do either of us (me and my reader!) a bit of good.
So, the U.S. House Ways and Means Committee, Kevin Brady presiding, wishes you and yours
** Reported income is what the IRS is interested in. Make sure to keep a large portion of your income un-reported. Simple? [Note from PS legal dept.: YOU! DID! NOT! READ! THAT! HERE!... we know nothing .. we own nothing, squid pro quo, Clarice!]