Will The GOP Tax Reform Bill Hurt Cities Like Detroit?

[emu steve]

This tax bill has so many things I dislike, e.g., elimination of state and local tax deductions, ending deductions for medical expenses [[nice if one has big expenses, esp. for folks with expensive to treat chronic illnesses), etc.

A provision would kill the historic tax credit which would hurt renovations of historic buildings which so many people here like.

#KillTheBill [[even though it isn't written yet).

Sadly, politicians, for this tax bill, the GOP, are writing bills which are good for their DONORS but bad for their constituents. Basically big money donors are, in effect, saying give us a nice tax bill or we will withhold financial support for 2018.

http://www.freep.com/story/money/bus...ery/839310001/

[MikeyinBrooklyn]

I don't have an opinion on the bill yet, as I have not read it in any form. But, emu, I have to say I disagree with a few points you have made. And that surprises me a little because I think we are often on the same page.

First, the state and local tax deductability is one of the most odious and unfair things in the current tax code. Why? Because it amounts to people living in low-tax states paying a higher effective income tax rate than those living in high-tax states. 2 people making the same money but living in different localities will pay a different total amount of taxes to the national government based upon the taxes they vote for in their locality. That is not fair. It is also an example of people living in places where the political mantra is people need to "pay their fare share" actively seeking to pay less than said share. If you live where the state and local taxes are high you should either grin and bear it, or seek relief in the form of lowering your state and local taxes. Don't finagle your way out of paying your presumed federal rate. You shouldn't get to pay less for electricity because you choose to buy expensive food. The one thing should have nothing to do with the other.

I also generally dislike all other forms of tax credits. I think it is wrong for the government to pick winners and losers. The state should not be in a position to judge your life, needs, and wants. Additionally, most tax credits favor people who have more money. People who have a lot of money are much more likely to start businesses, send their kids to expensive schools, have mortgages, engage in business travel, etc. All those things are deductible. So someone struggling financially who pays rent instead of a mortgage, can't start their own business, has kids in public schools, doesn't travel for their lower-wage job will pay a higher rate than [[in the same bracket) than someone else. What is fair about that? The wealthier someone is, the more likely they are to engage in tax-exempt behavior, sticking a working class person with a higher share of the tax bill. And don't get me started on the so-called "earned income tax credit" which is actually a straight-up wealth transfer and does not require earning any income whatsoever.

Using the tax code to affect behavior is a perversion of government, and both sides do it. Taxes should only be used to raise revenue for the government, and they should be kept to a minimum, and applied to the people fairly, blind to our personal lives, business interests and political clout.

Don't get me wrong. I am not in favor of anyone paying more taxes. I am just against the government picking and choosing who gets special rights to pay less. There should be a very low rate, but everyone should pay it.

I would be in favor of any tax bill that lowers rates, lets people keep more of the money they have earned, and untangles at least some [[preferably all) of the special interest carve outs in the current tax code.

[emu steve]

I don't want to get O/T, but how about the estate [['death') tax?

It might shock some who consider me a 'shill' or whatever for the Ilitches, but regarding say the Wings.

Mr. I. bought the team for peanuts. It is worth big bucks today. When and will [[and how much) will the family pay tax on the CAPITAL GAIN [[or appreciation)?

Can the Ilitches keep passing it, tax deferred, to family members and not now have to pay taxes on all that capital appreciation?

[[Hint: I never have to worry about estate tax. Maybe sadly. I wish I had say 5 - 10M sitting around... so I don't know much about it, but neither do almost all Americans.).

[Lowell]

Agree on retaining the estate tax.

Everyone who has an estate north of $11 million, raise your hand. Thought so.

IMO everyone should be screaming keep the Estate Tax! This not even a 1%-er hand out issue, it is a 0.2%-er hand out, meaning it only effects estates north of $11 million. For example, repeal of the estate tax would benefit the estate of the current present president [surprise, surprise] to the tune of $3B +, assuming he is worth the $10B he claims he is.

For 2017, the estate and gift tax exemption is $5.49 million per individual, up from $5.45 million in 2016. That means an individual can leave $5.49 million to heirs and pay no federal estate or gift tax. A married couple will be able to shield just shy of $11 million [[$10.98 million) from federal estate and gift taxes. The annual gift exclusion remains at $14,000 for 2017.
https://www.forbes.com/sites/ashleae.../#fc79fc43b706

Per the above quote estates can also be doled out, tax-free prior to death, to an unlimited number of heirs and friends to the tune of $14K each per year, year after year.

[Johnnny5]

Unfortunately, there's no way the Republicans are going to pass this bill without including a repeal of the Estate Tax. I'm of the opinion that not only should the tax remain, but it should be strengthened by closing the abundance of loopholes the ultra rich are using to avoid it [[Trusts, questionable charitable gifts, etc).

As mentioned above, without this tax America is looking at generations of wealth that may never be fairly taxed. Compounding wealth that has already led to families like the Trump's, Kennedy's, Bush's controlling our country. With fortunes being made in Tech at younger ages than ever before, smaller families to divide the inheritance [[And the ability to easily diversify their holdings). The compounding of this wealth will make some of these families richer than anything this world has ever seen.

[Wesley Mouch]

Agree on retaining the estate tax.

Everyone who has an estate north of $11 million, raise your hand. Thought so.

IMO everyone should be screaming keep the Estate Tax! This not even a 1%-er hand out issue, it is a 0.2%-er hand out, meaning it only effects estates north of $11 million. For example, repeal of the estate tax would benefit the estate of the current present president [surprise, surprise] to the tune of $3B +, assuming he is worth the $10B he claims he is.
...snip...

Lowell is a populist it seems. That makes you more like Trump than not. The rich are cheating us. Hording cash and wealth. Seize from the rich. Viva equality. Noble intent.

Beware of unintended consequences.

A small family business might be worth $20 million. Valuable land. Expensive equipment. Intellectual property. Couple million rainy day fund. So what's a family to do? One option would be to sell out to Corporate America. We love the family farm, but the land's worth too much, and you'll have to pay $3 million in taxes that you don't have in cash. Let's sell to Monsanto [[or insert your industry conglomerate here), and hire Saul to use every available method to minimize taxes while we're alive. The dream of our daughter who wants to keep the farm going is just a dream. Taxes drive our decision. Sally out. WalMart real estate division in. Farm bye-bye.

I'm sure my example is flawed. Don't focus on how I'm wrong. Focus on whether the law will really be crafted to protect Sally's Organic Kale Farm in Clinton Township, or Donald Trump and Jeff Bezos.

You probably mean well. But doesn't it make more sense to eliminate the Capital Basis Step-Up, and tax Sally when her and her brother sell the farm? Why is the death of their parents a good trigger for a multi-million dollar tax bill?

In this room, nobody will raise the hands about having an $11m estate. It seems to me that you're not looking outside your bubble. There are rooms out there where some elderly widow would sheepishly raise her hand when you asked about $11m estates. She might make you re-think your zealous and joyful pursuit of populist rhetoric.

I'd be curious to hear what CorktownYuppie or BankruptcyGuy think. What's the view from the inside.

[Johnnny5]

I'm sure my example is flawed. Don't focus on how I'm wrong. Focus on whether the law will really be crafted to protect Sally's Organic Kale Farm in Clinton Township, or Donald Trump and Jeff Bezos.

Your example is well beyond flawed. It's over empathizing such a rare occurrence that it's basically propaganda. If these Republicans really cared about the tiny number of farmers that might be affected it would be far easier to add exceptions that exclude these farmers as opposed to repealing the entire tax.

https://www.cbpp.org/blog/the-myth-t...ns-small-farms

http://money.cnn.com/2017/10/10/news...tax/index.html

[emu steve]

I believe I've heard that the rich acquire assets [[e.g., sports teams) which greatly appreciate in value. Rather than sell them and pay taxes, etc. they borrow against them and pass them on to their heirs.

I'm going to email a noted economic/finance writer [[who has answered my emails in the past) and ask what does happen to a sports team when the owner dies and it passes to family heirs. Do the new heirs acquire it at the original value or at the new value [[as of the date of the owner's death)?

So Trump-Ryan are trying to take away the Medicaid expansion, eliminate medical expense deductions, limit property tax deductions, take away the state and local tax deductions, etc.

My God, what are they doing to the working and middle class tax payers?

Tax reform has become one of the biggest Trojan horses of all time in America.

[emu steve]

Stepped-up basis is important here and mentioned above.

https://en.wikipedia.org/wiki/Stepped-up_basis

[Wesley Mouch]

...snip...limit property tax deductions, take away the state and local tax deductions, etc.

My God, what are they doing to the working and middle class tax payers?
...

I accept that these changes may affect working and middle class taxpayers.

Does that mean they can't be limited? Seems like a limit on property tax deduction would mainly affect the rich? Isn't the goal to tax the rich and lighten the burden on middle class? If you get more cash from the rich, then you can lighten m-c load elsewhere.

As to State and Local [[SALT), I saw a reputable reference to the Economist stating that 90% of the SALT exemption went to taxpayers with more than $100,000 income. Again, seems like the rich really use this deduction more than Joe the Plumber.

[emu steve]

I accept that these changes may affect working and middle class taxpayers.

Does that mean they can't be limited? Seems like a limit on property tax deduction would mainly affect the rich? Isn't the goal to tax the rich and lighten the burden on middle class? If you get more cash from the rich, then you can lighten m-c load elsewhere.

As to State and Local [[SALT), I saw a reputable reference to the Economist stating that 90% of the SALT exemption went to taxpayers with more than $100,000 income. Again, seems like the rich really use this deduction more than Joe the Plumber.

I'm not sure about these claims.

The question is simple:

Do SALT, mtge interest, charity, medical expenses, etc. total more than the standard deduction than it can easily be used by those 50 - 99K.

[Hermod]

As to State and Local [[SALT), I saw a reputable reference to the Economist stating that 90% of the SALT exemption went to taxpayers with more than $100,000 income. Again, seems like the rich really use this deduction more than Joe the Plumber.

True, since the tax bill increases the standard deduction, only the more wealthy benefit from deducting state and local taxes. The less wealthy will find that the standard deduction will more than cover all the deductions they can dream up.

I am moderately wealthy but have few "gimmicks" for deductions. Last year, my accountant just took the standard deduction as he said it was so close that taking the standard deduction would lessen my chance of an audit.

[emu steve]

NY Times article on medical care deduction.

https://www.nytimes.com/2017/11/08/h...=top-news&_r=0

[313WX]

IMO, tax reform as proposed by the GOP will be a net positive for the average Detroiter. It won't be this massive tax break that Trump and the Republicans are trying to peddle, but most will see a decrease in their taxes owed.

[emu steve]

True. It will hit those who live where you live and where I live. Atlanta suburbs are highlighted in this article.

https://www.washingtonpost.com/busin...=.b2f2443916c3

[emu steve]

This tax bill has so many things I dislike, e.g., elimination of state and local tax deductions, ending deductions for medical expenses [[nice if one has big expenses, esp. for folks with expensive to treat chronic illnesses), etc.

A provision would kill the historic tax credit which would hurt renovations of historic buildings which so many people here like.

#KillTheBill [[even though it isn't written yet).

Sadly, politicians, for this tax bill, the GOP, are writing bills which are good for their DONORS but bad for their constituents. Basically big money donors are, in effect, saying give us a nice tax bill or we will withhold financial support for 2018.

http://www.freep.com/story/money/bus...ery/839310001/

BTW, lost in this discussion has been the historic tax credit cuts proposed.

[313WX]

True. It will hit those who live where you live and where I live. Atlanta suburbs are highlighted in this article.

https://www.washingtonpost.com/busin...=.b2f2443916c3

I can't say I feel too bad for the type of folks they describe in the article.

First off, I have to laugh at the Washington Post, because instead of focusing on some place in the backyard like Loudoun County, VA, they decide to put an transparent political slant in their article by going all of the way to a red state.

Second, I do live in the Atlanta suburbs, but they're not all created equal. In my county, the schools are great, I have easy access to a decent amount of shopping and the community is extremely safe. On top of that, I don't have to deal with the horrible traffic that many folks complain about. Yet, home prices on average are only in the $200K - $300K range [[in fact, you can still get a nice-sized starter home, new construction, for less than $200K). This is repeated in almost every Metro Atlanta county that's not North Fulton, Cobb or Gwinnett . If I'm a lower middle class or working class individual, why should you, an upper middle class individual, be rewarded [[or why should people feel sorry for you) more than myself if you chose to live above your means of $100K - $200K and buy a home in a part of town where the average cost is $600K - $700K?

[313WX]

The below links give a more accurate idea of the tax impact for the average American under the proposed tax reform bill.

It should be noted, those who itemize their deductions will be hurt the most [[mainly in high tax / high COL locations), but 70% of American taxpayers do not.

https://www.washingtonpost.com/news/...=.725714aac4ff

http://thestacker.com/stories/150/wh...s-20-us-cities

[emu steve]

The below links give a more accurate idea of the tax impact for the average American under the proposed tax reform bill.

It should be noted, those who itemize their deductions will be hurt the most [[mainly in high tax / high COL locations), but 70% of American taxpayers do not.

https://www.washingtonpost.com/news/...=.725714aac4ff

http://thestacker.com/stories/150/wh...s-20-us-cities

Ah, we are finally zeroing in on the issue:

Namely, a lot of MIDDLE CLASS folks will get a tax increase [[those who have big Schedule A deductions). The statement that the typical middle class taxpayer will get a $1,000 / year tax cut is hooey.

Some may see their taxes go down say $1K, but those with high medical expense deductions could see their tax bill go up a lot.

That medical expense is designed to be 'catastrophic' expense protection. If someone has 10, 15, or even 25K medical expenses that deduction can be a real life line.

[313WX]

Ah, we are finally zeroing in on the issue:

Namely, a lot of MIDDLE CLASS folks will get a tax increase [[those who have big Schedule A deductions). The statement that the typical middle class taxpayer will get a $1,000 / year tax cut is hooey.

Some may see their taxes go down say $1K, but those with high medical expense deductions could see their tax bill go up a lot.

That medical expense is designed to be 'catastrophic' expense protection. If someone has 10, 15, or even 25K medical expenses that deduction can be a real life line.

Ok, I got it now. The question isn't whether one will be paying more or less in taxes, but whether the tax reform will lead to more indirect expenses overall for some people [[there's a difference).

That's a fair point.

[Hermod]

The left always screams about "deductions" and "tax breaks" but when you do tax reform and eliminate deductions to pay for lower rates, they all of a sudden love them those deductions.

[emu steve]

Yes. Some middle class tax payers will be winners and other middle class tax payers will be losers, some big.

That is NOT how it is being sold. It is being sold as a win for all. Think I heard the statement that no middle income taxpayers will see their taxes go up and that is definitely false.

[Atticus]

IMO, tax reform as proposed by the GOP will be a net positive for the average Detroiter. It won't be this massive tax break that Trump and the Republicans are trying to peddle, but most will see a decrease in their taxes owed.

In the short term that maybe true... but it is kind of like the roads funding when you look at the long term picture.

Michigan spends the least per capita on roads of any of the 50 states. Thus it should come as no surprise that our roads are awful. Awful roads translates into motorists having to spend more often on vehicle alignment problems, bent tire wheels, and other general issues created by driving every day on rough surfaces. This is particularly true for lower income folks driving older cars that tend to be more susceptible to these damages.

Long story short, people in Michigan have the least amount of tax money taken away from them for road funding. Short term win. However down the road, that wheel alignment fix will probably end up costing more than paying a few extra cents per gallon for good roads. So long term loss overall.

[Hermod]

BTW, lost in this discussion has been the historic tax credit cuts proposed.

If a project doesn't make economic sense, we don't need it. Part of that problem went away in the 1986 tax bill where they took away a lot of real estate deductions. Office buildings were going up that didn't make economic sense, only tax sense. This bill takes away some deductions. If that is accompanied by lower tax rates, that is a positive. The tax code should not create winners and losers.

[Wesley Mouch]

I'm not sure about these claims.

The question is simple:

Do SALT, mtge interest, charity, medical expenses, etc. total more than the standard deduction than it can easily be used by those 50 - 99K.

Couldn't find the Economist link, but here's the NYTimes Economix from 2013:

As one can see in this table from Congress’s Joint Committee on Taxation, the vast bulk of returns claiming the Salt deduction and the greatest proportion of the dollars deducted are from those with higher incomes. Almost half the dollar amount of the deduction is claimed by those with incomes above $200,000.
Photo
CreditJoint Committee on Taxation
Here, you can see that for 2010, the tax dollars paid by those with less than $100,000 was 14.4%. Thus 85.6% were paid by those making over $100,000.

This is a tax deduction for the rich, not the middle class. Unless you consider over $100,000 [[2010) middle class.

Even if you take the up to $200,000 figure as 'middle class'... then still half the benefit goes to those making OVER $200,000!

This deduction gotta go if you want to reduce income inequality [[which I don't).

reference: https://economix.blogs.nytimes.com/2...d-local-taxes/