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This is thread to discuss taxes and the changes in the law and what impact that will have. I think people are going to be surprised in April 2019 when they see they can no longer write off a bunch of stuff they wrote off before. Since the standard deception is doubling, the number of people who itemize will go way down. They will no longer deduct mortgage interest because they won't have enough to exceed the standard deduction and it will likely eliminate more smaller donations to charity because they won't get those write-offs anymore. I noticed charities are still hawking the 'it's a tax write-off' thing but when people figure out they can't deduct, it will impact charities.
I think the mortgage interest deduction will hit the real estate market. And also, the inability to deduct state and local taxes and property taxes exceeding $10k. Obviously, this will impact higher tax states more, like NY, NJ and California the most.
This is thread to discuss taxes and the changes in the law and what impact that will have. I think people are going to be surprised in April 2019 when they see they can no longer write off a bunch of stuff they wrote off before. Since the standard deception is doubling, the number of people who itemize will go way down. They will no longer deduct mortgage interest because they won't have enough to exceed the standard deduction and it will likely eliminate more smaller donations to charity because they won't get those write-offs anymore. I noticed charities are still hawking the 'it's a tax write-off' thing but when people figure out they can't deduct, it will impact charities.
I think the mortgage interest deduction will hit the real estate market. And also, the inability to deduct state and local taxes and property taxes exceeding $10k. Obviously, this will impact higher tax states more, like NY, NJ and California the most.
Thoughts?
You mention NJ. It has a very high cost government structure and owes more in pensions than it has. The problem is not the 10,000 limit but the need for the state to have to tax that high.
I think people are going to be surprised in April 2019 when they see they can no longer write off a bunch of stuff they wrote off before. Since the standard deception is doubling, the number of people who itemize will go way down. They will no longer deduct mortgage interest because they won't have enough to exceed the standard deduction and it will likely eliminate more smaller donations to charity because they won't get those write-offs anymore.
I think you've glossed over an absolutely critical aspect of this. People get to choose whether to take the standard deduction or to itemize, so to be precise, they will choose to no longer deduct their mortgage interest; they will choose to not to deduct their charitable donations, etc. One point of the standard deduction is to reduce the paperwork involved in filing for and processing a great deal of smaller deductions.
I really struggle to put my finger on which taxpayers get significantly harmed by this change, on the surface. Of course, all changes has "winners" and "losers" but I think in this case, for those for whom there is a big impact for them that impact is positive, and for those for whom there is a negative impact that impact is relatively small for them. Most critically, as far as I know, there won't be a single taxpayer who "can no longer write off a bunch of stuff they wrote off before" that will be objectively worse off, tax-wise, as a result, at least not without factoring in a lot of second-order and third-order consequences.
Quote:
Originally Posted by Grlzrl
I noticed charities are still hawking the 'it's a tax write-off' thing but when people figure out they can't deduct, it will impact charities.
Here's where those second-order and third-order consequences come in, and where the real winners and losers get surfaced. I'm a leader in my church, and I can attest to the fact that [a] a lot of congregants pre-paid their 2017-2018 pledge in December 2017; [b] pledge amounts per family are significantly down year-over-year; and [c] while our membership has been pretty steady for a number of years, we've seen about an 8% decrease in the run-up to the 2018-2019 pledge drive. While there could be other reasons for that, I think we have to allow for the possibility that there are some people who previously pledged only because it was tax-deductible (and if you don't pledge something, even a token amount, you're not a member anymore).
What does this impact? First to be affected will be those things that we fund in the moment on an as-needed basis, including, our response to calls for assistance in disaster relief, our response to calls for assistance to soup kitchens and other outreach to those most vulnerable in society, etc. It will also reduce our religious outreach, i.e., our contributions to homeless shelters for young LGBTQ, our contributions to legal funds fighting for racial justice, our contributions to organizing letter-writing campaigns in support of poverty relief efforts, etc.
So, effectively, the overall impact will be more unrelenting misery for those most vulnerable in our society. The moral voice of the nation will revert to one shaped more so by the nation's affluent, rather than by a mingling of perspectives of both the rich and the middle class.
Quote:
Originally Posted by Grlzrl
I think the mortgage interest deduction will hit the real estate market.
Perhaps a little, but people still have to live - so the real impact will be a reverting of our society back toward the landlord and renter (i.e., lord and serf) model.
Quote:
Originally Posted by Grlzrl
And also, the inability to deduct state and local taxes and property taxes exceeding $10k. Obviously, this will impact higher tax states more, like NY, NJ and California the most.
Correct, and of course the impact of that will be to push more moderates toward conservatism, which was the whole point of the tax reform in the first place - to try to lock in a few more decades of relevance of the self-motivated right-wing political perspective which has been losing ground in our nation pretty steadily since the 1950s.
I think you've glossed over an absolutely critical aspect of this. People get to choose whether to take the standard deduction or to itemize, so to be precise, they will choose to no longer deduct their mortgage interest; they will choose to not to deduct their charitable donations, etc. One point of the standard deduction is to reduce the paperwork involved in filing for and processing a great deal of smaller deductions.
Back when I was preparing income tax filings for people, I constantly ran into people who refused to itemize. I would do the math and paperwork for them and present both cases in front of them to select which path they desired to follow.
It is an important distinction to make.
I always itemized whenever I could, to me it made sense to pay the least amount of taxes as possible. But there are people who are drawn to the 'EZ' forms. Simply because they are 'EZ'.
Quote:
... I really struggle to put my finger on which taxpayers get significantly harmed by this change, on the surface. Of course, all changes has "winners" and "losers" but I think in this case, for those for whom there is a big impact for them that impact is positive, and for those for whom there is a negative impact that impact is relatively small for them. Most critically, as far as I know, there won't be a single taxpayer who "can no longer write off a bunch of stuff they wrote off before" that will be objectively worse off, tax-wise, as a result, at least not without factoring in a lot of second-order and third-order consequences.
Here's where those second-order and third-order consequences come in, and where the real winners and losers get surfaced. I'm a leader in my church, and I can attest to the fact that [a] a lot of congregants pre-paid their 2017-2018 pledge in December 2017; [b] pledge amounts per family are significantly down year-over-year; and [c] while our membership has been pretty steady for a number of years, we've seen about an 8% decrease in the run-up to the 2018-2019 pledge drive. While there could be other reasons for that, I think we have to allow for the possibility that there are some people who previously pledged only because it was tax-deductible (and if you don't pledge something, even a token amount, you're not a member anymore).
What does this impact? First to be affected will be those things that we fund in the moment on an as-needed basis, including, our response to calls for assistance in disaster relief, our response to calls for assistance to soup kitchens and other outreach to those most vulnerable in society, etc. It will also reduce our religious outreach, i.e., our contributions to homeless shelters for young LGBTQ, our contributions to legal funds fighting for racial justice, our contributions to organizing letter-writing campaigns in support of poverty relief efforts, etc.
So, effectively, the overall impact will be more unrelenting misery for those most vulnerable in our society. The moral voice of the nation will revert to one shaped more so by the nation's affluent, rather than by a mingling of perspectives of both the rich and the middle class.
it doesnt seem like i will know until later next year. my taxes dont get done in april. it is my understanding that i will see a nice lowering in the rate on my income from my business.
The main thing I can think of is that the changes killed my desire to ever own a home. Otherwise, I'm taking home more, though I do wonder at what cost. Last I remember, we're not good at handling our debt, so to create a structure that causes us to go further in debt seems odd. That being said, what does debt really mean to the government. The US could be 10 quadrillion in debt or just 10, would it change our lives?
The main thing I can think of is that the changes killed my desire to ever own a home. Otherwise, I'm taking home more, though I do wonder at what cost. Last I remember, we're not good at handling our debt, so to create a structure that causes us to go further in debt seems odd. That being said, what does debt really mean to the government. The US could be 10 quadrillion in debt or just 10, would it change our lives?
Absolutely. As we increase our debt we increase the money supply and increase interest payments. If we rapidly increased our debt there would likely be heavy inflation. National debt in the last fiscal year increased about $1 trillion (or 5%). Interest is still manageable because of low interest rates. I think keeping the federal debt interest payments manageable was a major factor in keeping the federal funds rate low for an extended period. At some point, the rate has to be increased, and the long term result will be higher debt interest payments.
Also, the dollar remains the major international currency measure. Should that ever change, such as China is seeking to get the yuan to that status, there could be a reduction in demand for US debt which would likely result in a paying a higher interest rate.
You mention NJ. It has a very high cost government structure and owes more in pensions than it has. The problem is not the 10,000 limit but the need for the state to have to tax that high.
For me this is the thing that will impact me the most. SALT limits make it so that Itemizing no longer makes sense for me as the property taxes are rendered irrelevant. Before the changes, I had modified my tax payments to be every other year (home and auto) which netted me higher 'refunds' over a 2-year period. Also I'm in NE which isn't a chart topping high cost state (from a quick google search).
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