The Trump Tax Cut/Reform of 2017

[August1991]

A simplified version for Canadians.....

First of all, there's a history to this: the famous Kennedy Tax Cut (enacted by Johnson in fact). Then the Reagan Tax Cut and the Bush Tax Cuts....

Second, as to serious US tax reform, I'll believe it when any US federal government manages to impose a GST, federal VAT as every other modern, civilized State has managed to do. (My litmus test for true US tax reform - if not a true leader - is when a future US President manages to get a GST-like tax through Congress. And trust me, it will happen.)

Third, having been on this forum long enough, I realize now that partisanship - Team A vs Team B - is a feature of life that the Internet exacerbates; unless Facebook-style, it exacerbates false friends. Whatever. Most reviews on the Internet seem to argue that the Trump Tax Cut/Reform is bad, terrible. (Maybe Trump has many Facebook unfriends.)

**************

Among the various links explaining the impact of this tax change, I found this one the best:

Scott Sumner

It's a short read, and an eye-opener for a Canadian taxpayer.

My takeaway is 4 points:

1. Trump eliminates SALT. In the US, taxpayers can deduct state taxes from their federal tax. (Imagine in Canada if Quebec/Ontario governments could raise provincial taxes knowing that the tax increase was deductible from federal taxes? Indeed, Duplessis negotiated a one-off deal like that. In some provinces, local property taxes are deductible from provincial taxes. Union dues are deductible.) In this, Trump is making America more like Canada.

2. Trump raises personal deductions. In Canada, the basic deduction is now about 12,000$, linked to the CPI. In the US, it was 6,000$. Trump raised it to about 12,000$. (In the US, they have married and kid deductions that skew the comparison to Canada but here again, Trump is making America more like Canada.)

3. Mortgage interest. This is weird to Canadians since we cannot deduct our mortgage interest from taxable income. (In the US, one can deduct interest from two different homes.) Trump limits this to one and reduces the mortgage/property value eligible for deduction.  (Once again, Trump is making America more like Canada.)

4. No more health mandate. From what I can understand, this kills Obamacare. (In Canada, if you drive a car, you have to have 3rd party liability - the pink paper in your wallet. Obamacare was based on the same principle. Everyone needs a pink paper.) Well, Trump just changed the tax law and there's no fine if you walk down the street without a pink paper in your wallet.

**************

You.'ll hear alot about Trump reducing corporate taxes. The left (Team A) will argue that it's good for the rich; the right (Team B ) will argue that it's good for the economy. Frankly, IME, US corporate tax rates were always random numbers. I reckon that Trump is making the US rates a little more honest.

Drilling down, you may hear about marginal rates, bands. At the federal level, in Canada, we have 5 now - at Level 5, if you earn over 200,000$, you give $33 of every next $100 to the rest of us (or Trudeau to spend on our behalf).

Under Trump in the US, there will be 7 bands. Why? Because at the top end, there will be two more bands. If you earn above $200,000, you pay 35% and above $500,000, you pay 37%. 

****

Trump, Trudeau, Team A, Team B. My opinion, your opinion.

Broadly speaking, I think this tax reform is good for Americans. It means the US federal government imposes taxes in a way that is closer to the way our federal government imposes taxes.

Edited December 21, 2017 by August1991

[bush_cheney2004]

4 hours ago, August1991 said:

A simplified version for Canadians.....

First of all, there's a history to this: the famous Kennedy Tax Cut (enacted by Johnson in fact). Then the Reagan Tax Cut and the Bush Tax Cuts....

 

President Obama extended the Bush era "tax cuts" in 2010 (there really is no such thing as a tax cut, but I will play along)...so we can add Obama to the list.

Quote

3. Mortgage interest. This is weird to Canadians since we cannot deduct our mortgage interest from taxable income. (In the US, one can deduct interest from two different homes.) Trump limits this to one and reduces the mortgage/property value eligible for deduction.  (Once again, Trump is making America more like Canada.)

 

Yes, but there is another political nuance to this change.   Trump and the Republicans face little political risk here because most of the high tax states are "Blue", with no prospect for flipping "Red".    New York and California residents will feel this bite.

 

 

Quote

4. No more health mandate. From what I can understand, this kills Obamacare. (In Canada, if you drive a car, you have to have 3rd party liability - the pink paper in your wallet. Obamacare was based on the same principle. Everyone needs a pink paper.) Well, Trump just changed the tax law and there's no fine if you walk down the street without a pink paper in your wallet.

 

Doesn't kill Obamacare, but weakens it for number of healthy Americans in the insurance pool and social "mandate".   The U.S. Supreme Court ruled that the mandate was in fact just another tax, despite Obama/Democrat claims to the contrary.   Many millions of IRS Form 1095 variants will no longer be required to prove health care insurance for each calendar month...trees will thank President Trump.

Another important part of the tax bill authorizes drilling in the Alaskan National Wildlife Refuge, something that has been bitterly fought over for many years.   Trump got it done for an Alaskan senators vote.  Drill baby...drill.

 

 

Edited December 21, 2017 by bush_cheney2004

[Boges]

6 hours ago, bush_cheney2004 said:

Yes, but there is another political nuance to this change.   Trump and the Republicans face little political risk here because most of the high tax states are "Blue", with no prospect for flipping "Red".    New York and California residents will feel this bite.

There are like GOP 20+ congressmen from those states. They can kiss those seats goodbye. 

Edited December 21, 2017 by Boges

[Bonam]

10 hours ago, bush_cheney2004 said:

Yes, but there is another political nuance to this change.   Trump and the Republicans face little political risk here because most of the high tax states are "Blue", with no prospect for flipping "Red".    New York and California residents will feel this bite.

The federal deduction for state/local taxes has always puzzled me. Why would the federal government want to encourage states to raise taxes by subsidizing the cost of said taxes? The federal government should not be in the business of providing incentives for states to raise taxes. The residents of a state wanting to raise taxes should take up issue with the state, rather than ignoring reality and getting a refund from the federal government. Why should people who live in low tax states with fewer services subsidize people who live in high tax states? Makes no sense. Now New Yorkers and Californians can stop being deluded about their state's extremely high expenditures and seek tax relief there. 

 

[August1991]

12 hours ago, Bonam said:

The federal deduction for state/local taxes has always puzzled me. Why would the federal government want to encourage states to raise taxes by subsidizing the cost of said taxes? The federal government should not be in the business of providing incentives for states to raise taxes.

In Canada, we generally don't do that - aside from the 1950s Duplessis deal with Diefenbaker.

=====

Trump is making US taxes (aside from Duplessis) more like Canadian taxes.

In Canada, if you earn $1000 (X) - you pay 5% of X to the federal government and then 10% of X to the provincial government.  In Canada, there are - in general - no deductions for other taxes.

IMV, I prefer the Canadian taxation method: it makes clear who is paying what to whom.

Edited December 22, 2017 by August1991

[Bonam]

1 minute ago, August1991 said:

In Canada, if you earn $1000 (X) - you pay 5% of X to the federal government and then 10% of X to the provincial government.  In Canada, there are - in general - no deductions for other taxes.

IMV, I prefer the Canadian taxation method: it makes clear who is paying what.

Agreed. 

[August1991]

22 hours ago, bush_cheney2004 said:

Doesn't kill Obamacare, but weakens it for number of healthy Americans in the insurance pool and social "mandate".   The U.S. Supreme Court ruled that the mandate was in fact just another tax, despite Obama/Democrat claims to the contrary.   Many millions of IRS Form 1095 variants will no longer be required to prove health care insurance for each calendar month...

I disagree. It largely kills Obamacare.

With the Trump Tax deal, people now know that they don't have to buy health insurance. There's no penalty if you don't...

Massachusetts RomneyCare was based entirely on what we in Canada call 3rd Party Liability: You have to have a pink paper in your wallet when driving a car.

Well, Trump just said that you don't need a pink paper to walk down a street.

 

[Bonam]

10 minutes ago, August1991 said:

I disagree. It largely kills Obamacare.

With the Trump Tax deal, people now know that they don't have to buy health insurance. There's no penalty if you don't...

If people have to be forced by threat of government fines and penalties to buy a product, then it's not a product worth buying. 

[August1991]

1 hour ago, Bonam said:

If people have to be forced by threat of government fines and penalties to buy a product, then it's not a product worth buying. 

Disagree. If you drive a car in my neighbourhood (and injure me), I want someone (the government?) to verify that you have bought 3rd party insurance.

=====

Bonam, government bureaucrats/private lawyers: which method is cheaper?

Edited December 22, 2017 by August1991

[bush_cheney2004]

3 hours ago, August1991 said:

I disagree. It largely kills Obamacare.

With the Trump Tax deal, people now know that they don't have to buy health insurance. There's no penalty if you don't...

 

The Obamacare tax penalty did not motivate all uninsured Americans to buy in...anybody below a taxable income threshold could not be penalized by the IRS....and that is many millions of Americans who could not or would not play along.

The Obamacare individual mandate penalty was a tax that did not provide health insurance. Comparisons to car insurance are problematic, as discussed here:

http://www.theamericanconservative.com/2013/10/30/please-stop-comparing-health-insurance-to-car-insurance/

Trump's repeal is a reset back to the previous baseline of life's guarantee of death and taxes...not health care.

Edited December 22, 2017 by bush_cheney2004

[bush_cheney2004]

Tax reform notwithstanding, President Trump's critics on the left are very dismayed at the realization of his "irresponsible" (but longstanding Republican) goal.    Not only did this crude reality TV huckster and 1% club member defeat their Democrat candidate, he has actually achieved a stated goal in less than one year.

There will be no more silly talk about "no major legislation" signed into law.

[Argus]

8 hours ago, Bonam said:

If people have to be forced by threat of government fines and penalties to buy a product, then it's not a product worth buying. 

You are forced to pay for health care in Canada through taxes. You want to do without?

[Argus]

8 hours ago, August1991 said:

I disagree. It largely kills Obamacare.

With the Trump Tax deal, people now know that they don't have to buy health insurance. There's no penalty if you don't...

This will mean insurers will raise their rates. But here's the kicker. Subsidies under Obamacare, which still exist, are not a set amount, but a percentage. This means that as rates rise the subsidies rise. So this will cost the US government hundreds of millions extra in subsidies.

Edited December 22, 2017 by Argus

[August1991]

On 12/22/2017 at 10:42 AM, Argus said:

This will mean insurers will raise their rates. But here's the kicker. Subsidies under Obamacare, which still exist, are not a set amount, but a percentage. This means that as rates rise the subsidies rise. So this will cost the US government hundreds of millions extra in subsidies.

Uh, disagree.

Without the tax penalty, everything else is irrelevant. Romney based his medical insurance plan on everyone buying a private health plan.

Obamacare is dead.

 

[bush_cheney2004]

1 minute ago, August1991 said:

Without the tax penalty, everything else is irrelevant. Romney based his medical insurance plan on everyone buying a private health plan.

Obamacare is dead.

 

Obamacare was dead even with the tax penalty.

[August1991]

On 12/22/2017 at 6:00 AM, bush_cheney2004 said:

Tax reform notwithstanding, President Trump's critics on the left are very dismayed at the realization of his "irresponsible" (but longstanding Republican) goal.    Not only did this crude reality TV huckster and 1% club member defeat their Democrat candidate, he has actually achieved a stated goal in less than one year.

There will be no more silly talk about "no major legislation" signed into law.

b_c, no one on the US left seems to realize the biggest change: SALT.

Our own Conrad Black got it: 
 

Together they have achieved the greatest tax reform and reduction in over 30 years, largely emasculated Obamacare, put a rod on the backs of those states that elect incompetents like Jerry Brown and the Cuomos and lay the resulting state income taxes off on the whole country, repatriated trillions of dollars of corporate profit, exonerated over half the people from personal income taxes, reduced the return of 80 percent of taxpayers to a postcard, and produced conditions for 4 percent GDP growth next year.

http://www.conradmblack.com/1358/trump-whirlwind-year 

[bush_cheney2004]

4 minutes ago, August1991 said:

b_c, no one on the US left seems to realize the biggest change: SALT.

 

More directly, those high tax states gave Hillary Clinton more popular votes too, but she still lost to Trump.

Payback is a bitch.

 

[August1991]

11 minutes ago, bush_cheney2004 said:

 

More directly, those high tax states gave Hillary Clinton more popular votes too, but she still lost to Trump.

Payback is a bitch.

 

Amazing. The Saltwater people still don't understand that Trump has scr*wed them again - for all to see.

=====

I'm still surprised that you Americans had such a tax regime where Jerry Brown (for example) could raise taxes and then Californians could deduct this tax from their federal tax payment.

In Canada, if you earn X - you pay %of X to to the province and %of X to the federal government. No deductions - except in Quebec (agreed in the 1950s) and we are still talking about it.

Edited December 24, 2017 by August1991

[August1991]

Also, the personal deductions. No one in Canada/the US Left is explaining that Trump is raising the personal deductions to Canadian levels.

Fake News.

[bush_cheney2004]

43 minutes ago, August1991 said:

I'm still surprised that you Americans had such a tax regime where Jerry Brown (for example) could raise taxes and then Californians could deduct this tax from their federal tax payment.

In Canada....

 

California had property tax revolts during Brown's first tenure as governor many years ago by voter approved "propositions", which forces state, county, and local taxing districts to go after income and sales taxes instead.   The scheme works better if these very high taxes can be shielded from federal income tax.

Canada is a loose confederation of provinces, not a republic of states.

[August1991]

3 minutes ago, bush_cheney2004 said:

Canada is a loose confederation of provinces, not a republic of states.

Confederation?

Canada is a federal State, an idea borrowed from the United States: each province/state is sovereign.

Republic?

I wish.

[Argus]

On 12/23/2017 at 9:13 PM, August1991 said:

Amazing. The Saltwater people still don't understand that Trump has scr*wed them again - for all to see.

Well, there are quite a number of Republican seats in 'saltwater' states, so we'll see how they do in the mid-terms. 

[Bonam]

3 hours ago, Argus said:

Well, there are quite a number of Republican seats in 'saltwater' states, so we'll see how they do in the mid-terms. 

I think the supposed backlash from the tax reform is overblown in the media. The democrats did a great smear job on the tax bill and everyone thinks they will be paying way more tax come 2018. When they realize they aren't, and are in fact paying a bit less, the furor will die down. And even in NY/NJ/CA, the only people paying over 10k in state/local taxes are the top 5%, you know, the same people that vote Democrat so that they can pay their fair share. So they should be cheering the extra tax burden.

[Argus]

20 hours ago, Bonam said:

I think the supposed backlash from the tax reform is overblown in the media. The democrats did a great smear job on the tax bill and everyone thinks they will be paying way more tax come 2018. When they realize they aren't, and are in fact paying a bit less, the furor will die down. And even in NY/NJ/CA, the only people paying over 10k in state/local taxes are the top 5%, you know, the same people that vote Democrat so that they can pay their fair share. So they should be cheering the extra tax burden.

There is literally nothing about this tax reform for anyone to cheer about who isn't rich. Except for dumb people. Which, I suppose, includes everyone not rich who supports Trump. It vastly increases the debt by slashing taxes for big corporations, giving big tax breaks to Trump's family and business, and only gives a token reward to the middle class which will fade away in ten years, leaving them with the big bill to pay. And Republicans are already talking about the need to close the deficit by curtailing medicare, medicaid, and social security since these programs aren't needed by their donor base.

 

Edited December 26, 2017 by Argus

[Topaz]

Hey, Argus, aren't u glad u aren't an American?