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Tax reforms I would like to see

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Re: Tax reforms I would like to see
Post by Spacekiwi   » Sun Sep 13, 2015 12:14 am

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No one would fund the IRS/IRD for a start.....
biochem wrote:I doubt that would work in real life. Cool departments would get lots of money. Boring departments that are necessary to keep the country functioning would be funding deprived until the wheels fall off.
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Re: Tax reforms I would like to see
Post by Daryl   » Sun Sep 13, 2015 3:34 am

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Here no one gets a tax deduction for their principal residence mortgage or for the cost of getting to their normal work site. Your principal residence is capital gains tax free as well.
Investment properties have lots of deductions including interest and many are negative geared - they make a technical loss which you then write off against your salary. This is a good tax option but often a stupid business approach. You get a $1 of your tax money back but spend $2 to get it.
I'll upset some of the conservatives here by suggesting that the top tax bracket should be about 60% for over $200k pa. Don't forget that those earning big bucks have already had the benefit of the lower levels of tax for the first amount of reasonable pay. The higher tax just applies to the unjustifiable levels that CEOs and such get above that.
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Re: Tax reforms I would like to see
Post by dscott8   » Sun Sep 13, 2015 10:39 am

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Give religious organizations exemptions ONLY for money that is spent on actual charitable activities. NOT for huge, fancy buildings, NOT for dabbling in politics, NOT for marketing your church to bring in more members.
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Re: Tax reforms I would like to see
Post by biochem   » Sun Dec 03, 2017 12:49 am

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Tax reform is back again. The actual bills are impossible to evaluate since they are changing hourly and will continue to change as the House and Senate negotiate.

So looking at some of the individual ideas floated for the various tax plans on their own:

1. Significantly increase the standard deduction. Exactly how much is a moving target.

This idea has been floated here before in various forms. The idea is that with this increase only the upper middle class and the rich would itemize.

Winners: lower middle class and middle middle class who currently itemize save time, money (no paying tax preparers) and stress.

Losers: tax preparers, mildly realtors (if people don't get the mortgage deduction then some will be less likely to buy but since a big part of the American Dream is home ownership the impact would be limited)

In general I like the idea. Of course this is the kind of thing where the devil will be in the details, so I'll have to see what exactly the final proposal is.

2. Limit deduction on home mortgage interest to roughly a $500,000 mortgage (that would be a $650,000 house with the standard 20% down and of course buyers of more expensive properties could do it via 2 mortgages i.e. A $500,000 first mortgage and the rest in a second mortgage)

Really only impacts buyers of very expensive homes. Bigger impact on realtors who specialize in selling expensive homes.

Current cap is $1 million.

I like this idea as well.

3. Cap or eliminate deduction for local property and/or income tax

The people in some states have chosen to vote for high taxes. They get to deduct this off their federal taxes which means that people in low tax areas are paying higher federal taxes. The feeling from those people is that if people in some states want high taxes, that's their choice but don't expect the rest of the country to subsidize it.

Exact numbers are a moving target. It ranges from eliminate both and no one gets any local deductions. To set the deductions at the national average. To set deductions such that only the 3-5 states with the highest local taxes would be affected.

If this and #1 remain in the final bill, this provision would only impact the upper class and the rich, making it a tax increase for those two income levels.

In general I like this idea as well. I'd like to see the Feds disengage from involvement in local taxation. Let each locality make up their own minds without federal involvement.
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Re: Tax reforms I would like to see
Post by Annachie   » Sun Dec 03, 2017 1:41 am

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I'd remove the estate tax, assuming the relevent will is more than 10 years old.

(Obviously it would be more complex than that simple sentence.)
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Re: Tax reforms I would like to see
Post by biochem   » Sun Dec 03, 2017 1:48 am

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Annachie wrote:I'd remove the estate tax, assuming the relevent will is more than 10 years old.

(Obviously it would be more complex than that simple sentence.)


Why a 10 year old will?
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Re: Tax reforms I would like to see
Post by jontom   » Sun Dec 03, 2017 2:44 am

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If I were writing tax reform, here's three changes I'd make that aren't in the current bill:

1) Change tax treatment of inventory so that businesses are changed on positive change in inventory, not on gross inventory. No more inventory reduction sales, but also no more end-of-year tax gouges if the economy turns south.

2) Likewise, change from taxing all retained earnings to taxing the change in retained earnings. Lets businesses run in the black instead of running in the red to avoid current tax law. Particularly helpful for small businesses (proprietorships, partnerships, and S-corps).

3) Make capital gains taxable as normal income, but index the basis for the gain. This gives a tax preference to long-term investments but gets rid of the games played on short-term capital gains to get income reclassed as a capital gain in order to avoid paying full freight.
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Re: Tax reforms I would like to see
Post by biochem   » Sun Dec 03, 2017 8:32 am

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jontom wrote:If I were writing tax reform, here's three changes I'd make that aren't in the current bill:

1) Change tax treatment of inventory so that businesses are changed on positive change in inventory, not on gross inventory. No more inventory reduction sales, but also no more end-of-year tax gouges if the economy turns south.

2) Likewise, change from taxing all retained earnings to taxing the change in retained earnings. Lets businesses run in the black instead of running in the red to avoid current tax law. Particularly helpful for small businesses (proprietorships, partnerships, and S-corps).


This sounds reasonable.

Also the reduction of the corporate tax rate to the global average is reasonable. The current global tax rate is making the USA less competitive and frankly the big companies (Apple, GE etc) aren't paying it anyway. They can afford expensive lawyers and accountants to set up every tax dodge possible. So the real impact of our uncompetitive rate is falling on the small and mid sized corporations who can't afford this gamesmanship.


3) Make capital gains taxable as normal income, but index the basis for the gain. This gives a tax preference to long-term investments but gets rid of the games played on short-term capital gains to get income reclassed as a capital gain in order to avoid paying full freight.


Also another reasonable idea. There needs to be other loopholes closed as well including the ones which allow corporate executives and hedge fund managers to diguise most of their salary as capital gains.
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Re: Tax reforms I would like to see
Post by Daryl   » Sun Dec 03, 2017 10:27 pm

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I'm intrigued as to businesses being taxed on their inventory. Ours are taxed on net profit and loss. Inventory could possibly be depreciated if it lost value over time.
Our capital gains tax is paid at the individual or company's tax rate. You can discount it by indexation, or if you hold it over a year just cut it into half.
In regard to the new tax bill, it doesn't make sense to me. The two biggest financial challenges to the US are the growing national debt, and the growing inequity between the haves and have nots. Solution is to cut the top and corporate tax rates? How will that help? Anyone who says trickle down economics goes to the back of the class.
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Re: Tax reforms I would like to see
Post by Starsaber   » Sun Dec 03, 2017 11:33 pm

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Daryl wrote:I'm intrigued as to businesses being taxed on their inventory. Ours are taxed on net profit and loss. Inventory could possibly be depreciated if it lost value over time.
Our capital gains tax is paid at the individual or company's tax rate. You can discount it by indexation, or if you hold it over a year just cut it into half.
In regard to the new tax bill, it doesn't make sense to me. The two biggest financial challenges to the US are the growing national debt, and the growing inequity between the haves and have nots. Solution is to cut the top and corporate tax rates? How will that help? Anyone who says trickle down economics goes to the back of the class.


If either side actually does anything about the debt, they won't have it as a weapon to use against the other side, so whoever is in power just doesn't care about it.
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