This section is provoking some thought from me, and this is because I probably haven't taken enough time as yet to synthesise (fully) what's going on here.
From my own personal experience of Federal income taxes over the past 43 years - and yes: I have done and filed my own taxes throughout this entire period (with a brief exception when I was living overseas and had a Corporate Employer who was doing 'tax equalisation' for me,) here are my initial thoughts:
What used to be afforded to us all in "Schedule A" of Form 1040 (the Federal Tax Return for individuals,) was a set of categories in which a comprehensive range of "itemised" deductions (from our income) was allowed.
And this section of the Federal return does still exist.
*However*
What is known as the "Standard Deduction" on Form 1040, has risen to a level (it's presently $16000 or thereabouts I think,) at which it is quite hard for the usual wage-earner ever to have itemized deductions in Schedule A that will exceed.
In addition, itemized deductions in Schedule A were already pretty seriously throttled in a number of its categories
Medical deductions for example, were only allowed for those in excess of some percentage of one's AGI (adjusted gross income.) I think that percentage might have been something like 7% of one's AGI. And this meant that a person would have to had been out of pocket for quite a serious amount of medical expenses in order to get any sort of Schedule A deduction.
A thing that many people will be much more aware of recently though, relates to deductions for mortgage interest and property taxes on one's home.
Initially there were caps on the largest allowable mortgage upon which income paid was deductible. That used to be $1M (which admittedly is a pretty big mortgage loan,) but nevertheless ...
More recently, *no such deductions* are allowed at *all* at present.
This is the infamous "SALT" (State and Local Taxes) area of previously allowed Sched A deductions that were completely discontinued.
So, before putting you all into a total coma here:
The punch line of this section seems to me to be:
"We're really not going to allow much of any benefit to people who are 'wage earners' at all!"
And yes: while they are lowering the income tax rates a little bit in each of the Federal tax earned income brackets, they are still largely going to be taking a good 20% to 25% off rather most people's income who live down at this [woeful] end of the money-making scale.
Hint:
Earned income is *not* the way that the truly wealthy in our society *add* to their wealth, or *protect* it from Federal 'income' taxation.
I will be happy to develop a short tutorial about how people with *wealth* (as opposed to *income*) go about all of this.
*You* are doing all the hard work and diligence here.
And I think it's having some really important effect, and is an enormous help to just everyone really - as none of us would even know where to begin on going through this massive juggernaut.
This bill is the REAL Bunker Buster - the thing that is going to penetrate and disrupt the foundations of our Democratic processes in America
Thank you for simplifying the language of this bloated and intentionally misleading bill. HOWEVER—for most of us who read your substack what I need for each section is —what does this change, what does it mean for your average person and what, generally, is good or bad about this proposed section? What are the future implications? What is it going to “cost” us? Why would Heritage people think it is a good idea? Who does it harm, who does it help? Then we know how to fight back against it. Then we know what to demand if our congresspeople. For example, to hear that 16 million people will be kicked off Medicare is one fact (but your mind thinks—maybe they can get into another plan). But to be told—it also means that hundreds of rural hospitals will be forced to close—well that’s way more disturbing because it affects entire regions of states, both red and blue, and will have longer lasting detrimental effects—you can’t just start up a hospital after years of disuse, for example. We need CONTEXT!
This one was a little dry, and I usually try to includes pieces on how it affects us all, but for the Bill because it’s so long I’m working on just simplifying first so people can understand for themselves how it fits.
First, thank you for putting this out there. There are a few things I still need to reread- mainly because I just deal with a standard deduction. Thank you for doing the hard work.
I'm not sure I've really done any "hard" work here, I'm just spouting out a few immediate observations I can make about the evolution of the Federal Tax laws in my own experience of them for a 'certain stretch of time' now :)
I'm not a tax accountant, just an engineer.
And my idea about that, is that engineers are people who like to take things apart to try to figure out how they work :)
I've also had some different situations in my working life, involving: normal full-time employment by one company or another; International relocation - also while doing my Ph.D. when I was still employed by a then rather major US Corporation; Cessation of full-time employment while married to a partner who was employed; Self-employment as a consultant (in which I really just gave all of my time away without any monetary compensation;) And more recently, a somewhat gentlemanly demur in which I was able to devote my time to my two children while they were infants and then receiving their formative education.
I also have a mother who is in her 9th decade of life now - whose taxes I do for her (which are trivially simple,) but also dealt with both the State and Federal filings surrounding my father's end of life (and aspects relating to their estate planning accordingly.)
So I guess I have had a chance to experience the tax laws (both State and Federal - and in respect of a number of *different* states' taxation moreover,) as well as aspects of International tax laws and certain treaty arrangements between the US and the UK in consequence.
Just so you're (all) aware: *I* am *not* a billionaire (and not even close!) :)
I'm a guy who has really only ever worked as a paid employee of one University, and then three corporations, where I received a regular pay check, and did my best to contribute to their retirement programs, and otherwise save and be prudent with whatever income I had that was beyond what I needed to pay my rent and living expenses.
But I do know quite a few people who have come into astonishing wealth owing to their having been consequential owners of one or other of the companies that I've had quite a lot to do with.
Far from all of these are ill-intended, or were even chasing that kind of wealth (although *some* were definitely in the latter category.)
And so I have had a chance to see what that all looks like, as well as given some attention to how one deals with the matters of wealth *retention* (as well as growth,) once their in those rarified realms.
You don't have to look too hard to see how this works.
Start by looking at how Bill Gates and Warren Buffett have dealt with the extreme wealth that they have each accumulated.
A great deal of that has to do with not only *estate* taxation, but also both *income* and capital gains taxes.
I'm teasing you all a bit now I know, although I think you will quickly come to the same realisation about what's going on with their enormous Charitable Foundations :)
I'll share my own suggestion about how I think that all works, and then perhaps be resoundingly contradicted by someone who *is* an expert tax professional :)
This section is provoking some thought from me, and this is because I probably haven't taken enough time as yet to synthesise (fully) what's going on here.
From my own personal experience of Federal income taxes over the past 43 years - and yes: I have done and filed my own taxes throughout this entire period (with a brief exception when I was living overseas and had a Corporate Employer who was doing 'tax equalisation' for me,) here are my initial thoughts:
What used to be afforded to us all in "Schedule A" of Form 1040 (the Federal Tax Return for individuals,) was a set of categories in which a comprehensive range of "itemised" deductions (from our income) was allowed.
And this section of the Federal return does still exist.
*However*
What is known as the "Standard Deduction" on Form 1040, has risen to a level (it's presently $16000 or thereabouts I think,) at which it is quite hard for the usual wage-earner ever to have itemized deductions in Schedule A that will exceed.
In addition, itemized deductions in Schedule A were already pretty seriously throttled in a number of its categories
Medical deductions for example, were only allowed for those in excess of some percentage of one's AGI (adjusted gross income.) I think that percentage might have been something like 7% of one's AGI. And this meant that a person would have to had been out of pocket for quite a serious amount of medical expenses in order to get any sort of Schedule A deduction.
A thing that many people will be much more aware of recently though, relates to deductions for mortgage interest and property taxes on one's home.
Initially there were caps on the largest allowable mortgage upon which income paid was deductible. That used to be $1M (which admittedly is a pretty big mortgage loan,) but nevertheless ...
More recently, *no such deductions* are allowed at *all* at present.
This is the infamous "SALT" (State and Local Taxes) area of previously allowed Sched A deductions that were completely discontinued.
So, before putting you all into a total coma here:
The punch line of this section seems to me to be:
"We're really not going to allow much of any benefit to people who are 'wage earners' at all!"
And yes: while they are lowering the income tax rates a little bit in each of the Federal tax earned income brackets, they are still largely going to be taking a good 20% to 25% off rather most people's income who live down at this [woeful] end of the money-making scale.
Hint:
Earned income is *not* the way that the truly wealthy in our society *add* to their wealth, or *protect* it from Federal 'income' taxation.
I will be happy to develop a short tutorial about how people with *wealth* (as opposed to *income*) go about all of this.
Maybe you should be writing these, not me!😆
Oh no Ellie:
*You* are doing all the hard work and diligence here.
And I think it's having some really important effect, and is an enormous help to just everyone really - as none of us would even know where to begin on going through this massive juggernaut.
This bill is the REAL Bunker Buster - the thing that is going to penetrate and disrupt the foundations of our Democratic processes in America
Thank you ;)
Thank you for simplifying the language of this bloated and intentionally misleading bill. HOWEVER—for most of us who read your substack what I need for each section is —what does this change, what does it mean for your average person and what, generally, is good or bad about this proposed section? What are the future implications? What is it going to “cost” us? Why would Heritage people think it is a good idea? Who does it harm, who does it help? Then we know how to fight back against it. Then we know what to demand if our congresspeople. For example, to hear that 16 million people will be kicked off Medicare is one fact (but your mind thinks—maybe they can get into another plan). But to be told—it also means that hundreds of rural hospitals will be forced to close—well that’s way more disturbing because it affects entire regions of states, both red and blue, and will have longer lasting detrimental effects—you can’t just start up a hospital after years of disuse, for example. We need CONTEXT!
This one was a little dry, and I usually try to includes pieces on how it affects us all, but for the Bill because it’s so long I’m working on just simplifying first so people can understand for themselves how it fits.
First, thank you for putting this out there. There are a few things I still need to reread- mainly because I just deal with a standard deduction. Thank you for doing the hard work.
Dear Sherry,
I'm not sure I've really done any "hard" work here, I'm just spouting out a few immediate observations I can make about the evolution of the Federal Tax laws in my own experience of them for a 'certain stretch of time' now :)
I'm not a tax accountant, just an engineer.
And my idea about that, is that engineers are people who like to take things apart to try to figure out how they work :)
I've also had some different situations in my working life, involving: normal full-time employment by one company or another; International relocation - also while doing my Ph.D. when I was still employed by a then rather major US Corporation; Cessation of full-time employment while married to a partner who was employed; Self-employment as a consultant (in which I really just gave all of my time away without any monetary compensation;) And more recently, a somewhat gentlemanly demur in which I was able to devote my time to my two children while they were infants and then receiving their formative education.
I also have a mother who is in her 9th decade of life now - whose taxes I do for her (which are trivially simple,) but also dealt with both the State and Federal filings surrounding my father's end of life (and aspects relating to their estate planning accordingly.)
So I guess I have had a chance to experience the tax laws (both State and Federal - and in respect of a number of *different* states' taxation moreover,) as well as aspects of International tax laws and certain treaty arrangements between the US and the UK in consequence.
Just so you're (all) aware: *I* am *not* a billionaire (and not even close!) :)
I'm a guy who has really only ever worked as a paid employee of one University, and then three corporations, where I received a regular pay check, and did my best to contribute to their retirement programs, and otherwise save and be prudent with whatever income I had that was beyond what I needed to pay my rent and living expenses.
But I do know quite a few people who have come into astonishing wealth owing to their having been consequential owners of one or other of the companies that I've had quite a lot to do with.
Far from all of these are ill-intended, or were even chasing that kind of wealth (although *some* were definitely in the latter category.)
And so I have had a chance to see what that all looks like, as well as given some attention to how one deals with the matters of wealth *retention* (as well as growth,) once their in those rarified realms.
You don't have to look too hard to see how this works.
Start by looking at how Bill Gates and Warren Buffett have dealt with the extreme wealth that they have each accumulated.
A great deal of that has to do with not only *estate* taxation, but also both *income* and capital gains taxes.
I'm teasing you all a bit now I know, although I think you will quickly come to the same realisation about what's going on with their enormous Charitable Foundations :)
I'll share my own suggestion about how I think that all works, and then perhaps be resoundingly contradicted by someone who *is* an expert tax professional :)