Trump Tax Reform and Home Prices
- Thread starter Goriot
- Start date
NEW -> Contingent Buyer Assistance Program
I am not a 2% er in USA and likely not a 10% in Irvine. However, I don't get the argument that the rich don't pay their fair share, they do and what you want is to have the rich pay more % than you do. (I am sure all of us here in TI knows that even when the % tax rate is the same the higher the earning the higher taxes you pay).
I say eliminate any loop hole deductions that the rich has but other than that single tax rate is fine
I understand that. What I'm saying is the value of itemizing (a key selling point of home ownership for many) is significantly diminished if the standard deduction doubles and the deduction for state/local income tax paid is eliminated.
Say currently a person pays $10k in prop tax, $20k in mortgage interest, and $10k in CA income tax.
Current rules
$12,600 standard deduction
$40,000 itemized deduction ($10k prop tax, $20k interest, $10k state income tax)
-----------------
$27,400 additional federal deduction via itemizing
Proposed rules
$25,200 standard deduction
$30,000 itemized deduction ($10k prop tax, $20k interest)
-----------------
$4,800 additional federal deduction via itemizing
$40,000 current itemized deduction
$30,000 proposed itemized deduction
-----------------
$ 10,000 reduction in tax deduction (increased taxable income) under proposed rules
(Individual rates and bracket adjustments are being discussed too, but we don't know that info right now)
Results:
(1)This hypothetical arguably average Irvine homeowner will be paying federal income tax on an additional $10,000 of taxable income.
(2) If this person is choosing between renting (assume standard deduction) and owning (assume above itemized deductions), the proposed rules reduce the "tax incentive of home-ownership" by $22,600 ($27,400 additional federal tax deduction via itemizing under current rules vs $4,800 under proposed rules)
I agree, many wealthy people have done exceptional things to become wealthy. Hard work, sacrifice, great decision making. Their products/services often benefit a great number of people. There are some truly exceptional wealthy people out there and I am not at all interested in punishing them for their success.
I'm just pointing out that these proposals heavily benefit the wealthy/elite. And I'm talking the kind of wealth where $1M annual income $10M net assets will barely get your car valet parking to the wealth party.
As far as eliminating loop holes, it's a pipe dream because (1) the wealthy/elite will simply pivot and find new loop holes with the help of some of the brightest (and most expensive) attorneys and tax strategists and (2) the very people who would be harmed by "closing loop holes" are the ones with their hands in the pockets of the law makers.
Single flat tax sounds nice and simple, but all those people who make, say $30k and below, they currently might not pay much tax, but they likely spend every last dime they have on non-discretionary things (food, shelter, transportation, maybe education, etc). They're not saving for retirement. Their vacations are stay-cations. A 15% flat tax (or whatever) will break them financially unless their wages are raised. And guess what happens to the price of all those nice things we buy at costco and the stucco house dealership when all the prices of their labor (and their raw materials, transportation, etc) adjust for higher wage? Yep, the prices of our groceries, houses, coffee, meals out, etc will increase.
Not trying to shit on the flat tax or close the loop holes ideas (sorry if it came across that way), just saying there's no magic bullet. The system is extremely complicated and the power to change/manipulate it is very concentrated.
irvinehomeowner
Well-known member
I actually like the proposal. Gets rid of all the complication but keeps the big item deductions.
someguy
Active member
It's not all sunshine and rainbows. Consider the effect of removing the (itemized) deduction for state and local tax. That's a valuable deduction for many middle to upper income people living in states like CA with very high state income tax.
How about their proposal to double the standard deduction? That would make home ownership in many scenarios less of a tax deduction. Think of how mortgage interest & property taxes are an itemized deduction. Itemizing is valuable when total itemized deduction are > standard deduction. Doubling the standard deduction raises the bar for when itemizing (which 'softens' the cost of interest & property taxes) becomes valuable.
Couple those two things together and suddenly owning a home in CA gets much more expensive.
https://www.washingtonpost.com/busi...3fc6ff7faee_story.html?utm_term=.28f29609b831
How about their proposal to double the standard deduction? That would make home ownership in many scenarios less of a tax deduction. Think of how mortgage interest & property taxes are an itemized deduction. Itemizing is valuable when total itemized deduction are > standard deduction. Doubling the standard deduction raises the bar for when itemizing (which 'softens' the cost of interest & property taxes) becomes valuable.
Couple those two things together and suddenly owning a home in CA gets much more expensive.
https://www.washingtonpost.com/busi...3fc6ff7faee_story.html?utm_term=.28f29609b831
someguy
Active member
100% agree Bullsback, they're only proposals at this point, still a ways to go and much can change before the deal is inked. Just saying, the current proposals aren't so great for many mid/upper income Irvine homeowners.
Bail the estate tax -> sounds great if your estate is over $10 million
Lower tax on pass thru entities -> sounds great if you're a small/medium business owner
Lower C corp tax -> super if you have a vested interest in a C corp
Tax holiday for repatriation -> super if you have a vested interest in a US multinational corp
Eliminate AMT -> super if you're in that 'murky' income bracket (typically $250k+) with various AMT addbacks
Eliminate the medicare surtax -> super if your income is over $250k and you have investment income
Oh gotta throw the little guy something, how about doubling the standard deduction? Yah, look at em go over those scraps!
The proposals are a circle jerk for the wealthy and powerful.
Bail the estate tax -> sounds great if your estate is over $10 million
Lower tax on pass thru entities -> sounds great if you're a small/medium business owner
Lower C corp tax -> super if you have a vested interest in a C corp
Tax holiday for repatriation -> super if you have a vested interest in a US multinational corp
Eliminate AMT -> super if you're in that 'murky' income bracket (typically $250k+) with various AMT addbacks
Eliminate the medicare surtax -> super if your income is over $250k and you have investment income
Oh gotta throw the little guy something, how about doubling the standard deduction? Yah, look at em go over those scraps!
The proposals are a circle jerk for the wealthy and powerful.
Irvine Dream
New member
someguy said:
I am not a 2% er in USA and likely not a 10% in Irvine. However, I don't get the argument that the rich don't pay their fair share, they do and what you want is to have the rich pay more % than you do. (I am sure all of us here in TI knows that even when the % tax rate is the same the higher the earning the higher taxes you pay).
I say eliminate any loop hole deductions that the rich has but other than that single tax rate is fine
J
jmoney74
Guest
I just hate how the government taxes on money that is already taxed! I mean, I'm all for the rich paying their fair share but why do they have to get their estate taxed when they pass that money along? While Im on this subject.. why do we even have to pay sales tax? The complaints can go on forever. They just need to simplify it and never change it. Learn how to BUDGET!
J
jmoney74
Guest
I think as you fill out your tax form with the employer.. you check off how many dependents you have.. they should take out the right amount of tax! JUST SAYIN!!!
someguy
Active member
peppy said:
I understand that. What I'm saying is the value of itemizing (a key selling point of home ownership for many) is significantly diminished if the standard deduction doubles and the deduction for state/local income tax paid is eliminated.
Say currently a person pays $10k in prop tax, $20k in mortgage interest, and $10k in CA income tax.
Current rules
$12,600 standard deduction
$40,000 itemized deduction ($10k prop tax, $20k interest, $10k state income tax)
-----------------
$27,400 additional federal deduction via itemizing
Proposed rules
$25,200 standard deduction
$30,000 itemized deduction ($10k prop tax, $20k interest)
-----------------
$4,800 additional federal deduction via itemizing
$40,000 current itemized deduction
$30,000 proposed itemized deduction
-----------------
$ 10,000 reduction in tax deduction (increased taxable income) under proposed rules
(Individual rates and bracket adjustments are being discussed too, but we don't know that info right now)
Results:
(1)This hypothetical arguably average Irvine homeowner will be paying federal income tax on an additional $10,000 of taxable income.
(2) If this person is choosing between renting (assume standard deduction) and owning (assume above itemized deductions), the proposed rules reduce the "tax incentive of home-ownership" by $22,600 ($27,400 additional federal tax deduction via itemizing under current rules vs $4,800 under proposed rules)
someguy
Active member
Irvine Dream said:
I agree, many wealthy people have done exceptional things to become wealthy. Hard work, sacrifice, great decision making. Their products/services often benefit a great number of people. There are some truly exceptional wealthy people out there and I am not at all interested in punishing them for their success.
I'm just pointing out that these proposals heavily benefit the wealthy/elite. And I'm talking the kind of wealth where $1M annual income $10M net assets will barely get your car valet parking to the wealth party.
As far as eliminating loop holes, it's a pipe dream because (1) the wealthy/elite will simply pivot and find new loop holes with the help of some of the brightest (and most expensive) attorneys and tax strategists and (2) the very people who would be harmed by "closing loop holes" are the ones with their hands in the pockets of the law makers.
Single flat tax sounds nice and simple, but all those people who make, say $30k and below, they currently might not pay much tax, but they likely spend every last dime they have on non-discretionary things (food, shelter, transportation, maybe education, etc). They're not saving for retirement. Their vacations are stay-cations. A 15% flat tax (or whatever) will break them financially unless their wages are raised. And guess what happens to the price of all those nice things we buy at costco and the stucco house dealership when all the prices of their labor (and their raw materials, transportation, etc) adjust for higher wage? Yep, the prices of our groceries, houses, coffee, meals out, etc will increase.
Not trying to shit on the flat tax or close the loop holes ideas (sorry if it came across that way), just saying there's no magic bullet. The system is extremely complicated and the power to change/manipulate it is very concentrated.