# A Guide to the Tax Changes



## MULTIZ321 (Dec 30, 2017)

A guide to the Tax Changes
By Eugene Kiely/ FactCheck.org

"The Tax Cuts and Jobs Act is now law.

The House and Senate approved the bill on Dec. 19. It passed 227-203 in the House with no Democratic votes and 12 Republican “no” votes. The Senate then passed the bill 51-48 along strict party lines, with one Republican senator, John McCain, not voting.

Because of minor changes in the bill made by the Senate, the House was required to pass the bill again before sending it to the president. The House gave final approval on Dec. 20 by a 224 to 201 vote. Again, the bill received no Democratic support and was opposed by 12 Republicans. President Donald Trump signed it on Dec. 22.

Here we compare some of the major provisions of the new law with the previous tax code...."

*Individual Income Tax Rates*
The bill maintains seven individual income tax brackets, but changes the tax rates and thresholds. See the charts below.

*Previous law: *These are the tax brackets that individual taxpayers will use when filing taxes in 2018 for the 2017 tax year, according to the IRS (see pages 7-9).

*Single Filers
Tax Bracket* *Taxable Income *
10 percent Up to $9,325
15 percent $9,326-$37,950
25 percent $37,951-$91,900
28 percent $91,901-$191,650
33 percent $191,651-$416,700
35 percent $416,701-$418,400
39.6 percent Over $418,400......


Richard


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## Roger830 (Dec 31, 2017)

A big help to us retired folks on ss is the increase of the standard deduction from $12,700 to $24,000.


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## alwysonvac (Dec 31, 2017)

Roger830 said:


> A big help to us retired folks on ss is the increase of the standard deduction from $12,700 to $24,000.



Before you go jumping for joy, make sure you read everything. 
For example personal exemptions are eliminated and state & local tax deductions are capped.


*Personal Exemption*
_A personal exemption is the amount that you can deduct from your income for every taxpayer and most dependents claimed on your return.

Previous law: $4,050 per person, which means a married couple with two dependents would receive a personal exemption of $16,200.

New law: The personal exemption is eliminated. The exemption returns after 2025.
_
*State and Local Tax Deductions*
_Previous law: Taxpayers who itemize their taxes can deduct state and local property and real estate taxes, and either state and local income or sales taxes. For more information, see our item “The Facts on the SALT Deduction.”

New law: The SALT deduction will be capped at $10,000. The deduction limit ends after 2025._​


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## rapmarks (Dec 31, 2017)

alwysonvac said:


> Before you go jumping for joy, make sure you read everything.
> For example personal exemptions are eliminated and state & local tax deductions are capped.
> 
> 
> ...


It is funny how people don't realize that part.  I always thought seniors got an additional personal deduction.  I think a lot of people don't do their own taxes, so they don't realize this.


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## GetawaysRus (Dec 31, 2017)

Taxes are one of those things in life that are complicated, and I suspect that the GOP tax bill doesn't really simplify things.  I have been trying to understand what's in the bill (I read somewhere that it's nearly 1,100 pages long, but I can't even verify that), but I suspect that I won't fully understand how the tax bill affects my own personal situation until I complete my 2018 income taxes in April 2019.

Nancy Pelosi is a modern-day sage.  As she has said before, they had to pass the bill so that we can find out what's in it.


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## Roger830 (Dec 31, 2017)

alwysonvac said:


> Before you go jumping for joy, make sure you read everything.
> For example personal exemptions are eliminated and state & local tax deductions are capped.
> ​


​Since my wife retired, we have used the personal exemption even though in the high tax state of Connecticut.

I have always done my own taxes, except the first year I owned a rental property where I found an error when the expert did it.

The new tax law seems a positive for everyone except those with a high income in a high tax state.

The increase in the standard deduction is higher than the loss of the personal exemption for a senior couple.


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## SmithOp (Dec 31, 2017)

rapmarks said:


> It is funny how people don't realize that part.  I always thought seniors got an additional personal deduction.  I think a lot of people don't do their own taxes, so they don't realize this.



Seniors get additional standard deduction, I haven’t read the bill yet so don’t know if that changes.

If you are legally blind there is another bump to the standard deduction.

Don’t confuse Exemptions with Deductions.

From irs dot gov web site:
Increased Standard Deduction - Additional Standard Deductions

Age: If you are age 65 or older, you may increase your standard deduction by $1,550 if you file single or head-of-household. If you are married filing jointly and you OR your spouse is 65 or older, you may increase your standard deduction by $1,250. If BOTH you and your spouse are 65 or older, you may increase your standard deduction by $2,500.



Sent from my iPad using Tapatalk Pro


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## rapmarks (Dec 31, 2017)

Seniors will still get an additional deduction,close to the current one,  someone posted that elsewhere.
  Just roughly looking at my bracket, I don't think I am a winner.  Of the returns I do, neither of my children will win, my sister will save a little. 
But I won't have to stay up at night worrying about the estate tax.


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## VacationForever (Dec 31, 2017)

rapmarks said:


> It is funny how people don't realize that part.  I always thought seniors got an additional personal deduction.  I think a lot of people don't do their own taxes, so they don't realize this.



If you are over age 65, blind or disabled, you can tack on $1,300 per person to your standard deduction ($1,600 for unmarried taxpayers).


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## VacationForever (Dec 31, 2017)

I just realized that we are going to lose the deduction for financial advisor/management fees.  I am not complaining because the new tax law is not intended to help folks like us who can afford to pay for such fees.  Initially I had calculated that the law would save us about 6K in 2018, and now it is down to 1K savings.  I think we will end up paying more in the old tax system than the new by 2019.


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## Luanne (Dec 31, 2017)

GetawaysRus said:


> Nancy Pelosi is a modern-day sage.  As she has said before, they had to pass the bill so that we can find out what's in it.


Her comment has routinely been taken out of context.  
https://www.snopes.com/pelosi-healthcare-pass-the-bill-to-see-what-is-in-it/


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## pedro47 (Dec 31, 2017)

Richard, thanks for the facts check Information.


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## Passepartout (Dec 31, 2017)

Since my DW became eligible for Mandatory Minimum Distributions in this year, and I get hit with MMDs in '18, along with the new tax law's effects with be the need to either pay a LOT of taxes next year, OR make a LOT of charitable contributions. Probably both. Oh, and either arrange for some substantial 'withholding' or plan on writing a big check at tax time. Problem with that is if one writes the big check from tax advantaged accounts (you know, those IRAs we contributed before tax dollars to?) it just triggers yet another 'taxable event'.

Time to develop a strategy. We're contemplating forming a foundation. Sheesh!- I just thought those were just for RICH people! Which we aren't.

Jim


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## VacationForever (Dec 31, 2017)

Passepartout said:


> Since my DW became eligible for Mandatory Minimum Distributions in this year, and I get hit with MMDs in '18, along with the new tax law's effects with be the need to either pay a LOT of taxes next year, OR make a LOT of charitable contributions. Probably both. Oh, and either arrange for some substantial 'withholding' or plan on writing a big check at tax time. Problem with that is if one writes the big check from tax advantaged accounts (you know, those IRAs we contributed before tax dollars to?) it just triggers yet another 'taxable event'.
> 
> Time to develop a strategy. We're contemplating forming a foundation. Sheesh!- I just thought those were just for RICH people! Which we aren't.
> 
> Jim


Looking ahead, we are relieved that 32% starts at $315K, although we will be nowhere near that bracket, unless we win the lottery...


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## WinniWoman (Dec 31, 2017)

I am not worrying about any of it. I am going to just do my taxes like I always do on Tax Act and whatever it is it is. I only am concerned that being in NY we lose the state and local tax exemption and property tax deductions are capped at $10,000. But what can I do about it? Nothing... until I can move the hell out of here.


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## CalGalTraveler (Dec 31, 2017)

We live in one of the high tax states but are not rich. Higher income but higher cost of living...everything is relative.

This will have a devastating effect on our taxes and ability to stay in our beloved home of 18 years because of the SALT cap on state taxes.

I hope several things happen in the next year:

1) The state government finds a way around this to avoid high tax payers from moving out of state.
    a) Calif. is discussing moving state taxes into the payroll tax which will reduce our AGI and enable the write-off of what remains.
    b) converting the California school systems to 501c3 to transition school taxes to charitable write-offs.  Apparently several states already do this.
    c) lower property and state income taxes (pigs will fly)

2) The new regime after the 2018 mid-terms will repeal the SALT cap.


The wealthiest will establish corporations and pass-thru entities for their homes and rent them back to themselves to continue to get the full SALT deduction and stay in their homes. The middle will be forced to sell their homes and downsize to a smaller property tax footprint, leave the state, or become renters.

This legislation is a trojan horse...while some of your taxes may go down for now,* it will be more than offset by decreases to your Social Security,  and increases to Medicare/Health plan costs to pay for the newly increased deficit spend from this legislation*...just wait.


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## Roger830 (Dec 31, 2017)

Passepartout said:


> Since my DW became eligible for Mandatory Minimum Distributions in this year, and I get hit with MMDs in '18, along with the new tax law's effects with be the need to either pay a LOT of taxes next year, OR make a LOT of charitable contributions. Probably both. Oh, and either arrange for some substantial 'withholding' or plan on writing a big check at tax time. Problem with that is if one writes the big check from tax advantaged accounts (you know, those IRAs we contributed before tax dollars to?) it just triggers yet another 'taxable event'.
> 
> Time to develop a strategy. We're contemplating forming a foundation. Sheesh!- I just thought those were just for RICH people! Which we aren't.
> 
> Jim



I once worked for a small engineering consulting firm.

One time around tax time, the owner was complaining to me about his high taxes. I told him that he should consider himself fortunate, that I wished I paid more taxes. He turned many shades of red.


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## wilma (Dec 31, 2017)

Roger830 said:


> ​
> The new tax law seems a positive for everyone except those with a high income in a high tax state.



No, it will also be a negative for middle income people in high tax states......


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## Passepartout (Dec 31, 2017)

Roger830 said:


> One time around tax time, the owner was complaining to me about his high taxes. I told him that he should consider himself fortunate, that I wished I paid more taxes.


My dad once told me something similar. I recall it as wishing he made enough to pay a million dollars in taxes. 

It just demonstrates that the wealthy have problems, just like the less so. They are just different problems.

The point, though is that during our working lives we've been told to save and invest in those IRAs, then in the year you turn 70 1/2, you have what amounts to a semi-unexpected windfall that you have to pay taxes on, or give away.


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## Roger830 (Dec 31, 2017)

wilma said:


> No, it will also be a negative for middle income people in high tax states......



The $11,300 increase in the standard deduction and the $2000 child credit plus the lower rate should be a positive for most.


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## CalGalTraveler (Dec 31, 2017)

Roger830 said:


> The $11,300 increase in the standard deduction and the $2000 child credit plus the lower rate should be a positive for most.



I believe the personal exemption is now eliminated.  Wouldn't this elimination offset this benefit?  For our family that is a loss of $16,200.

By my math, $13,300 is pennies compared to the loss of $30,000+ SALT deduction and $16,200 loss of the personal exemption. Our children are over 18 (in college) so this is only $11,300 for us.  *A net increase of $33,000 per year in taxable income without a raise and same cost of living! *and growing if property taxes continue to increase.  Plus we are paying for 2 kids in college.

Can you imagine adding $33,000 to your tax bill every year?  Again, we are not rich (and will be much lesser so) after this change if we don't sell our home or do tax avoidance moves.


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## bogey21 (Dec 31, 2017)

mpumilia said:


> I am not worrying about any of it. I am going to just do my taxes like I always do on Tax Act and whatever it is it is...



I look at it the same way except I use Turbo Tax.

George


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## Luanne (Dec 31, 2017)

I'm suggesting to dh that we have our taxes figured using itemized deductions and just the standard deduction to see which way we come out better.


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## krj9999 (Dec 31, 2017)

Children 17 or older (even if still claimed as dependents) don't qualify for the $2k credit either.



CalGalTraveler said:


> I believe the personal exemption is now eliminated.  Wouldn't this elimination offset this benefit?  For our family that is a loss of $16,200.
> 
> By my math, $13,300 is pennies compared to the loss of $30,000+ SALT deduction and $16,200 loss of the personal exemption. Our children are over 18 (in college) so this is only $11,300 for us.  *A net increase of $33,000 per year in taxable income without a raise and same cost of living! *and growing if property taxes continue to increase.  Plus we are paying for 2 kids in college.
> 
> Can you imagine adding $33,000 to your tax bill every year?  Again, we are not rich (and will be much lesser so) after this change if we don't sell our home or do tax avoidance moves.


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## VacationForever (Dec 31, 2017)

CalGalTraveler said:


> I believe the personal exemption is now eliminated.  Wouldn't this elimination offset this benefit?  For our family that is a loss of $16,200.
> 
> By my math, $13,300 is pennies compared to the loss of $30,000+ SALT deduction and $16,200 loss of the personal exemption. Our children are over 18 (in college) so this is only $11,300 for us.  *A net increase of $33,000 per year in taxable income without a raise and same cost of living! *and growing if property taxes continue to increase.  Plus we are paying for 2 kids in college.
> 
> Can you imagine adding $33,000 to your tax bill every year?  Again, we are not rich (and will be much lesser so) after this change if we don't sell our home or do tax avoidance moves.


You are considered RICH by the middle class American's standard.  In a separate post you had indicated that you have multiple homes. We do not have issues with wealth disparity but this new tax law is not supposed to reduce taxes for the rich individuals, only for corporations and middle class Americans.


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## bobpark56 (Dec 31, 2017)

Luanne said:


> I'm suggesting to dh that we have our taxes figured using itemized deductions and just the standard deduction to see which way we come out better.


In theory, that's a good idea. In practice, it's a real pain in the fanny to try to gather all your 'deductible' expenses and figure out whether it's legal to deduct them or not. I'm guessing you have never personally tried to do this.


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## Luanne (Dec 31, 2017)

bobpark56 said:


> In theory, that's a good idea. In practice, it's a real pain in the fanny to try to gather all your 'deductible' expenses and figure out whether it's legal to deduct them or not. I'm guessing you have never personally tried to do this.


We do have an accountant prepare our tax returns.  However I DO collect all of our expenses and list them out for him.  We probably could do our own taxes, but just feel "safer" having someone else do them as they keep up on the tax laws and changes.  My dad did my taxes for years, he was an accountant.


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## Brett (Dec 31, 2017)

VacationForever said:


> You are considered RICH by the middle class American's standard.  In a separate post you had indicated that you have multiple homes. We do not have issues with wealth disparity but this new tax law is not supposed to reduce taxes for the rich individuals, only for corporations.



yes, an article in the Wall Street Journal said the *20% tax deduction* on pass through entities (sub chapter S, LLC, partnerships)  was "tailor made" for the commercial real estate market.
 "commercial real estate industry has hit a jackpot"
.
...    a huge *huge *financial windfall for real estate developers
Buh-lieve Me !


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## ecwinch (Dec 31, 2017)

*Moderator Note:  Just a friendly reminder from the mods, that political discussions are not permitted in any forum - including the TUG Lounge.  While the new tax changes are not a political topic per se, when the discussion starts to drift to the politics of the new tax plan then is not appropriate for the forum.*


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## Brett (Dec 31, 2017)

ecwinch said:


> *Moderator Note:  Just a friendly reminder for the mods, that political discussions are not permitted in any forum - including the TUG Lounge.  While the new tax changes are not a political topic per se, when the discussion starts to drift to the politics of the new tax plan then is not appropriate for the forum.*




right, you are only allowed to discuss the actual provisions of the new tax law and how they impact individuals and corporations  ....  certainly no political discussions are allowed here


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## VacationForever (Dec 31, 2017)

CalGalTraveler said:


> This legislation is a trojan horse...while some of your taxes may go down for now,* it will be more than offset by decreases to your Social Security,  and increases to Medicare/Health plan costs to pay for the newly increased deficit spend from this legislation*...just wait.



... and do you have DATA for this?


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## wilma (Dec 31, 2017)

VacationForever said:


> You are considered RICH by the middle class American's standard.  In a separate post you had indicated that you have multiple homes. We do not have issues with wealth disparity but this new tax law is not supposed to reduce taxes for the rich individuals, only for corporations and middle class Americans.



Middle class incomes vary by state and calif has much higher middle class incomes compared to the US average, look it up.


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## VacationForever (Dec 31, 2017)

wilma said:


> Middle class incomes vary by state and calif has much higher middle class incomes compared to the US average, look it up.


I am well aware of that and I was from California and even paid CA's "Millionaire" tax penalty when it was made retroactive as I had sold a home overseas several months before and honestly reported the gains, paying both CA income tax and Federal capital gains tax. I was simply responding that from other posts by CalGalTraveler, she would fall under the wealthy category. 

We now live in a no income tax state and with very low property tax.  We consider ourselves higher middle class and by 2019, our taxes will likely be higher in the new tax system than the old.  The new tax system is not supposed to benefit everyone.


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## Conan (Dec 31, 2017)

VacationForever said:


> This new tax law is not supposed to reduce taxes for the rich individuals, only for corporations.



I'm afraid that's not the intention nor the result if by rich you mean high-income.
The mean income to cross the line into the top 1% is somewhere around $500,000. The mean family income for everybody in the top 1% is nearer to $1,500,000.

Even if you're a married couple in the lower end of the 1% living in a no-tax state with say $400,000 of interest income and $400,000 of capital gains/qualified dividends, here's what the new law does for you (in addition to probably sparing you any estate tax exposure).

2017 *(updated since I ran my estimates through Turbotax)*
Adjusted gross income: $800,000
Deductions: $50,000 comprised of $20,000 real estate tax plus $30,000 charity
Deductions you're allowed: 35,414 because in your bracket some are phased out
Personal exemptions 0 (your income is too high so yours are phased out, which maybe explains why starting in 2018 everybody else in the US is losing theirs too)
Taxable income 764,586
Regular tax including cap gains/qualified dividends at favored rate 170,224
Alternative minimum tax 4,314
Net investment income tax 20,900
Total tax 195,438 (24.4% of 800,000)

2018
Adjusted gross income: $800,000
Deductions: $50,000 comprised of $20,000 real estate tax plus $30,000 charity
Deductions you're allowed: 40,000 because of the 10,000 cap on local tax (the phase out is repealed)
Personal exemptions 0 (repealed)
Taxable income 760,000
Regular tax including cap gains/qualified dividends at favored rate 136,000
(thanks to new lower brackets for ordinary income)
Alternative minimum tax 0
Net investment income tax 20,900
Total tax 157,000 (19.6% of 800,000)

Hey, you just got $38,000 richer!!


https://www.ineomobility.com/wp-content/uploads/2017/12/2018-Tax-Updates-2018-Federal-Tax-Info.pdf


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## dioxide45 (Dec 31, 2017)

mpumilia said:


> I am not worrying about any of it. I am going to just do my taxes like I always do on Tax Act and whatever it is it is. I only am concerned that being in NY we lose the state and local tax exemption and property tax deductions are capped at $10,000. But what can I do about it? Nothing... until I can move the hell out of here.





bogey21 said:


> I look at it the same way except I use Turbo Tax.
> 
> George



You won't need Tax Act or Turbo Tax. You will be able to do your taxes on a post card, remember?


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## isisdave (Dec 31, 2017)

The new plan is not a better deal if you're a couple with more than two kids, or if either of the two is over 16, or if you're a single parent with more than one kid.

Remember, that $2000 tax credit is an increase from $1000, not a new feature, so you have to put it that way into the equation with SD increase, exemption decrease, and CTC increase. Folks point out that $1000 credit increase vs $4000 exemption decrease is a wash if you're in the 25% bracket, and that's true as long as your one or two kids are under 17.  As I recall, they start costing a lot more when they go to college!


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## rapmarks (Dec 31, 2017)

bobpark56 said:


> In theory, that's a good idea. In practice, it's a real pain in the fanny to try to gather all your 'deductible' expenses and figure out whether it's legal to deduct them or not. I'm guessing you have never personally tried to do this.


I have done both, spent an hour just doing charitable, and in the end, turbo tax told me I would be better with the standard deduction.  I would guess that any accountant does both, or probably just eyeballs the documents and knows


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## CalGalTraveler (Dec 31, 2017)

VacationForever said:


> We now live in a no income tax state and with very low property tax.  We consider ourselves higher middle class and by 2019, our taxes will likely be higher in the new tax system than the old.  The new tax system is not supposed to benefit everyone.



LoL, if we were rich we would not be worrying about this. Like you, upper middle class would be most appropriate (yes we have one modest vacation home that is a rental), but we have worked hard all of our lives and saved.  And No this was not handed to us on a platter.

The upper middle class in high tax states, (and possibly in low tax states too per @VacationForever note above) are realizing higher taxes and will be squeezed. So much for rewarding people for working hard and saving all of their lives.


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## rapmarks (Dec 31, 2017)

Conan said:


> I'm afraid that's not the intention nor the result if by rich you mean high-income.
> The mean income to cross the line into the top 1% is somewhere around $500,000. The mean family income for everybody in the top 1% is nearer to $1,500,000.
> 
> Even if you're a married couple in the lower end of the 1% living in a no-tax state with say $400,000 of interest income and $400,000 of capital gains/qualified dividends, here's what the new law does for you (in addition to probably sparing you any estate tax exposure).
> ...


Thanks for the figures,  I see no mention of the amt in these figures.  What are the effects of amt in 2018


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## WinniWoman (Dec 31, 2017)

dioxide45 said:


> You won't need Tax Act or Turbo Tax. You will be able to do your taxes on a post card, remember?




Yeah right. Where are these so called postcards for filing? ha! ha!


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## CalGalTraveler (Dec 31, 2017)

VacationForever said:


> ... and do you have DATA for this?



Yes there is data. But as the moderator requested, I don't want to get political here.  Just google what's being openly discussed for next year's legislative agenda.


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## Roger830 (Dec 31, 2017)

We live in a resort town where the population doubles in the summer.

There are ocean front houses that are usually empty with property tax of $20,000 to $50,000 per year. When those owners deduct those taxes,  others pay more to make up for it.

The same is true for low tax states. Those residents pay a higher federal tax because residents in high tax states are not paying their fair share because of deductions.


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## bluehende (Dec 31, 2017)

Roger830 said:


> We like in a resort town where the population doubles in the summer.
> 
> There are ocean front houses that are usually empty with property tax of $20,000 to $50,000 per year. When those owners deduct those taxes,  others pay more to make up for it.
> 
> The same is true for low tax states. Those residents pay a higher federal tax because residents in high tax states are not paying their fair share because of deductions.



The high tax states CA,NY, and NJ do not get back as much per dollar on their tax dollars than the low tax states.  I do not live in a high tax state but that seems unfair also.  They would argue that they pay more than their fair share.


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## Conan (Jan 1, 2018)

rapmarks said:


> Thanks for the figures,  I see no mention of the amt in these figures.  What are the effects of amt in 2018


 
The people in my example didn't pay *much *AMT in 2017 because they live in a no income tax state (and they don't have fancy tax preference items). *I've updated my example to show their AMT.*

The 2018 tax law keeps the AMT on paper, but limiting everyone's state and local tax deduction to $10,000 eliminates AMT for most regular people. You can think of the new law as "AMT-for-all," since the AMT for most of us who pay it works by taking away your state and local tax deductions and your personal exemptions. The new regular tax addresses that directly.


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## WinniWoman (Jan 1, 2018)

bluehende said:


> The high tax states CA,NY, and NJ do not get back as much per dollar on their tax dollars than the low tax states.  I do not live in a high tax state but that seems unfair also.  They would argue that they pay more than their fair share.



Exactly.


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## Roger830 (Jan 1, 2018)

In our town we get very little back from the state, most of the money goes to the failed cities.  Similar has been done at the federal level.

"From each according to his ability, to each according to his needs."


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## bogey21 (Jan 1, 2018)

I'm curious.  What do the high tax states do with all the money?  I live in Texas (no State Income tax; Property taxes on a $200,000 house less than $4,000; and a 8.25% Sales Tax) and we seem to get along just fine.  One negative is recen increase in toll roads.  But the money generated from taxes in high tax states must go somewhere.

George


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## Roger830 (Jan 1, 2018)

bogey21 said:


> I'm curious.  What do the high tax states do with all the money?
> But the money generated from taxes in high tax states must go somewhere.
> George



In Connecticut, we didn't have an income tax until about 25 years ago.

Now this year we had a $2 billion deficit in a $20 billion budget, looking at more deficits in the future.
Much of the blame is the underfunded pension system and the slow growth economy because of people and companies leaving the state.


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## rapmarks (Jan 1, 2018)

Conan said:


> The people in my example didn't pay AMT in 2017 because they live in a no income tax state (and they don't have fancy tax preference items).
> 
> The 2018 tax law keeps the AMT on paper, but limiting everyone's state and local tax deduction to $10,000 eliminates AMT for most regular people. You can think of the new law as "AMT-for-all," since the AMT for most of us who pay it works by taking away your state and local tax deductions and your personal exemptions. The new regular tax addresses that directly.


I do not itemize, I pay the amt.   My income is from dividends, capital gain distributions, iras, annuities etc. some are from bonds, but not much.


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## dioxide45 (Jan 1, 2018)

bogey21 said:


> I'm curious.  What do the high tax states do with all the money?  I live in Texas (no State Income tax; Property taxes on a $200,000 house less than $4,000; and a 8.25% Sales Tax) and we seem to get along just fine.  One negative is recen increase in toll roads.  But the money generated from taxes in high tax states must go somewhere.
> 
> George


That discussion would probably get political.


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## Conan (Jan 1, 2018)

rapmarks said:


> I do not itemize, I pay the amt.   My income is from dividends, capital gain distributions, iras, annuities etc. some are from bonds, but not much.


Capital gain distributions don't trigger AMT but you're right it's possible to take the standard deduction and still pay AMT. Here's an article, assuming it gets the numbers right, saying for 2018 you need to be married and have AGI in the $290K-$765K range to be in that position.







> The Senate Would Keep The Individual AMT, But Turn It Into A Very Different Tax
> http://www.taxpolicycenter.org/taxvox/senate-would-keep-individual-amt-turn-it-very-different-tax
> With about 90 percent of preferences eliminated from the regular tax, why would anyone pay the AMT? The answer: Because the Senate bill slashes individual income tax rates so much that _all_ married couples with ordinary income between $290,000 and $765,000 would owe AMT even if they only claimed the standard deduction. In this simplest case, nobody with income outside this range would owe AMT. It turns out that single filers would be spared (because the Senate bill cuts tax rates more for high-income married couples than for singles), but they make up only about 10 percent of tax units in the affected income range.


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## VacationForever (Jan 1, 2018)

bluehende said:


> The high tax states CA,NY, and NJ do not get back as much per dollar on their tax dollars than the low tax states.  I do not live in a high tax state but that seems unfair also.  They would argue that they pay more than their fair share.


Here is the problem... we are trying to mix federal taxes with state taxes.  State taxes do not flow to the federal government and hence the federal taxes really do not need to give any deductions/breaks for state taxes paid.  We paid alot of taxes in California and we did not like how the tax dollars were spent and hence we moved.  Where we live now is alot safer, lower homeless population and lower crime.  

We had dinner with a couple last night and they commute back to Calfornia regularly to see their kids and grandkids.  We have not done the comparsion but they said CA gasoline is 73 cents per gallon more expensive and yet the roads are more broken.  California has high taxes and that is the price one pays to live there.  The weather cannot be beaten.  We have been to NY 3 times, the first 2 times we really enjoyed and the 3rd time which was in March 2017, and we really did not want to go back anymore.  Many of the streets were filthy and smelly, and saw many homeless people.  One has to wonder why are high tax states having more issues with infrastructure, cleanliness, crime and homelessness than the low or no tax states.  Where we live now, everything feels right as can be in the US.


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## CalGalTraveler (Jan 1, 2018)

Conan said:


> The people in my example didn't pay AMT in 2017 because they live in a no income tax state (and they don't have fancy tax preference items).
> 
> The 2018 tax law keeps the AMT on paper, but limiting everyone's state and local tax deduction to $10,000 eliminates AMT for most regular people. You can think of the new law as "AMT-for-all," since the AMT for most of us who pay it works by taking away your state and local tax deductions and your personal exemptions. The new regular tax addresses that directly.



That's an interesting perspective. So how would $5000 in AMT paid that are now eliminated compare to $25,000 in lost property and state tax write-offs?  Would taxes be lower? equal or pay more?


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## Brett (Jan 1, 2018)

bogey21 said:


> I'm curious.  What do the high tax states do with all the money?  I live in Texas (no State Income tax; Property taxes on a $200,000 house less than $4,000; and a 8.25% Sales Tax) and we seem to get along just fine.  One negative is recen increase in toll roads.  But the money generated from taxes in high tax states must go somewhere.
> 
> George



you can easily google the budgets of high tax states - CA, Oregon, NY, etc. to find out "where the money goes"
Obviously if a state had low sales tax, low income tax and low property taxes and great pensions we'd all move there 
(except for Alaska)


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## Nickfromct (Jan 1, 2018)

.


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## CalGalTraveler (Jan 1, 2018)

Brett said:


> you can easily google the budgets of high tax states - CA, Oregon, NY, etc. to find out "where the money goes"
> Obviously if a state had low sales tax, low income tax and low property taxes and great pensions we'd all move there
> (except for Alaska)



I would like to see an comparative analysis of this if anyone could find one to share. It would be nice to see if this reform incents these states to lower taxes (pigs will fly) or at least put a cap on it. FWIW...California will soon be reaping pot profits which could offset some taxes.

If the states do nothing about their taxes, and with an aging population who is already inclined to downsize, this may go down in history as one of the great U.S. migrations similar to the drive west and the dust bowl.  Californians/New Yorkers/New Jersey etc. will have great incentive to move to the low tax states. The low tax states will inherit a large increase in population with all of the inflation of costs, "woes", norms etc. and this will drastically change the composition of those states for better or for worse.


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## bluehende (Jan 1, 2018)

VacationForever said:


> Here is the problem... we are trying to mix federal taxes with state taxes.  State taxes do not flow to the federal government and hence the federal taxes really do not need to give any deductions/breaks for state taxes paid.  We paid alot of taxes in California and we did not like how the tax dollars were spent and hence we moved.  Where we live now is alot safer, lower homeless population and lower crime.
> 
> We had dinner with a couple last night and they commute back to Calfornia regularly to see their kids and grandkids.  We have not done the comparsion but they said CA gasoline is 73 cents per gallon more expensive and yet the roads are more broken.  California has high taxes and that is the price one pays to live there.  The weather cannot be beaten.  We have been to NY 3 times, the first 2 times we really enjoyed and the 3rd time which was in March 2017, and we really did not want to go back anymore.  Many of the streets were filthy and smelly, and saw many homeless people.  One has to wonder why are high tax states having more issues with infrastructure, cleanliness, crime and homelessness than the low or no tax states.  Where we live now, everything feels right as can be in the US.



If I answer this we will be breaking the no politics rule here.  No one likes taxes.  It is my observation though that tax breaks others get are totally unfair, while the ones I get are essential to life seems to be a common attitude.


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## rapmarks (Jan 1, 2018)

CalGalTraveler said:


> That's an interesting perspective. So how would $5000 in AMT paid that are now eliminated compare to $25,000 in lost property and state tax write-offs?  Would taxes be lower? equal or pay more?


I bet thy would pay the amt in 2017, it wasn't included in the example


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## Nickfromct (Jan 1, 2018)

bluehende said:


> If I answer this we will be breaking the no politics rule here.  No one likes taxes.  It is my observation though that tax breaks others get are totally unfair, while the ones I get are essential to life seems to be a common attitude.



If I’m not mistaken, the AMT occurs because certain deductions are disallowed after you make a certain level of earnings. I believe some of the SALT deductions are included  in the AMT calcs. So if these expenses are capped, then the AMT should be reduced.


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## Conan (Jan 1, 2018)

rapmarks said:


> I bet thy would pay the amt in 2017, it wasn't included in the example



I went back and used 2017 Turbotax to refine the example on the prior page. There is some AMT in 2017 but the total taxes I had before are about the same.


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## VacationForever (Jan 2, 2018)

CalGalTraveler said:


> I would like to see an comparative analysis of this if anyone could find one to share. It would be nice to see if this reform incents these states to lower taxes (pigs will fly) or at least put a cap on it. FWIW...California will soon be reaping pot profits which could offset some taxes.
> 
> If the states do nothing about their taxes, and with an aging population who is already inclined to downsize, this may go down in history as one of the great U.S. migrations similar to the drive west and the dust bowl.  Californians/New Yorkers/New Jersey etc. will have great incentive to move to the low tax states. The low tax states will inherit a large increase in population with all of the inflation of costs, "woes", norms etc. and this will drastically change the composition of those states for better or for worse.


So true... we meet so many people/retirees here in our development, they are mostly transplants from California and New York.  Some even buy homes here and relocate their families while they still have businesses in New York.  They simply fly back and forth through the year.  I suspect that they do that to show residency here which means no taxes on their investments at the state level, while they still pay taxes for their income from California/New York.  There is one family with a young boy and he goes to school here while his father has his business in New York.  Again, with lower crime rate and a more pleasant environment, they feel that it is better to raise their son here.


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## taterhed (Jan 2, 2018)

There are currently efforts seeking sponsorship to shift state tax deductions to the employer side of the deductions (net zero for the employer) to reduce the SALT impact in some states. 

Be an interesting year....


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## CalGalTraveler (Jan 2, 2018)

On the positive side:  For business owners the pass-thru provision looks quite lucrative. Even as a service business you can be taxes at the 20% rate if if you can keep your income under the thresholds below.

_“If you are a specified service business and your taxable income exceed the threshold amount plus the phase in range ($207,500 for individual taxpayers and $415,000 for married taxpayers filing jointly), then you lose the deduction completely. In that case, the old pass-through rules apply meaning you pay tax using your individual tax rate.”

New York Times (more readable)
https://www.nytimes.com/interactive/2017/12/20/us/politics/small-business-tax-cut-pass-throughs.html_

_(technical article)
https://www.forbes.com/sites/kellyp...usinesses-pass-through-entities/#fe42056de33a
_

Implications?  IMO

More employees are going to push to become pass-thru freelancers so they can get the 20% rate.  However they will need to find affordable healthcare to make it financially feasible.

it appears that many professional service providers (lawyers, consultants etc.) will have incentive to move into semi-retirement to stay under the thresholds at 20% (and move to lower tax states).


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## CalGalTraveler (Jan 3, 2018)

It now appears that states are scrambling to outmaneuver the new SALT deduction cap. I am reading that California is reported to be introducing a state bill this week that creates a state 501c3 charity which enables taxpayers to donate their property taxes to the newly created state foundation in order to get the full charitable write-off or you can pay your state taxes as usual (against the federal cap). They claim that a number of states including Florida and South Carolina do this already. No mention of cutting budgets...

https://www.mercurynews.com/2018/01...maneuver-a-new-federal-cap-on-tax-deductions/


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## taterhed (Jan 3, 2018)

CalGalTraveler said:


> It now appears that states are scrambling to outmaneuver the new SALT deduction cap. I am reading that California is reported to be introducing a state bill this week that creates a state 501c3 charity which enables taxpayers to donate their property taxes to the newly created state foundation in order to get the full charitable write-off or you can pay your state taxes as usual (against the federal cap). They claim that a number of states including Florida and South Carolina do this already. No mention of cutting budgets...



I saw this along with the consideration for shifting state taxes to the employer side of the ledger....but I simply couldn't post the 'charitable contribution' aspect with (laughing) and falling off my chair.


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## WinniWoman (Jan 3, 2018)

VacationForever said:


> Here is the problem... we are trying to mix federal taxes with state taxes.  State taxes do not flow to the federal government and hence the federal taxes really do not need to give any deductions/breaks for state taxes paid.  We paid alot of taxes in California and we did not like how the tax dollars were spent and hence we moved.  Where we live now is alot safer, lower homeless population and lower crime.
> 
> We had dinner with a couple last night and they commute back to Calfornia regularly to see their kids and grandkids.  We have not done the comparsion but they said CA gasoline is 73 cents per gallon more expensive and yet the roads are more broken.  California has high taxes and that is the price one pays to live there.  The weather cannot be beaten.  We have been to NY 3 times, the first 2 times we really enjoyed and the 3rd time which was in March 2017, and we really did not want to go back anymore.  Many of the streets were filthy and smelly, and saw many homeless people.  One has to wonder why are high tax states having more issues with infrastructure, cleanliness, crime and homelessness than the low or no tax states.  Where we live now, everything feels right as can be in the US.



I'll tell you where they go in NY. Our property taxes go to Medicaid, Welfare, Highway dept. The school taxes just about surpass the property taxes.
A lot of both goes to salaries and pensions and health insurance. You need a third income just to afford the two of those, never mind what you pay in state and local from your pay and when you file.

NY is a welfare state that welcomes all to fleece the system. Come on in- we have a program for everything.

Meanwhile, our roads are crap and homeowners cannot afford these taxes any longer. That is why there are so many foreclosed homes up our way.


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## VacationForever (Jan 3, 2018)

mpumilia said:


> I'll tell you where they go in NY. Our property taxes go to Medicaid, Welfare, Highway dept. The school taxes just about surpass the property taxes.
> A lot of both goes to salaries and pensions and health insurance. You need a third income just to afford the two of those, never mind what you pay in state and local from your pay and when you file.
> 
> NY is a welfare state that welcomes all to fleece the system. Come on in- we have a program for everything.
> ...


... and CA is very similar in terms of use of taxes.


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## CalGalTraveler (Jan 3, 2018)

and Calif is expected to add $5 Billion to the Calif economy of taxable revenue to the coffers from the newly legalized marijuana industry...


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## isisdave (Jan 3, 2018)

VacationForever said:


> ... and CA is very similar in terms of use of taxes.


Not really.  In California, education costs are paid from state funds, while in many Eastern states, they are paid from a local school tax which is placed against property values, and is frequently MORE than either state income tax or other (usually county) property taxes, which pay for fire and police, road maintenance, jail, public welfare, possibly an airport, etc.

The state-funded education model was supposed to make public education more equal by providing the same number of dollars per student (although providing education has different costs in different localities). I used to live in New York, and have friends in New Jersey who report that a school budget usually has to be approved by voters, and that this is VERY difficult when school taxes on a $200,000 house might be $10,000. As I recall, if the voters won't pass the budget, then an "austerity" budget was imposed, which basically meant a very minimal school year without much in the way of enrichment or extracurriculars.

Neither system seems ideal to me, but the "Eastern" system seems a lot more stressful.


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## Talent312 (Jan 3, 2018)

Brett said:


> Obviously if a state had low sales tax, low income tax and low property taxes and great pensions we'd all move there...



That sounds a lot like Florida, but don't move here.

"Most of the people who retire in Florida are wrinkled and they lean on a crutch.
And mobile homes are smotherin' my Keys. I hate those bastards so much."
-- Jimmy Buffett, "Migration" (1974)

.


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## WinniWoman (Jan 3, 2018)

isisdave said:


> Not really.  In California, education costs are paid from state funds, while in many Eastern states, they are paid from a local school tax which is placed against property values, and is frequently MORE than either state income tax or other (usually county) property taxes, which pay for fire and police, road maintenance, jail, public welfare, possibly an airport, etc.
> 
> The state-funded education model was supposed to make public education more equal by providing the same number of dollars per student (although providing education has different costs in different localities). I used to live in New York, and have friends in New Jersey who report that a school budget usually has to be approved by voters, and that this is VERY difficult when school taxes on a $200,000 house might be $10,000. As I recall, if the voters won't pass the budget, then an "austerity" budget was imposed, which basically meant a very minimal school year without much in the way of enrichment or extracurriculars.
> 
> Neither system seems ideal to me, but the "Eastern" system seems a lot more stressful.



And just live in a rural, but populated  area like ours where most of the people work for the school system or local government - the biggest employers in the counties- and guess how they vote? The rest of us don’t have a chance.


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## bobpark56 (Jan 3, 2018)

Roger830 said:


> We live in a resort town where the population doubles in the summer.
> 
> There are ocean front houses that are usually empty with property tax of $20,000 to $50,000 per year. When those owners deduct those taxes,  others pay more to make up for it.
> 
> The same is true for low tax states. Those residents pay a higher federal tax because residents in high tax states are not paying their fair share because of deductions.


This gets to the heart of the issue. Permitting people to deduct state and local taxes subsidizes taxpayers in states with the highest tax rates, at the cost of higher federal tax rates for us all. This in turn encourages governments in those states to continue to spend more per capita than governments in more efficiently managed states. Reducing/eliminating the indirect tax subsidies should incentivize state and local governments to be more efficient (i.e., reduce spending)...else the politicians will be hearing about it from their voters.


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## rickandcindy23 (Jan 3, 2018)

Our property taxes are very low in Colorado, but the counties re-assessed this year, and we are expecting at least 1/3 higher taxes for next year.  Still, it will probably be less than $2,500 for our house.  We live in a very average house.


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## rickandcindy23 (Jan 3, 2018)

Tax rates in 1930 were much higher.  We have never seen rates as high as in the 30's and 40's.

The economy boomed, growing by *59 percent *between 1921 and 1929. In 1930, Herbert Hoover raised tax rates from *25 percent* to a maximum of *63 percent*, and Franklin Roosevelt boosted them to *79 percent* later in the decade.

The 1940 top federal tax rate on regular income was *81.1%* while the rate on capital gains was *30%*.

In 1944-45, “the most progressive tax years in U.S. history,” the *94%* rate applied to any income above $200,000 ($2.4 million in 2009 dollars, given inflation). In World War Two, tax law revisions increased the numbers of “those paying some income taxes” from *7%* of the U.S. population (1940) to *64%* by 1944.


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## TUGBrian (Jan 3, 2018)

I think its important to note that most things being argued (both for and against) are for those of us who itemize our returns, and ignores the fact that the overwhelming majority of tax filing american households do not itemize, and instead take the standard deduction each year.


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## VacationForever (Jan 3, 2018)

isisdave said:


> Not really.  In California, education costs are paid from state funds, while in many Eastern states, they are paid from a local school tax which is placed against property values, and is frequently MORE than either state income tax or other (usually county) property taxes, which pay for fire and police, road maintenance, jail, public welfare, possibly an airport, etc.
> 
> The state-funded education model was supposed to make public education more equal by providing the same number of dollars per student (although providing education has different costs in different localities). I used to live in New York, and have friends in New Jersey who report that a school budget usually has to be approved by voters, and that this is VERY difficult when school taxes on a $200,000 house might be $10,000. As I recall, if the voters won't pass the budget, then an "austerity" budget was imposed, which basically meant a very minimal school year without much in the way of enrichment or extracurriculars.
> 
> Neither system seems ideal to me, but the "Eastern" system seems a lot more stressful.


No so fast!  California passed Mello-Roos taxes on properties many years ago, limiting to 1% of appraised property values in addition to the standing 1% property taxes.  Mello-Roos tax is used to build or expand schools, and infrastructure.  Most new developments make use of this and bump property taxes to about 2% at newly developed areas.  The last house that I bought and sold was in a new development.  We had Mello-Roos on everything - school district, fire department etc etc...  If you live in an older area or a house that is rebuilt in an old area you will hardly see Mello-Roos.  Even then, lawmakers love to put a new bond for school at local election time, which usually gets passed, adding to the property tax again.


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## VacationForever (Jan 3, 2018)

Talent312 said:


> "Obviously if a state had low sales tax, low income tax and low property taxes and great pensions we'd all move there..."
> 
> That sounds a lot like Florida, but don't move here.
> 
> ...



Similarly here, while local sales tax is 8.25%, there is zero income tax, 0.5% property taxes, very low crime rate.  Properties are all very new, developed in the past 20 to 30 years, each under a Master Plan and no traffic congestion.  Pensions are associated with the employer so it is not unique to any state.  Alot of "us" move here.  Beautiful skyline, mountains and scenery.  But please don't move here, it will jack up our prices. LOL


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## klpca (Jan 3, 2018)

VacationForever said:


> Similarly here, while local sales tax is 8.25%, zero income tax, 0.5% property taxes, very low crime rate.  Properties are all very new, developed in the past 20 to 30 years, each under a Master Plan and no traffic congestion.  Pensions are associated with the employer so it is not unique to any state.  Alot of "us" move here.  Beautiful skyline, mountains and scenery.  But please don't move here, it will jack up our prices. LOL


Interesting - my cousin in Reno lives in an upscale area where they are having a terrible time with their local schools due to overcrowding. They tried to pass a bond to expand the local school, but it didn't pass. Her daughter's third grade class was set up in the library with a divider between the class and the stacks. They pulled their kids out and now send them to private school.


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## klpca (Jan 3, 2018)

VacationForever said:


> No so fast!  California passed Mello-Roos taxes on property many years ago, limiting to 1% of appraised property values.  Mello-Roos tax is used to build or exand schools, and infrastructure.  Most new developments make use of this and bump property taxes to about 2% at newly developed areas.  The last house that I bought and sold was in a new development.  We had Mello-Roos on everything - school district, fire department etc etc...  If you live in an older area or a house that is rebuilt in an old area you will hardly see Mello-Roos.  Even then, lawmakers love to put a new bond for school at local election time, which usually gets passed, adding to the property tax again.


I never understand why people willingly buy in a Mello Roos district, but in our area it is new and shiny so people line up to buy. Drive 5 miles south, pay about half in property tax, and stay in the exact same school district.


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## bluehende (Jan 3, 2018)

TUGBrian said:


> I think its important to note that most things being argued (both for and against) are for those of us who itemize our returns, and ignores the fact that the overwhelming majority of tax filing american households do not itemize, and instead take the standard deduction each year.



This really depends on where you live.  On Long Island almost 80% of filers itemize and will lose in this tax bill.  That is why Republican Peter King voted against it.


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## VacationForever (Jan 3, 2018)

2 certainties in life, death and taxes.


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## Conan (Jan 3, 2018)

bluehende said:


> This really depends on where you live.  On Long Island almost 80% of filers itemize and will lose in this tax bill.



I was looking at my own taxes 2017 vs. 2018 (I live in  high tax state).

With state and local taxes capped at $10,000 we'll be taking a standard deduction when it comes time to file for 2018. The standard deduction for married joint in 2018 is $24,000. So unless we give more than $14,000 to charity (and we don't) that's the way to go.

No alternative minimum tax either since they're raising the AMT exemption for marrieds from $84,500 to $109,400. (And the phaseout point where you begin to lose that AMT exemption moves from $160,900 to $1,000,000.)


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## GetawaysRus (Jan 3, 2018)

TUGBrian said:


> I think its important to note that most things being argued (both for and against) are for those of us who itemize our returns, and ignores the fact that the overwhelming majority of tax filing american households do not itemize, and instead take the standard deduction each year.



You're right, Brian.  But I suspect that many people who were able to afford a timeshare purchase have enough income that itemizing was beneficial.

Going forward, it looks like I will become one of the non-itemizers because of the loss of the state and local tax deduction.  For me, the vast bulk of the dollars on Form A were the state and local taxes.

I just picked up TurboTax today at Costco (it's on sale now).  I won't know for a few months (until I complete 2017 taxes), but it will be interesting to see what TurboTax recommends I do about paying 2018 estimated taxes.  In other words, will the program be sophisticated enough to forecast what is going to happen to our tax bills going forward?  Will it recommend that I pay the same amount as 2017 or make an adjustment for the new tax law?


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## Conan (Jan 3, 2018)

The new law crushes two constituencies
1. High tax states because of the $10,000 ceiling (and if you're no longer itemizing the state tax deduction is functionally zero).
2. Charities because many potential givers will lose the incentive when they move over to the standard deduction.


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## isisdave (Jan 3, 2018)

VacationForever said:


> No so fast!  California passed Mello-Roos taxes on properties many years ago, limiting to 1% of appraised property values in addition to the standing 1% property taxes.  Mello-Roos tax is used to build or expand schools, and infrastructure.  Most new developments make use of this and bump property taxes to about 2% at newly developed areas.  The last house that I bought and sold was in a new development.  We had Mello-Roos on everything - school district, fire department etc etc...  If you live in an older area or a house that is rebuilt in an old area you will hardly see Mello-Roos.  Even then, lawmakers love to put a new bond for school at local election time, which usually gets passed, adding to the property tax again.



Well ... sort of.

Mello Roos was more of a "deferred payment" plan. The developer got the locality to front the utility and street infrastructure, and then collect it back over typically 20 or 25 years. We had one when we bought this house in 1994, and it was paid back by about 2014. It was about $900 a year. This added about $18000 to our $218000 house, but looked to us like a very small second mortgage. And of course it was all disclosed and agreed to by us beforehand. This was a time when most of western Riverside county was being developed.

Since 1996, Mello Roos districts have required a 2/3 vote, and this has made it much harder to have one, unless you're developing on the edge of the desert and no one lives there yet. VF, was yours more recent than that?


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## TUGBrian (Jan 3, 2018)

bluehende said:


> This really depends on where you live.  On Long Island almost 80% of filers itemize and will lose in this tax bill.  That is why Republican Peter King voted against it.



in 49 of the 50 states, the majority of tax filers use the standard deduction and do not itemize.

and more than 2 out of every 3 citizens who file taxes...use the standard deduction.

I dont feel the tax code representing hundreds of millions of people should be the least bit concerned with the relatively speaking small population of folks who live on long island who itemize their taxes every year.


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## VacationForever (Jan 3, 2018)

isisdave said:


> Well ... sort of.
> 
> Mello Roos was more of a "deferred payment" plan. The developer got the locality to front the utility and street infrastructure, and then collect it back over typically 20 or 25 years. We had one when we bought this house in 1994, and it was paid back by about 2014. It was about $900 a year. This added about $18000 to our $218000 house, but looked to us like a very small second mortgage. And of course it was all disclosed and agreed to by us beforehand. This was a time when most of western Riverside county was being developed.
> 
> Since 1996, Mello Roos districts have required a 2/3 vote, and this has made it much harder to have one, unless you're developing on the edge of the desert and no one lives there yet. VF, was yours more recent than that?


The development was started by 11 developers in the boonies in 2004 to 2008 in Northern California.  The local school district Mello Roos was payable over 25 years starting at $1,500 per year, with a built-in guaranteed 5% increase every year.   If you think timeshare MF increase is bad, this one was even worse.  We bought our home in 2008 and sold in 2017.  We had 3 to 4 Mello Roos, including fire department, police and other utilities.  Essentially it added another 1%, making it 2% property tax each year.  There is a little known fact that some of the Mello Roos can be pre-paid through a lump sum payment.  We went ahead and paid off the most expensive Mello Roos which was the school district one.  We paid 20K directly to the school district when we bought the house.  Our buyers were very fortunate...  It had gone to 2.4K per year for our neighbors on this one Mello Roos by the time we sold.


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## Sugarcubesea (Jan 3, 2018)

VacationForever said:


> So true... we meet so many people/retirees here in our development, they are mostly transplants from California and New York.  Some even buy homes here and relocate their families while they still have businesses in New York.  They simply fly back and forth through the year.  I suspect that they do that to show residency here which means no taxes on their investments at the state level, while they still pay taxes for their income from California/New York.  There is one family with a young boy and he goes to school here while his father has his business in New York.  Again, with lower crime rate and a more pleasant environment, they feel that it is better to raise their son here.


The president of the company I work for made FL his state of residency and commutes back and forth to our company HQ. since he makes over $500K a year it saves him paying state taxes.


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## VacationForever (Jan 3, 2018)

Sugarcubesea said:


> The president of the company I work for made FL his state of residency and commutes back and forth to our company HQ. since he makes over $500K a year it saves him paying state taxes.


If his job has to be done in your state, even though he commutes between the 2 states, I do not believe he gets a free ticket on his salary/compensation.  State income tax laws are written to tax where the workplace is.  He does get tax relief for his other investment income.  However, if he owns the company, he may be able to set up a consultancy firm in Florida and contracts his services with his company's and that way his consultancy fees are "taxed" (no tax) in Florida.


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## bluehende (Jan 3, 2018)

TUGBrian said:


> in 49 of the 50 states, the majority of tax filers use the standard deduction and do not itemize.
> 
> and more than 2 out of every 3 citizens who file taxes...use the standard deduction.
> 
> I dont feel the tax code representing hundreds of millions of people should be the least bit concerned with the relatively speaking small population of folks who live on long island who itemize their taxes every year.



You said it yourself 1 in 3 itemize.  I only used LI for an example.  I feel this tax law unfairly singles out a few states to increase their taxes or at the least minimize their cut.  The high tax states for years have paid more to the federal government than they get back.  Low tax states get back more.  The high tax states are also the high income states.  Why should someone in a state that it takes 65K to live nicely pay such a lower rate than the family in a high income high cost of living area that may take 150K to have the same lifestyle.  They pay a much larger share of their income in taxes.  Should there be a cost of living factor in taxes.  There are many ways to look at taxation.  None of them are fair in every ones eyes.  In case you think I am talking my own book I do not live in a high tax state.


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## TUGBrian (Jan 4, 2018)

vice versa, why should I have to pay more in federal income taxes because my state is better at managing its finances than those with extremely high state/local taxes that are able to be written off federal returns?

no change is ever going to make 100% of the people involved happy when you are talking hundreds of millions of folks...it quite simply isnt possible.

I agree completely that taxes should be "fair" across the board...but the problem is if you poll 300 million people asking them what is fair, you are likely to get 200 million different answers.


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## WinniWoman (Jan 4, 2018)

TUGBrian said:


> in 49 of the 50 states, the majority of tax filers use the standard deduction and do not itemize.
> 
> and more than 2 out of every 3 citizens who file taxes...use the standard deduction.
> 
> I dont feel the tax code representing hundreds of millions of people should be the least bit concerned with the relatively speaking small population of folks who live on long island who itemize their taxes every year.




Which is why a flat tax would be best and then we really could just file on a postcard!


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## WinniWoman (Jan 4, 2018)

bluehende said:


> You said it yourself 1 in 3 itemize.  I only used LI for an example.  I feel this tax law unfairly singles out a few states to increase their taxes or at the least minimize their cut.  The high tax states for years have paid more to the federal government than they get back.  Low tax states get back more.  The high tax states are also the high income states.  Why should someone in a state that it takes 65K to live nicely pay such a lower rate than the family in a high income high cost of living area that may take 150K to have the same lifestyle.  They pay a much larger share of their income in taxes.  Should there be a cost of living factor in taxes.  There are many ways to look at taxation.  None of them are fair in every ones eyes.  In case you think I am talking my own book I do not live in a high tax state.




Right. And just think of all the people in states like NY- the ones upstate- who do not live and work in NYC and have lower incomes and still have incredibly high taxes! Not everyone in New York has high incomes- in fact- most don't. Many are making low to mid 5 figure salaries and have high taxes and expenses.

I will add that high tax states like NY and California, however, are high production states as compared with many others and contribute to the coffers of the entire country.


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## WinniWoman (Jan 4, 2018)

When I do my taxes, Tax Act calculates both itemizing and not itemizing to determine if I should take the standard deduction or itemize. It always goes with itemizing, and I don't even have many things to include- EXCEPT my hell hole high property and school taxes, the little property taxes from the timeshare maintenance fees, and charity. (I have no mortgage or home equity loans). Nothing else really to claim.

So that says it all.


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## Roger830 (Jan 4, 2018)

bluehende said:


> Why should someone in a state that it takes 65K to live nicely pay such a lower rate than the family in a high income high cost of living area that may take 150K to have the same lifestyle.  They pay a much larger share of their income in taxes.



Next week I'll travel to Florida for 6 weeks. 

I have a hard time finding meat in the supermarket for the price that I pay in Connecticut. Good housing, motor vehicles, gasoline, clothing, electronic products, are all the same price. The only thing noticeably higher in the north is taxes.

With the new tax law, the lower income folks in Florida will have a few more dollars to make those items more affordable.


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## geekette (Jan 4, 2018)

How do we know for sure the ratio of itemizers?  Someone said something, now it has been repeated, but I did not hear IRS give any stats whatsoever, so I doubt the idea that so few itemize.  Those that do obviously have deductible expenses.  Or used to.  I'm not sure that it matters how many itemize in forming a tax policy, but I'd like the stat verified vs repeated without it.

I would prefer national sales tax vs income tax.  Everyone pays when they buy something.  We get visitor dollars that way, too, and US citizens doing jobs in other countries can keep their income.  Hard to cheat, too.

I won't fully know until this time next year how I am impacted, but between mortgage and cancer, the dbl'ing of the std deduction doesn't cover it.


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## bluehende (Jan 4, 2018)

Roger830 said:


> Next week I'll travel to Florida for 6 weeks.
> 
> I have a hard time finding meat in the supermarket for the price that I pay in Connecticut. Good housing, motor vehicles, gasoline, clothing, electronic products, are all the same price. The only thing noticeably higher in the north is taxes.
> 
> With the new tax law, the lower income folks in Florida will have a few more dollars to make those items more affordable.




I just looked up the difference between Orlando and suburban NJ around NY.  If you were making 50k in NJ you would only need 38K to live accordingly in Orlando.  The difference seems to be real estate cost mostly.  You cannot ship real estate from one place to the other like other goods.  Here is the model that gives the costs used in the calculations.

https://www.bankrate.com/calculators/savings/moving-cost-of-living-calculator.aspx

Tax policy has a lot of effect on our economy.  A true discussion of this will get way too political.  All I will say is that this bill has a lot more in it than a few dollars in someones pocket and the effects of these changes will go way beyond your paycheck for good or bad.


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## ace2000 (Jan 4, 2018)

TUGBrian said:


> I think its important to note that most things being argued (both for and against) are for those of us who itemize our returns, and ignores the fact that the overwhelming majority of tax filing american households do not itemize, and instead take the standard deduction each year.



Brian's point above is correct.  Many are believing the mainstream media's narrative about the new tax law, and I see many of their talking points in the replies on this thread.  Trust me folks, doubling your standard deduction will have a major effect on your taxes owed - and that change is not only going to benefit the wealthy.  Also, just the simple change of doubling that standard deduction, is going to make the tax process simpler for those that used to itemize, and now won't have to (I will fall into that group).  If anyone believes otherwise, please share some real sources, with some real facts, that prove your case.  I won't be holding my breath waiting for all of your replies.


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## Roger830 (Jan 4, 2018)

bluehende said:


> I just looked up the difference between Orlando and suburban NJ around NY.  If you were making 50k in NJ you would only need 38K to live accordingly in Orlando.  The difference seems to be real estate cost mostly.  You cannot ship real estate from one place to the other like other goods.  Here is the model that gives the costs used in the calculations.



Real estate cost is a function of supply and demand. 

It likely that because interest and property taxes were deductible, real estate prices were driven too high.


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## Bailey#1 (Jan 4, 2018)

All I can say is I hope this Tax Law works. To me it doesn't make sense that a Tax cut that  adds 1.5 trillion to our debt is any good. All I see down the road is inflation going up, SSI and Medicare getting cut, house devaluations, and a more divided nation. But I been wrong before, and I hope I am wrong now.


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## bluehende (Jan 4, 2018)

You do not have to hold your breath to check this out.

https://taxfoundation.org/who-itemizes-deductions/

30.1 percent itemize deductions from IRS data.

You also forgot in your analysis two things. These come from the tax bill not the mainstream media that you obviously do not believe.

1. The personal exemption is now gone.  That negates amazingly all but around 30% of that benefit.  That as I believe has been said is the overwhelming majority.
2.  You do not know if you will itemize deductions until dec 31.  You will have to do all the paperwork and keep track.  The only simplification is that you do not have to add the numbers at the end.

I do not see where anyone is throwing out talking points.  In fact I commend everyone for keeping it civil and walking that political line.  You commented on a post that was discussing high tax states loss of deductions and whether that is fair.  Do you really need a link to believe that this is true.  Good people can disagree on the fairness but not the fact they are going away.  The funny part is I do not actually endorse some of the "fixes" I have mentioned.  However, I do see a bit of truth to them.   The conversation would be way too political , but I would love to have conversations with the group that are discussing tax fairness right now.  It is a civil and interesting discussion.


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## bluehende (Jan 4, 2018)

Roger830 said:


> Real estate cost is a function of supply and demand.
> 
> It likely that because interest and property taxes were deductible, real estate prices were driven too high.



Absolutely agree.  The problem is with correcting that problem.  Since low real estate areas work under the same tax code why should the high tax states be punished by a quick reversal of long standing tax policy.


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## wilma (Jan 4, 2018)

ace2000 said:


> Brian's point above is correct.  Many are believing the mainstream media's narrative about the new tax law, and I see many of their talking points in the replies on this thread.  Trust me folks, doubling your standard deduction will have a major effect on your taxes owed - and that change is not only going to benefit the wealthy.  Also, just the simple change of doubling that standard deduction, is going to make the tax process simpler for those that used to itemize, and now won't have to (I will fall into that group).  If anyone believes otherwise, please share some real sources, with some real facts, that prove your case.  I won't be holding my breath waiting for all of your replies.



While it may be simpler to not itemize and instead take the larger standard decution, some middle class taxpayers in high tax states will pay more under the new tax law. Do you not believe that? There are many sources that describe this increase for some middle class in states like calif, new york, etc. look it up.


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## ace2000 (Jan 4, 2018)

geekette said:


> How do we know for sure the ratio of itemizers?  Someone said something, now it has been repeated, but I did not hear IRS give any stats whatsoever, so I doubt the idea that so few itemize.



It's real...  here's a source for you.


> “Overall, only 30 percent of taxpayers itemize now, and only about 10 or 12 percent will itemize once the new law goes into effect. So it’s a small group of taxpayers at that top end of the income distribution who will be affected.”



https://www.marketplace.org/2017/12...operty-tax-payment-early-deduction-irs-reform


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## bluehende (Jan 4, 2018)

Here is a good outline of the new tax bill.  It also gives hundreds of links if you want to delve deeper.

https://www.thebalance.com/trump-s-tax-plan-how-it-affects-you-4113968


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## ace2000 (Jan 4, 2018)

wilma said:


> While it may be simpler to not itemize and instead take the larger standard decution, some middle class taxpayers in high tax states will pay more under the new tax law. Do you not believe that? There are many sources that describe this increase for some middle class in states like calif, new york, etc. look it up.



No, I don't believe that.  I believe it's possible that some may, but the benefit of doubling the standard deduction will more than make up for that loss, for the large majority.  Think about it - the standard deduction for a married couple is doubling to 24K.  You would have to be paying a huge share to your state to not receive a positive return in that exchange.

Regardless, as has been stated before - why should the low tax states subsidize the high taxed states with that deduction anyway?


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## VacationForever (Jan 4, 2018)

TUGBrian said:


> vice versa, why should I have to pay more in federal income taxes because my state is better at managing its finances than those with extremely high state/local taxes that are able to be written off federal returns?
> 
> no change is ever going to make 100% of the people involved happy when you are talking hundreds of millions of folks...it quite simply isnt possible.
> 
> I agree completely that taxes should be "fair" across the board...but the problem is if you poll 300 million people asking them what is fair, you are likely to get 200 million different answers.


Well said, Brian.


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## VacationForever (Jan 4, 2018)

mpumilia said:


> Right. And just think of all the people in states like NY- the ones upstate- who do not live and work in NYC and have lower incomes and still have incredibly high taxes! Not everyone in New York has high incomes- in fact- most don't. Many are making low to mid 5 figure salaries and have high taxes and expenses.
> 
> I will add that high tax states like NY and California, however, are high production states as compared with many others and contribute to the coffers of the entire country.


You just have to fire your state lawmakers who put in policies to suck taxes out of their people.


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## WinniWoman (Jan 4, 2018)

VacationForever said:


> You just have to fire your state lawmakers who put in policies to suck taxes out of their people.



Unfortunately, there are too many people who either don't pay taxes or evidently like taxes that live in our state. NYC votes ruin the rest of the state. Which is why there is even a movement to divide upstate NY with downstate. Many want NYC and LI and Westchester and Rockland Counties to be its' own entity like Washington DC is to the USA. They want upstate NY to become a new state called New Amsterdam.


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## ace2000 (Jan 4, 2018)

bluehende said:


> I do not see where anyone is throwing out talking points.  In fact I commend everyone for keeping it civil and walking that political line.  You commented on a post that was discussing high tax states loss of deductions and whether that is fair.  Do you really need a link to believe that this is true.  Good people can disagree on the fairness but not the fact they are going away.  The funny part is I do not actually endorse some of the "fixes" I have mentioned.  However, I do see a bit of truth to them.   The conversation would be way too political , but I would love to have conversations with the group that are discussing tax fairness right now.  It is a civil and interesting discussion.



See my last post above regarding some of your questions.  No way you can have a discussion about tax fairness without getting political, so you'll have to go elsewhere for that debate.

 Just to be clear, are you saying that most people will not benefit from the new changes??? Because, what I am saying is that regardless of all the nitpicking going on about the changes regarding the state tax deductions, the vast majority of taxpayers are going to get tax relief from the new law - including those in the high tax states.  Disagree?


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## bluehende (Jan 4, 2018)

ace2000 said:


> No, I don't believe that.  I believe it's possible that some may, but the benefit of doubling the standard deduction will more than make up for that loss, for the large majority.  Think about it - the standard deduction for a married couple is doubling to 24K.  You would have to be paying a huge share to your state to not receive a positive return in that exchange.
> 
> Regardless, as has been stated before - why should the low tax states subsidize the high taxed states with that deduction anyway?



However a family of 4 loses 16k in personal exemptions.


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## ace2000 (Jan 4, 2018)

wilma said:


> While it may be simpler to not itemize and instead take the larger standard decution, some middle class taxpayers in high tax states will pay more under the new tax law. Do you not believe that? There are many sources that describe this increase for some middle class in states like calif, new york, etc. look it up.



See my previous post.  There may be some that don't, but the overwhelming majority will get tax relief - including those in the high tax states.


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## bluehende (Jan 4, 2018)

ace2000 said:


> See my last post above regarding some of your questions.  No way you can have a discussion about tax fairness without getting political, so you'll have to go elsewhere for that debate.
> 
> Just to be clear, are you saying that most people will not benefit from the new changes??? Because, what I am saying is that regardless of all the nitpicking going on about the changes regarding the state tax deductions, the vast majority of taxpayers are going to get tax relief from the new law - including those in the high tax states.  Disagree?



Not at all.  I believe the analysis that shows 85% will benefit.  What I see though is a single group of people singled out.  These are high tax states citizens that are upper middle class.  I take exception to them being categorized as "takers".  They contribute a lot to the tax coffers for the single fact that their incomes are higher.  IMHO these tax breaks helped to even that out.  What I will disagree with is that the benefit received is worth the cost.  I would have loved to see a tax bill that gave larger tax cuts to the middle class and kept the bill much closer to revenue neutral.


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## klpca (Jan 4, 2018)

ace2000 said:


> See my previous post.  There may be some that don't, but the overall majority will get tax relief - including those in the high tax states.


I have run my numbers and was surprised to see a small reduction in taxes. Yippee for us. Saving ~$500. I know someone else who is saving $15k. I think that crumbs have been given as a way to placate the masses. But 1.5 trillion added to the national debt. Really? I'm not happy about that at all. I am surprised that this group (tuggers) who agonize about a $50 increase in maintenance fees is not more upset about that!


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## rapmarks (Jan 4, 2018)

ace2000 said:


> See my previous post.  There may be some that don't, but the overwhelming majority will get tax relief - including those in the high tax states.


I would agree with this if the personal exemptions hadn't been taken away.


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## Elan (Jan 4, 2018)

klpca said:


> I have run my numbers and was surprised to see a small reduction in taxes. Yippee for us. Saving ~$500. I know someone else who is saving $15k. I think that crumbs have been given as a way to placate the masses. But 1.5 trillion added to the national debt. Really? I'm not happy about that at all. I am surprised that this group (tuggers) who agonize about a $50 increase in maintenance fees is not more upset about that!



  Yeah, like missing the forest for the trees.  There was no "objective" to this tax bill, as far as I can tell.  It really didn't simplify anything and it won't result in huge tax savings for the working class, where, as has been proven time and time again, it matters in terms of economic stimulus.  Yet, we get to pay interest on another 1.5 trillion in debt.  That's not progress, folks.


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## klpca (Jan 4, 2018)

rapmarks said:


> I would agree with this if the personal exemptions hadn't been taken away.


I din't know if you have run your numbers, but the rate adjustments seem to have offset this (honest - I checked a number of my family members whose returns that I prepare - similar results across the board). That said, I still do not support this law change as is is far from fiscally responsible, imho.


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## ace2000 (Jan 4, 2018)

bluehende said:


> Not at all.  I believe the analysis that shows 85% will benefit.  What I see though is a single group of people singled out.  These are high tax states citizens that are upper middle class.  I take exception to them being categorized as "takers".  They contribute a lot to the tax coffers for the single fact that their incomes are higher.  IMHO these tax breaks helped to even that out.  What I will disagree with is that the benefit received is worth the cost.  I would have loved to see a tax bill that gave larger tax cuts to the middle class and kept the bill much closer to revenue neutral.



Thank you for being honest with your 85% statement.  That's exactly my point. 

I can go along with a lot of what you're saying.  But, you're going to have a hard time convincing people from the low tax states that it is fair to subsidize the people from the high tax states with their federal tax dollars.  And that's regardless of the "way it's always been".


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## "Roger" (Jan 4, 2018)

ace2000 said:


> Thank you for being honest with your 85% statement.  That's exactly my point.
> 
> I can go along with a lot of what you're saying.  But, you're going to have a hard time convincing people from the low tax states that it is fair to subsidize the people from the high tax states with their federal tax dollars.  And that's regardless of the "way it's always been".


California, for example, sends far more money to the federal government than it receives in return. Just the opposite is true for most if not all the low tax states. Yet the high tax states are now the ones being portrayed as being subsidized by the low tax states. Interesting.


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## Elan (Jan 4, 2018)

You know, this thread has proven what I've long thought about taxes.  As soon as something changes, many folks knee-jerk reaction is to figure out how to game the system or at least adjust to best suit their short term personal situation.  Yet, they ignore the fact that if we didn't have to pay interest on our debt, we could all presumably enjoy lower taxes.  It's about time we started thinking (and voting) with our brains instead of our pocket books.  (And the sad reality is we're not even doing that, in the long run).  Remember when we were actually, for a brief period in time, paying down our debt???  I'll take that any day over $500 in annual tax savings.


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## CalGalTraveler (Jan 4, 2018)

Although it would seem logical that the SALT write-off benefits the high tax states, the notion is simply not true when you look at the bigger picture.  According to the IRS (and based on Census population figures), high tax states tend to pay more in federal taxes than the lower tax states.  As you will see in the chart below, California, New York, New Jersey, Illinois and Minnesota top the list and pay as much or more per capita.  Florida is also up there in terms of total contribution but they pay far less per capita ($8k Florida vs. $10k CA) than the other states.

In terms of Gross Revenue in 2015, Calif, NY, NJ, Illinois and Minnesota combined constituted 33% of the gross tax collections to the U.S. Government.


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## ace2000 (Jan 4, 2018)

Elan said:


> You know, this thread has proven what I've long thought about taxes.  As soon as something changes, many folks knee-jerk reaction is to figure out how to game the system or at least adjust to best suit their short term personal situation.  Yet, they ignore the fact that if we didn't have to pay interest on our debt, we could all presumably enjoy lower taxes.  It's about time we started thinking (and voting) with our brains instead of our pocket books.  (And the sad reality is, we're not even doing that, in the long run).  Remember when we were actually, for a brief period in time, paying down our debt???  I'll take that any day over $500 in annual tax savings.



Definitely true.  And I'm walking a fine line here, because I also believe that paying down our debt is our number one national security issue - and I tend to vote accordingly.  

Even though I believe our taxes are currently too high, just cutting taxes without corresponding cuts in expenditures is assinine.


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## bluehende (Jan 4, 2018)

ace2000 said:


> Thank you for being honest with your 85% statement.  That's exactly my point.
> 
> I can go along with a lot of what you're saying.  But, you're going to have a hard time convincing people from the low tax states that it is fair to subsidize the people from the high tax states with their federal tax dollars.  And that's regardless of the "way it's always been".



Here I will give you actual data.

http://www.businessinsider.com/the-...st-dependent-on-the-federal-government-2015-7


This shows the states that receive the least and most of their state budget from the federal government.  You will notice that the ones that get the least from the federal government are all  high income states.  I so not think that is a coincidence.  If they did not pay high taxed then they should be entitled to more from the federal government.  This analysis does not take into account total dollars.  Here is a link to an article that goes into details.

https://people.howstuffworks.com/wh...the-federal-government-which-get-the-most.htm

Here are a few paragraphs.

New Jersey was the most generous donor state, paying $9,902 in federal taxes per resident and only getting back $6,740 in federal spending. That's 61 cents for every tax dollar. Nevada was the second big donor, mostly because of taxes on casinos, followed by Connecticut, where its high-earning residents got back 69 cents on their federal tax dollar.

The other top recipient states were Mississippi with its large low-income population and Alaska, whose small population numbers and long history of Washington D.C. earmarks, resulted in nearly $14,000 in federal spending per resident compared with $5,400 in taxes paid.


The whole list generally runs along the high tax low tax line with some exceptions.  It is interesting that CA & NY have a large number of people that are on assistance which keeps them off the top of the donor state list but does not knock them into the recipient category.

I think we can argue over whether the higher income states should pay more taxes, but I do believe that saying you are subsidizing them is inaccurate at best.


PS  In looking through these numbers I realize my state DE is getting screwed.  But then our extenuating circumstance is our franchise tax that helps our budget to not be dependent on the Federal government.


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## VacationForever (Jan 4, 2018)

bluehende said:


> Here I will give you actual data.
> 
> http://www.businessinsider.com/the-...st-dependent-on-the-federal-government-2015-7
> 
> ...



With NV being the 2nd largest donor, the statement which several of you made about high state taxes subsidizing the low/no income tax states no longer holds true.  It really does not matter whether those taxes come from corporate or individuals as we are talking about state level.  As an individual, it certainly is advantageous to live in NV with no state taxes.

As you have also pointed out, many of high income tax states also support a large number of those on "welfare", which offsets a significant amount of taxes collected by Federal as they get returned in the form of Medicaid and other programs.


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## CalGalTraveler (Jan 4, 2018)

VacationForever said:


> With NV being the 2nd largest donor, the statement which several of you made about high state taxes subsidizing the low/no income tax states no longer holds true.  It really does not matter whether those taxes come from corporate or individuals as we are talking about state level.  As an individual, it certainly is advantageous to live in NV with no state taxes.
> 
> As you have also pointed out, many of high income tax states also support a large number of those on "welfare", which offsets a significant amount of taxes collected by Federal as they get returned in the form of Medicaid and other programs.



Nevada is an exception because of casino revenue which makes this a unique outlier that cannot be replicated in other states.  I seem to recall that Nevada also has a large population of homeless living underground in the sewer system in Las Vegas and in Reno, so it is also taking federal assistance - but like California and NY, they are not getting good ROI from the Federal Govt on their tax contribution.

This tax contribution to benefit imbalance may be why the Calif state govt is thumbing their nose at the Feds e.g. SALT workarounds, creating trade agreements with China (CA has a GDP larger than France, Canada and Russia and is the 6th largest in the world so has considerable leverage), signing climate agreements, legalizing marijuana, creating sanctuary state etc.   IMO my fear is that with this rift, if we have a major earthquake or event, will the Federal government be there to assist?

If we throw out Nevada as an outlier, high tax states subsidizing low tax states still holds true. What is interesting is that most people were unaware of this situation until now.


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## bluehende (Jan 4, 2018)

VacationForever said:


> With NV being the 2nd largest donor, the statement which several of you made about high state taxes subsidizing the low/no income tax states no longer holds true.  It really does not matter whether those taxes come from corporate or individuals as we are talking about state level.  As an individual, it certainly is advantageous to live in NV with no state taxes.
> 
> As you have also pointed out, many of high income tax states also support a large number of those on "welfare", which offsets a significant amount of taxes collected by Federal as they get returned in the form of Medicaid and other programs.



Yet these states are still net donor states.  Is it fair to take away a tax break and make them even larger tax donors?  Only 14 states are tax donors and every high tax state is among them.  This does  not negate the premise especially as it is a fairly low population state dominated by one industry that pays high taxes due to their licensing agreements.  Another thing you should take into account is the total dollars.  CA and NY donate many more dollars than NV does.  NV is a rounding off error for CA.


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## ace2000 (Jan 4, 2018)

bluehende said:


> Here I will give you actual data.



That's an excellent post supporting your argument, but I'm willing to bet it's not going to convince very many people on the other side.  Everyone is going to come down on the side of their own selfish interests, and regarding what type of state they pay taxes in.  Low tax states are going to be happy with the changes, and high taxed states are not.


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## CalGalTraveler (Jan 4, 2018)

I appreciate that we can have a civil discussion here about very important issues.  Even though I may not agree with everything, it is good to hear different perspectives.


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## bluehende (Jan 4, 2018)

ace2000 said:


> That's an excellent post supporting your argument, but I'm willing to bet it's not going to convince very many people on the other side.  Everyone is going to come down on the side of their own selfish interests, regarding what type of state they pay taxes in.  Low tax states are going to be happy with the changes, and high taxed states are not.




Thank you.  I try to be fair, but realize I do have bias'.  We would agree on a lot more than we disagree and therefore can have a civil conversation (albeit it is political).  My views are actually that the donor states should help the less fortunate states, but it drives me nuts to hear that they are takers.  I fear it is more of a political position than an economic one.  I have benefited over the years from the vagaries of the tax code, especially the favorable treatment of earnings on capital, however I do realize that the advantages I have had are not exactly 100% fair.


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## VacationForever (Jan 4, 2018)

Alot of people are getting the extra $1000 bonus from their employers after the tax bill was passed. For the first time in history, we have positive increase in stock indices for each of the 12 months in 2017.  The stock market is loving it and we are off to a roaring start in 2018.  People's wealth is increasing.


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## Cropman (Jan 4, 2018)

Elan said:


> There was no "objective" to this tax bill, as far as I can tell. It really didn't simplify anything and it *won't result in huge tax savings for the working class*,



I agree, it won't amount to a huge tax savings for the working class, but it will provide an extra $500, $1000, or maybe even more.  That can make a difference to a lot of people.  The problem isn't taxes for* MOST* people, it's wages.  According to OMB the top 20% now pay 95% of the income taxes.  If that is true, most of the tax cut (or, for some, increase) is affecting the "rich", not the working class, because the working class isn't paying very much in taxes.

http://www.washingtonexaminer.com/o...es-middle-class-single-digits/article/2638746



bluehende said:


> Why should someone in a state that it takes 65K to live nicely pay such a lower rate than the family in a high income high cost of living area that may take 150K to have the same lifestyle.



I'm confused by this one.  Are you advocating for a flat tax instead of our current progressive tax?  Should we raise the rates of the family making $65k, or lower the rates on the family making $150k?  Or both?

IMHO this new bill puts a little more money in the working man's pocket.  It will put some more money back into most of the upper working class pocket.  The guys on the upper end, small businesses, and corporations will do the best because they are paying the most.  Hopefully the corporations and small businesses will pay better and hire and that will help eat into the larger deficit brought on by this bill.


----------



## Elan (Jan 4, 2018)

Cropman said:


> Hopefully the corporations and small businesses will pay better and hire and that will help eat into the larger deficit brought on by this bill.



  Unfortunately, that strategy has already proven to be a failure.  You don't stimulate an economy by giving corporations tax breaks and *hope* they'll employ more people or pay higher wages.  You stimulate an economy by putting more money in consumers hands, so that they buy more products and services, and effectively_ *force*_ corporations to hire more people and pay higher wages to keep up with increased demand.
  Anyone that still believes in trickle down economics is, quite frankly, a fool.  There's GDP growth data out there that proves that it doesn't work, and I've studied it fairly extensively.  Recall that almost immediately after 8 years of trickle down policy from 1980-1988, we were in a recession by mid-1990.  If trickle down truly spurred massive economic growth, that would *never* happen.  Trickle down theory only applies if the taxing entity is on the wrong side of the Laffer Curve, meaning that the tax rate is so excessive that they're limiting tax revenue by oppressing growth.  We're far from that point.  Trickle down is truly "voodoo economics".

  ETA:  As a related aside, the national debt *quadrupled *in the 1980-1988 time frame.


----------



## TUGBrian (Jan 4, 2018)

making the corporate tax rate (and discounted rates for repatriating offshore cash) competitive than the rest of the global economy will most certainly result in some amazing benefits.

basically if you are for the tax cuts...you can argue positives all day long.

if you are against the tax cuts...you can argue the negatives all day long.


just like any other major piece of legislation (or any political stance for that matter)


----------



## Cropman (Jan 4, 2018)

Elan,

I won't respond in totality, because that would quickly lead us down the rabbit hole of being political.  Just a short rejoinder, national debt did explode.  Congress spending, controlled by one party in both branches, went crazy during that time.  A deal for tax decrease for spending increase was done.  It's been 35 years.  The original theory was never totally done.  I'm sure that many people, more expert in it than I am, could argue both your side and the other side of that coin.


----------



## bluehende (Jan 4, 2018)

Cropman said:


> I agree, it won't amount to a huge tax savings for the working class, but it will provide an extra $500, $1000, or maybe even more.  That can make a difference to a lot of people.  The problem isn't taxes for* MOST* people, it's wages.  According to OMB the top 20% now pay 95% of the income taxes.  If that is true, most of the tax cut (or, for some, increase) is affecting the "rich", not the working class, because the working class isn't paying very much in taxes.
> 
> http://www.washingtonexaminer.com/o...es-middle-class-single-digits/article/2638746
> 
> ...



The only thing I was saying is that there are inequalities in the tax system and that the deductions for salt was helping reduce that inequality.  High tax states are donor states that send more to DC than they get back.  The maximum deduction now in the tax plan exasperates that redistribution.    I actually have no problem with limiting the deduction but we need to realize that we are redistributing their money. My fear is that the few people being hurt by this tax cut were selected for political reasons.   The bottom line is we have used the tax system for social engineering since it's inception.  Shocking these systems may have some very bad unintended consequences and my faith that our leaders will be able to adjust on the fly is low.  I hope this wasn't too rambling.


----------



## bluehende (Jan 4, 2018)

TUGBrian said:


> making the corporate tax rate (and discounted rates for repatriating offshore cash) competitive than the rest of the global economy will most certainly result in some amazing benefits.
> 
> basically if you are for the tax cuts...you can argue positives all day long.
> 
> ...



Here is a peer reviewed paper on tax rates.

https://poseidon01.ssrn.com/deliver...4025064031116017084079116085075029074&EXT=pdf


Here is the conclusion.

We believe that this study indicates that U.S.-based multinationals
do not face a tax-induced competitive disadvantage in competing
against EU-based multinationals. Even though the U.S. statutory rate
is ten percentage points higher than the average corporate statutory
rate in the European Union, the effective U.S. corporate tax rate is
the same or lower than the effective EU corporate tax rate for the
largest U.S. and EU multinationals.
Presumably, the reason for this result is that while the EU countries
have a lower statutory rate, their tax base is larger because it has
fewer exceptions. In fact, a comparison of the controlled foreign corp-
poration (CFC) rules of the United States (subpart F) and the major
EU jurisdictions (the United Kingdom, Germany, Italy, and France)
indicates that the EU CFC rules tend to be tougher than subpart F
because (1) they take into account the ETR in the source country in
deciding whether to tax income from a CFC,
43
and (2) they take into
account whether the CFC has a real presence in the source country.
44
Under the EU rules, for example, a bank earning interest income in a
tax haven is likely to be subject to current tax because the ETR in the
haven is low, and the bank does not have a real presence in the ha-
ven.
45
Under subpart F the income will likely qualify for the active
financing exception.
46
In addition, the European Union does not have
anything like the U.S. rules that enable U.S. multinationals to shift
profits from high-tax to low-tax CFCs without incurring a U.S. tax cost
(check-the-box and § 954(c)(6)).
47
This conclusion suggests that the United States can in fact reduce its
corporate tax rate to the EU average in a revenue neutral fashion
without affecting the competitiveness of U.S.-based multinationals,
since such a move would simply result in a tax regime that is more
similar to that faced by EU companies. Specifically, as many observ-
ers have recommended, it should be possible to abolish deferral alto-
gether if the U.S. rate were reduced sufficiently. Such a move would
have tremendous simplification potential since it would be possible to
get rid of both subpart F and outbound transfer pricing enforcement,
and it would eliminate the “lock out” problem as well (since repatria-
tions would not be taxed). Alternatively, it should be possible to
amend subpart F to take the source country rate into account, so that
an effective source rate that is below 90% of the U.S. statutory rate
would result in a subpart F inclusion, while reducing the U.S. statutory
rate. Such a move, while not as radically simplifying as abolishing
deferral, will significantly reduce the pressure on outbound transfer
pricing while not resulting in a competitive disadvantage to U.S.-based
multinationals or inducing more profit shifting from the United States
to low-taxed offshore locations, like the current rules do.


Me again

Our marginal rates are high , but our effective rates are right in line.  This allows some companies to be screwed if they have to pay the higher rate and some companies to get away like bandits.  Wouldn't it have been nice if they brought down the top rate and got rid of loop holes to make this revenue neutral.......like they promised.


----------



## Elan (Jan 4, 2018)

Cropman said:


> Elan,
> 
> I won't respond in totality, because that would quickly lead us down the rabbit hole of being political.  Just a short rejoinder, national debt did explode.  Congress spending, controlled by one party in both branches, went crazy during that time.  A deal for tax decrease for spending increase was done.  It's been 35 years.  The original theory was never totally done.  I'm sure that many people, more expert in it than I am, could argue both your side and the other side of that coin.


Yeah, I recall that era -- unfettered military spending ($650 toilet seats, anyone?) coupled with tax cuts.  Pure genius.

Deficit talk aside, my point is that there's historical data from an era of reduced rates (80-88) along with data from an era with increased rates (92-2000).  Everyone can assimilate it on their own, but the gist is that there's no great increase in GDP growth associated with lower tax rates.  That's enough to convince me, coupled with a follow-on recession by mid 1990, that trickle down economics doesn't work.  I'd encourage everyone to go look at the data themselves.  For me personally, I don't like the idea of taking a $1.5 trillion risk on something that didn't work the last time.

Sent from my Moto G (5S) Plus using Tapatalk


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## Brett (Jan 4, 2018)

bluehende said:


> Here is a peer reviewed paper on tax rates.
> 
> 
> 
> ...



yes,  it's true starting in 2018 the US corporate tax rate will be lower than the average European company rate - - but not as low as some businesses in China and other countries.     And it's also true that US based companies will not have to pay the dreaded "VAT" business tax at 17% - 25%.  And they will not have to pay the extra "public health care" taxes that European companies and individuals pay through payroll taxes.

yep, some amazing benefits for US corporate shareholders
(but that bill may ultimately comes due ...


----------



## bobpark56 (Jan 4, 2018)

bluehende said:


> You said it yourself 1 in 3 itemize.  I only used LI for an example.  I feel this tax law unfairly singles out a few states to increase their taxes or at the least minimize their cut.  The high tax states for years have paid more to the federal government than they get back.  Low tax states get back more.  The high tax states are also the high income states.  Why should someone in a state that it takes 65K to live nicely pay such a lower rate than the family in a high income high cost of living area that may take 150K to have the same lifestyle.  They pay a much larger share of their income in taxes.  Should there be a cost of living factor in taxes.  There are many ways to look at taxation.  None of them are fair in every ones eyes.  In case you think I am talking my own book I do not live in a high tax state.


(A) Strike the word "unfairly" in your lead-in, and it would be factual.
(B) Have you considered that giving tax subsidies to citizens in high-tax/high-spending states that are not available to citizens in more effectively managed states is counter-intuitive? (Consider the incentives here.)


----------



## bluehende (Jan 4, 2018)

bobpark56 said:


> (A) Strike the word "unfairly" in your lead-in, and it would be factual.
> (B) Have you considered that giving tax subsidies to citizens in high-tax/high-spending states that are not available to citizens in more effectively managed states is counter-intuitive? (Consider the incentives here.)



If you do not like subsidizing, then each state should get back the same ratio of their taxes to use as they wish.  So in order not to subsidize the taker states we need to reduce the federal tax bill for  high tax states by up to 35% or send them 50% more money.  That would eliminate the actual subsidizing going on here.  That is why I use the unfair word.  If a state is paying more than their fair share of taxes then adding to that tax bill is unfair.  And those tax breaks are available to everyone, why should a high tax state not use a break because your state does not want to?  Do you have any evidence that lower tax states manage their finances any better?  It would be nice if NYC government offices could move to Alabama to save money on real estate and wages, but that is not very practical.  The better correlation seems to be in vibrant economies.  Look at the GDP per capita and you will find the high tax states at the top and the low tax states at the bottom.  Have you considered that high tax states provide more services and some that low tax states use grants from the federal government to provide.

I could make your same argument on any tax break.  Why should I subsidize families with kids.  I will answer.  Because it is the right thing to do.


----------



## Brett (Jan 4, 2018)

bluehende said:


> If you do not like subsidizing, then each state should get back the same ratio of their taxes to use as they wish.  So in order not to subsidize the taker states we need to reduce the federal tax bill for  high tax states by up to 35% or send them 50% more money.  That would eliminate the actual subsidizing going on here.  That is why I use the unfair word.  If a state is paying more than their fair share of taxes then adding to that tax bill is unfair.  And those tax breaks are available to everyone, why should a high tax state not use a break because your state does not want to?  Do you have any evidence that lower tax states manage their finances any better?  It would be nice if NYC government offices could move to Alabama to save money on real estate and wages, but that is not very practical.  The better correlation seems to be in vibrant economies.  Look at the GDP per capita and you will find the high tax states at the top and the low tax states at the bottom.  Have you considered that high tax states provide more services and some that low tax states use grants from the federal government to provide.
> 
> I could make your same argument on any tax break.  Why should I subsidize families with kids.  I will answer.  Because it is the right thing to do.



any amount on the federal tax form  1040 Schedule A -  be it state income taxes, real estate taxes or "charitable contributions" etc  are all 'tax' breaks
Tom Cruise contributes millions to his religion - Scientology and gets a tax break
that's a tax break  'subsidy' -- it gets subtracted from the potential total tax collected


----------



## Panina (Jan 4, 2018)

I might pay more and am willing to if it ultimately helps most others.  My poorer friends were getting poorer and using public assistance that costs us all money. My richer friends were getting richer and people like me in the middle are struggling to not fall into the poorer side.

Time will tell the effects of this tax bill. All I know is something had to change.


----------



## fillde (Jan 4, 2018)

Here's an excerpt and tax bill calculator from the NY times:

Over all, about three-quarters of Americans would get a tax cut in 2018 under the version of the tax bill that was recently released by a joint House-Senate conference committee. But as the accompanying chart shows, there’s a lot of variation, even for families that look similar on paper. How families earn their money, whether they make large charitable contributions and other factors can affect how they would fare under the bill.

These results may look more generous than what you might have seen in other calculators. That’s because the final plan is indeed more generous to individuals in 2018 than previous House and Senate plans.

https://www.nytimes.com/interactive/2017/12/17/upshot/tax-calculator.html


----------



## lizap (Jan 5, 2018)

My only problem with it is that it was not made permanent for individuals.  I don't know what the intermediate to long-term impact will be, but I am fairly certain interest rates are headed up-way up.  And when that happens, we will be in a recessionary environment, and stocks will fall (usually prior to the start). And the budget deficit will grow. And taxes will probably go back up (or they will not be made permanent for individuals).


----------



## "Roger" (Jan 5, 2018)

Both parties agree that the gap between the rich and poor has been widening. Here is  single example of the effects of the tax cut.

My wife and I are not one percenters but much better off than we ever imagined. The Times chart indicates we will get about a $950tax cut ( disappearing by 2025). Friends, both working one independently, said they were looking at something like a $5000 to $10,000 tax cut ( maybe more if he can declare himself a pass through entity.  

This is  a  single case, but in line with what I have read about the cut. Hmmmm...


----------



## Conan (Jan 5, 2018)

"Roger" said:


> The Times chart indicates we will get about a $950tax cut ( disappearing by 2025). Friends, both working one independently, said they were looking at something like a $5000 to $10,000 tax cut ( maybe more if he can declare himself a pass through entity.
> 
> This is  a  single case, but in line with what I have read about the cut. Hmmmm...


Or more. In my example below the savings for an entry-level top 1%'er is about 5% or $38,000.





Conan said:


> Even if you're a married couple in the lower end of the 1% living in a no-tax state with say $400,000 of interest income and $400,000 of capital gains/qualified dividends, here's what the new law does for you (in addition to probably sparing you any estate tax exposure).
> 
> *2017*
> Adjusted gross income: $800,000
> ...


----------



## Roger830 (Jan 5, 2018)

If rates are lowered 2% for each tax bracket, then the more money that someone makes, the higher the tax cut.

The cumulative effect of all those cuts will be a stimulative to the economy, more economic growth which will produce more revenue for the government.


----------



## Conan (Jan 5, 2018)

Roger830 said:


> If rates are lowered 2% for each tax bracket, then the more money that someone makes, the higher the tax cut.
> 
> The cumulative effect of all those cuts will be a stimulative to the economy, more economic growth which will produce more revenue for the government.



If you mean to be describing the new tax law, 2% for each tax bracket is not a fair summary. For example it's 20% if you happen to own hotels and apartment buildings.

As to the talking point that tax cuts = economic stimulus = economic growth = more revenue for the government, let's wait and see.


----------



## mdurette (Jan 5, 2018)

I came across info yesterday that stated interest from a home equity line/loan will no longer be deductible unless the funds were used to acquire or improve your residence.  

With mortgage rates still low, wonder if there will be a spike in refinancing to move home equity debt over to a mortgage.


----------



## lizap (Jan 5, 2018)

Roger830 said:


> If rates are lowered 2% for each tax bracket, then the more money that someone makes, the higher the tax cut.
> 
> The cumulative effect of all those cuts will be a stimulative to the economy, more economic growth which will produce more revenue for the government.



Except that many upper income people are not going to spend the money. We will receive a substantial tax cut, but will not spend it; it will go in savings.


----------



## VacationForever (Jan 5, 2018)

lizap said:


> My only problem with it is that it was not made permanent for individuals.  I don't know what the intermediate to long-term impact will be, but I am fairly certain interest rates are headed up-way up.  And when that happens, we will be in a recessionary environment, and stocks will fall (usually prior to the start). And the budget deficit will grow. And taxes will probably go back up (or they will not be made permanent for individuals).


...and you really think it won't be extended?  Everyone loves a tax cut.  It will be extended and I expect even more reduction at that time because no party at that time will ever let it expire.


----------



## ace2000 (Jan 5, 2018)

VacationForever said:


> ...and you really think it won't be extended?  Everyone loves a tax cut.  It will be extended and I expect even more reduction at that time because no party at that time will ever let it expire.



I vote that we worry about that in 2025 when the tax cuts expire.  Definitely nothing to worry about now.


----------



## bluehende (Jan 5, 2018)

Roger830 said:


> If rates are lowered 2% for each tax bracket, then the more money that someone makes, the higher the tax cut.
> 
> The cumulative effect of all those cuts will be a stimulative to the economy, more economic growth which will produce more revenue for the government.



I wish it were that simple.  You also have to take into account the addition to the debt.  CBO estimate of 1.5 trillion.  This adds a lot of supply on the debt side.  This will raise interest rates thus chilling the economy.  Also the fed will step in if the economy gets too hot again putting upward pressure on interest rates.

Here is an article from Forbes (certainly not liberal bias) about this.

https://www.forbes.com/sites/anthon...e-promises-of-the-gops-tax-plan/#18ff549b338e

Here is the appropriate discussion.

This GOP's problem isn't in its claim that tax cuts lead to economic growth. The problem is the notion that tax cuts will _fully pay for themselves_ with economic growth. It is a claim that flies in the face of common sense, battle-tested economic theory, and approximately 100 years of history.

But if it were true...if the GOP could point to a study and say, "See that! The $1.5 trillion in tax cuts ends up costing the IRS no revenue at all!" it would make its tax plan much more salable to a distrusting public, and more importantly, skittish Senators. A member of the Senate who ran on a platform of being deficit averse could justify a yes vote for the plan if he or she could point to _anything _that would indicate that after accounting for growth, the plan won't actually increase the deficit by a dime.

Yesterday, the Tax Policy Center released its dynamic analysis of the _House version_ of H.R. 1,  and the results were...not good.

The study concluded that the $1.5 trillion in tax cuts proposed in the plan would not fully pay for themselves; in fact, after accounting for economic growth, the plan would result in...$1.3 trillion in tax cuts.

That's right...the sweeping cuts offered under the GOP plan would create enough economic growth to bring in an extra $160 billion over the next decade.

Why is the boost so small? The Tax Policy Center cites a number of reasons:


Limited boost in consumer demand. This is attributable to the fact that over the next ten years, it is the richest 5% of taxpayers who enjoy the biggest benefits under the House plan, and these taxpayers tend to spend a smaller portion of any increase in after-tax income when compared to lower income taxpayers.
Because the plan would add significantly to budget deficits unless spending cuts are enacted, interest rates will rise, discouraging business owners to further invest in their business.
The economy is already at near-full employment; as a result, any uptick in consumer demand resulting from an increase in after-tax income will result in only a small increase in output.


----------



## CalGalTraveler (Jan 5, 2018)

mdurette said:


> I came across info yesterday that stated interest from a home equity line/loan will no longer be deductible unless the funds were used to acquire or improve your residence.
> 
> With mortgage rates still low, wonder if there will be a spike in refinancing to move home equity debt over to a mortgage.



I could see this happening if rates stay low. Does anyone know whether a second home mortgage is still deductible?

*Update:* the California legislature introduced a bill yesterday to work around the SALT deduction cap by creating a state foundation; New York (Cuomo) is not far behind to apply same to NY state.  (IMHO...not taking action would have disastrous results for homeowners in these states.  We would be forced to either sell our home (at a reduced value thus affecting our eventual retirement fund) and move out of state, or do a complicated sale and leaseback of our home as a pass-thru business to get around the SALT cap which would incur unnecessary transaction costs and line the pockets of tax avoidance opportunists.)

http://www.washingtonexaminer.com/c...round-for-tax-laws-salt-limit/article/2645026

The feds "poked the bear" (LoL the California Golden bear) by pouring SALT on the wound (ahem) - the poor ROI from federal program benefits vs. tax contributions paid, makes California less reliant on the Federal Government and enables the California state government to structure its own taxes, trade laws, climate change, sanctuary cities , marijuana etc..  With a GDP greater than France, Russia and Canada, California is negotiating with other countries on its own.


----------



## isisdave (Jan 5, 2018)

"Roger" said:


> Friends, both working one independently, said they were looking at something like a $5000 to $10,000 tax cut ( maybe more if he can declare himself a pass through entity.




Or he might be mistaken. I think a lot of people confuse "income" with "taxable income" on those "see how you're affected" websites, and there will be a lot of surprised people a year from now.  To get a $10,000 tax cut, you'd have to lower your taxable income by almost $40,000 if you're in the 25% bracket. Maybe he applied the 20% pass-thru deduction to gross income rather than net.


----------



## isisdave (Jan 5, 2018)

I am really impressed by the thoughtfulness, politeness, and consideration given by everyone in this thread.  In most of my other "communities," you can't say "nice day!" without getting an argument or an insult. PLUS, I just got a deal on a last-minute rental in Las Vegas. TUG is just so great on so many levels!

It seems to me that the thing to worry about as the debt increases is that the interest we have to pay on that debt further squeezes the budget, making it harder to pay for (new) things we might need (like infrastructure, or moving the coastal cities 6 feet higher so they don't flood every year) harder without raising taxes or displacing other spending.  Usually, this is like "boiling the frog" and we don't notice it much from year to year, but a sudden rise in interest rates would sure get peoples' attention. This probably won't be a problem in our lifetimes, but we can't keep borrowing forever.


----------



## CalGalTraveler (Jan 5, 2018)

I do believe the reform has some positive, long overdue changes for business. I hope it reduces current tax incentives to locate overseas and incents businesses to repatriate funds. There are also benefits to small businesses via pass-thru and this may incent more entrepreneurship and investment into these businesses which could contribute to growth and taxes.

Will this completely offset the deficit created? Who knows? Time will tell.


----------



## Elan (Jan 5, 2018)

lizap said:


> Except that many upper income people are not going to spend the money. We will receive a substantial tax cut, but will not spend it; it will go in savings.


  Exactly.  There's a big difference between additional income, and additional _disposable _income.


----------



## bobpark56 (Jan 5, 2018)

bluehende said:


> If you do not like subsidizing, then each state should get back the same ratio of their taxes to use as they wish.  So in order not to subsidize the taker states we need to reduce the federal tax bill for  high tax states by up to 35% or send them 50% more money.  That would eliminate the actual subsidizing going on here.  That is why I use the unfair word.  If a state is paying more than their fair share of taxes then adding to that tax bill is unfair.  And those tax breaks are available to everyone, why should a high tax state not use a break because your state does not want to?  Do you have any evidence that lower tax states manage their finances any better?  It would be nice if NYC government offices could move to Alabama to save money on real estate and wages, but that is not very practical.  The better correlation seems to be in vibrant economies.  Look at the GDP per capita and you will find the high tax states at the top and the low tax states at the bottom.  Have you considered that high tax states provide more services and some that low tax states use grants from the federal government to provide.
> 
> I could make your same argument on any tax break.  Why should I subsidize families with kids.  I will answer.  Because it is the right thing to do.


I don't understand why you think it is the federal government being unfair rather than the high-tax states being unfair. After all, it is the states with high taxes that are causing the problem you are complaining about.


----------



## Roger830 (Jan 5, 2018)

I'm surprised that there is so much concern about the national debt. I don't recall such concern in the past.

The debt at more than $20 trillion will never be paid. Nobody knows how it will play out. 
Usually large government debt is washed away via inflation. It's likely that will happen here.

Extremely low interest rates indicate financial markets don't care about the size of the debt. 
When they do care, nothing else will matter and it won't be pleasant.


----------



## bobpark56 (Jan 5, 2018)

Elan said:


> Yeah, I recall that era -- unfettered military spending ($650 toilet seats, anyone?) coupled with tax cuts.  Pure genius.
> 
> <snip>
> 
> Sent from my Moto G (5S) Plus using Tapatalk


If I recall correctly, those $650 rates were for aircraft toilet seats from a production line that had been terminated years earlier. If a company has to restart a production line to produce a relatively small quantity of toilet seats, do you really think it will do so for, say, $25 a seat?


----------



## bobpark56 (Jan 5, 2018)

lizap said:


> Except that many upper income people are not going to spend the money. We will receive a substantial tax cut, but will not spend it; it will go in savings.


Banks will reinvest/loan out those deposited saving, will they not?


----------



## lizap (Jan 5, 2018)

Roger830 said:


> I'm surprised that there is so much concern about the national debt. I don't recall such concern in the past.
> 
> The debt at more than $20 trillion will never be paid. Nobody knows how it will play out.
> Usually large government debt is washed away via inflation. It's likely that will happen here.
> ...



Eventually markets will care. As interest rates head up, debt will become a much bigger issue as the cost will become higher since it will be financed at higher rates. Interest rates will eventually head up, probably sooner than later. We are in one of the longest economic expansions of all time..


----------



## lizap (Jan 5, 2018)

bobpark56 said:


> Banks will reinvest/loan out those deposited saving, will they not?



Who knows what the banks will do? I know there's a limit as to how much of their deposits they can lend out.


----------



## Elan (Jan 5, 2018)

bobpark56 said:


> If I recall correctly, those $650 rates were for aircraft toilet seats from a production line that had been terminated years earlier. If a company has to restart a production line to produce a relatively small quantity of toilet seats, do you merely think it will do so for, say, $25 a seat?


  That was one example.  There's stuff all over the web (and I remember nightly reports back in the day when it was "real time") of $7000 coffee pots, and $200 hammers, etc.  Google "excessive defense spending 1980's" or something like that to get a perspective on how out of control military spending was back then.  As an added point, my brother graduated from AOCS and served during that time period.  He told me *first hand* that if he wanted something, all he had to do was ask.  Said it was sickening.


----------



## isisdave (Jan 5, 2018)

Last fall we were in Catalonia, where about half the people want to separate from Spain. "No fair!" they say, "we send far more money to Madrid that we get back, because we are the economic powerhouse of the country!"

My immediate reaction was "Well, isn't that a good thing? Isn't that what you want? Would you rather be the poorest section of the country, and getting a net inflow of money because your people need it?"

It's funny how we can see things better when they're in the neighbor's yard. Isn't this the same thing as we're talking about? As a Californian, I know we send lots of money away, have more than our share of immigration problems, and eventually there will be The Big One. But I've been to Louisiana and Texas and Florida and other "net-receiver" states, and still I've lived here almost all of my life.

So unless Catalonia, or California, intends to truly separate and become a separate economy, I think we need to look at this situation as stabilizing the economy of the nation as a whole.

Thinking along further, is this also related to the balance-of-trade situation? We buy more from China than they do from us, currently, because we have a stronger economy, or currency, or whatever. As developing nations advance and become more like us, this balance will change, until it becomes more even. At that point, there won't be any need to send jobs overseas, as folks there will be earning about as much as folks at home.

What do you think?


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## CalGalTraveler (Jan 5, 2018)

The stock market will be the winner. The money will be redirected to the stock market more than banks creating upward pressure on stock prices.

In addition, CEOs will buy back stocks and increase dividends to increase their paychecks given Wall Street pressures for ROI (fastest way to show results to the board and shareholders e.g. "See what I have done? The stock price increased during my tenure.  This made us all richer.")

Financial manipulations work for a while but over the long term the results will be hollow and will come crashing down. Just walk through any Sears store.


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## isisdave (Jan 5, 2018)

Elan said:


> That was one example.  There's stuff all over the web (and I remember nightly reports back in the day when it was "real time") of $7000 coffee pots, and $200 hammers, etc.



I am a tightwad. I won't spend $11 to go to a movie after 5 if I can see it before 5 for $8, and I think $6 wine is just fine.

I also manage a small business park.  I know that when I spend Other Peoples' Money, I'm much more liberal.  If I get a quote from an electrician for $500, and I think the job should cost $350, I am likely to say "oh, just do it" whereas if it were at home, I'd get another quote.

And I've been a sustaining engineer ... the guys that support discontinued products for the rest of their business life. If you add in the fact that buying the existing $650 toilet seat has a fixed, predictable cost of $650, and sourcing a cheaper one will cost six hours of your time and a bundle of annoyance, you can see why this sort of thing happens.


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## VacationForever (Jan 5, 2018)

CalGalTraveler said:


> I could see this happening if rates stay low. Does anyone know whether a second home mortgage is still deductible?
> 
> *Update:* the California legislature introduced a bill yesterday to work around the SALT deduction cap by creating a state foundation; New York (Cuomo) is not far behind to apply same to NY state.  (IMHO...not taking action would have disastrous results for homeowners in these states.  We would be forced to either sell our home (at a reduced value thus affecting our eventual retirement fund) and move out of state, or do a complicated sale and leaseback of our home as a pass-thru business to get around the SALT cap which would incur unnecessary transaction costs and line the pockets of tax avoidance opportunists.)
> 
> ...


If it were true that California can fix its problems and be self reliant, they would have solved the HUGE public employees pension deficit by now.  Their deficit is causing increasing reduction in services across the state.


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## VacationForever (Jan 5, 2018)

isisdave said:


> I am really impressed by the thoughtfulness, politeness, and consideration given by everyone in this thread.  In most of my other "communities," you can't say "nice day!" without getting an argument or an insult. PLUS, I just got a deal on a last-minute rental in Las Vegas. TUG is just so great on so many levels!
> 
> It seems to me that the thing to worry about as the debt increases is that the interest we have to pay on that debt further squeezes the budget, making it harder to pay for (new) things we might need (like infrastructure, or moving the coastal cities 6 feet higher so they don't flood every year) harder without raising taxes or displacing other spending.  Usually, this is like "boiling the frog" and we don't notice it much from year to year, but a sudden rise in interest rates would sure get peoples' attention. This probably won't be a problem in our lifetimes, but we can't keep borrowing forever.


The issue with CA, especially in the south, is that reservoirs need to be built to hold the water when it rains.  When it rains, it floods and water runs to the ocean. California is in constant crisis of drought because it does not hold onto the water when it rains.  California has huge issues.


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## lizap (Jan 5, 2018)

I agree - We need this kind of dialogue at the national level. I'm happy they have not closed this thread.


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## bluehende (Jan 5, 2018)

bobpark56 said:


> I don't understand why you think it is the federal government being unfair rather than the high-tax states being unfair. After all, it is the states with high taxes that are causing the problem you are complaining about.



The only thing I have been saying is the common comment that the high tax states are finally going to pay their fair share is dead wrong.  In reality they have been paying over their fair share (see links I have posted).  We can argue whether them paying more is good or bad, but at least be honest and not berate them for something they have not done.  I would think if not appreciation for them subsidizing other states at least understand that they do actually do this.

I do not know what problem I am complaining about was caused by the high tax states.  The only problem you may see is raising their federal taxes.  I do not see that as a problem except if the reason was to politically punish a specific group.  And I will say again it is not really fair to ask the people that already get the least back for their dollars to pay more, but as we can see by this thread taxes are rarely considered fair.


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## 1Kflyerguy (Jan 5, 2018)

CalGalTraveler said:


> I could see this happening if rates stay low. Does anyone know whether a second home mortgage is still deductible?



Everything i have read states that interest for Home Equity Loans or Lines of Credit are no longer deductible.


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## 1Kflyerguy (Jan 5, 2018)

VacationForever said:


> The issue with CA, especially in the south, is that reservoirs need to be built to hold the water when it rains.  When it rains, it floods and water runs to the ocean. California is in constant crisis of drought because it does not hold onto the water when it rains.  California has huge issues.



California definitely has a water shortage.  Unfortunately you can't just dam up rivers and create reservoirs without creating lots of other problems..  

With the low snow pack in many years the rivers won't even fill the existing reservoirs in many years.


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## VacationForever (Jan 5, 2018)

1Kflyerguy said:


> California definitely has a water shortage.  Unfortunately you can't just dam up rivers and create reservoirs without creating lots of other problems..
> 
> With the low snow pack in many years the rivers won't even fill the existing reservoirs in many years.


Not true.  Look at last year.  Lots of rain but too few reservoirs to hold the water.  It is called save for the drought days.  Places like Folsom dam was letting out most of the water in fear of looding the dam, the water ran straight down the river into the sea. Southern California just lacks resevoirs.


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## klpca (Jan 5, 2018)

VacationForever said:


> Not true.  Look at last year.  Lots of rain but too few reservoirs to hold the water.  It is called save for the drought days.  Places like Folsom dam was letting out most of the water in fear of looding the dam, the water ran straight down the river into the sea. Southern California just lacks resevoirs.


No, really, we have them. We just don't ever get enough rain here. Even if we saved every drop. (10 inches per year).


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## VacationForever (Jan 5, 2018)

klpca said:


> No, really, we have them. We just don't ever get enough rain here. Even if we saved every drop. (10 inches per year).


If there are enough reservoirs, you won't get this kind of floods...
https://en.wikipedia.org/wiki/2017_California_floods


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## MULTIZ321 (Jan 5, 2018)

Dry Spell Raises Fears of Droughts Return in California
From Capital Public Radio/ Sacramento/ capradio.org

"PHILLIPS STATION, Calif. (AP) — It's been almost a year since Los Angeles residents felt any real rain, and precious little snow is in the Sierras, but water managers say it's too early for fears that California is sliding back into drought as abruptly as the state fell out of it.

Water officials carry out the first of their regular ritual winter snow measurements before news cameras on Wednesday. Plunging rods into snowpacks to measure the snow depth, water managers use the event to acquaint Californians with the state of the water supply. It's a crucial question in a semi-arid state with the U.S.'s biggest state economy, agricultural industry and population. In a normal year, nearly two-thirds of Californians' water supply starts as snow in the Sierras."

Richard


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## klpca (Jan 5, 2018)

VacationForever said:


> If there are enough reservoirs, you won't get this kind of floods...
> https://en.wikipedia.org/wiki/2017_California_floods


But weren't those floods in Northern Ca? Our socal reservoirs were just getting refilled. I wish we would get some rain here. It's dry as a bone.


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## VacationForever (Jan 5, 2018)

klpca said:


> But weren't those floods in Northern Ca? Our socal reservoirs were just getting refilled. I wish we would get some rain here. It's dry as a bone.


Last winter, Southern CA had lots of floods and runoff... see some links here.

http://www.latimes.com/local/lanow/la-me-ln-beach-report-card-20170615-htmlstory.html

http://www.latimes.com/local/lanow/la-me-rain-la-20170123-story.html

The issue is the lack of reservoirs to retain water when heavy rain occurs.  Without reserves, California is dry again the following year when there is no rain.

There are several solutions to the problem faced by California: build reservoirs, efficient use of water through recycling (more into that below) and desalination of sea water.  

Due to water rights, Nevada only gets 2% of Colorado River water because Nevada had very low population when the Federal water rights were drawn.  Since the state has grown in population, Nevada recycles water through reuse. We were told that 95% of the water that comes of a tap goes back into the system to be recycled/reused.  We were often told that Nevadans can take those long hot showers, more so than those Californians are supposed to, because in Nevada water that goes down the drain gets back into the system. You can read about it here: https://www.snwa.com/ws/recycled.html


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## klpca (Jan 5, 2018)

Well I read those articles. The first one is about storm runoff from city streets into the ocean. Not anything you could get uphill to a reservoir.  The second one mentions what I mentioned earlier - one good rain year does not fill reservoirs that haven't been filled during the drought years.

As a former Californian, you probably know that we've been under water rationing for years. We don't take long showers. We don't even have grass anymore. I keep a 5 gallon bucket in my tub to collect water while my shower heats up. (1 gallon saved per shower, btw). We have a desal plant in Carlsbad. Water is a huge issue in the West, and those who learn to conserve will be better off than those who are set in their ways (Palm Springs golf courses anyone?). Plus Ca has a huge water demand to grow crops that benefits everyone. Sorry that Nevada's allotment is so small. That will be a battle to resolve.


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## dioxide45 (Jan 5, 2018)

mdurette said:


> I came across info yesterday that stated interest from a home equity line/loan will no longer be deductible unless the funds were used to acquire or improve your residence.
> 
> With mortgage rates still low, wonder if there will be a spike in refinancing to move home equity debt over to a mortgage.


There should be no need. People with existing home equity line/loans are not impacted by the changes. Only those obtaining new lines/loans have the new restriction. There is a grandfather rule from what I have heard.


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## VacationForever (Jan 5, 2018)

klpca said:


> Well I read those articles. The first one is about storm runoff from city streets into the ocean. Not anything you could get uphill to a reservoir.  The second one mentions what I mentioned earlier - one good rain year does not fill reservoirs that haven't been filled during the drought years.
> 
> As a former Californian, you probably know that we've been under water rationing for years. We don't take long showers. We don't even have grass anymore. I keep a 5 gallon bucket in my tub to collect water while my shower heats up. (1 gallon saved per shower, btw). We have a desal plant in Carlsbad. Water is a huge issue in the West, and those who learn to conserve will be better off than those who are set in their ways (Palm Springs golf courses anyone?). Plus Ca has a huge water demand to grow crops that benefits everyone. Sorry that Nevada's allotment is so small. That will be a battle to resolve.



Good for you!  What a role model!  Do you know that since forever, Sacramento has/had a law that said there must be GREEN lawn outside every home otherwise they are/were breaking the law.  Also, fake grass is/was outlawed since it would breakdown after something like 15 years and create environmental hazard.  I think they were trying to change that law that a couple of years ago and I have no idea what the outcome was.


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## CalGalTraveler (Jan 6, 2018)

...


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## klpca (Jan 6, 2018)

VacationForever said:


> Good for you!  What a role model!  Do you know that since forever, Sacramento has/had a law that said there must be GREEN lawn outside every home otherwise they are/were breaking the law.  Also, fake grass is/was outlawed since it would breakdown after something like 15 years and create environmental hazard.  I think they were trying to change that law that a couple of years ago and I have no idea what the outcome was.


We did the desert landscape thing, but a lot of my neighbors have the fake grass - it looks pretty good. I'm sick and tired of drought but we're right back in it. Can't do much about the weather though.


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## "Roger" (Jan 6, 2018)

VacationForever said:


> ...We were told that 95% of the water that comes of a tap goes back into the system to be recycled/reused.  We were often told that Nevadans can take those long hot showers, more so than those Californians are supposed to, because in Nevada water that goes down the drain gets back into the system. You can read about it here: https://www.snwa.com/ws/recycled.html


Just curious about the 95% figure. I would love for it to be true, but the link you provide says that 40% of the water used is reclaimed with 90% of that 40% for indirect use. That is actually very good, but far short of 95%.


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## mdurette (Jan 6, 2018)

dioxide45 said:


> There should be no need. People with existing home equity line/loans are not impacted by the changes. Only those obtaining new lines/loans have the new restriction. There is a grandfather rule from what I have heard.



This article states nobody will be grandfathered:
https://www.forbes.com/sites/nickcl...-lose-home-equity-tax-deduction/#60f203546cdf

With current mortgage rates below current prime rate (which HELOCs are based off of) then I can see people with large HELOC balances moving the debt over.   A lot of people have 30 year mortgages around 3.25%.    It may make sense to consolidate 1st and HELOC to maintain the rate on the 1st.


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## bobpark56 (Jan 6, 2018)

lizap said:


> Who knows what the banks will do? I know there's a limit as to how much of their deposits they can lend out.


You missed the point. What gets stashed in banks gets turned over into the economy (via loans, etc.) and primes the economy. It is not hoarded, as the early poster implied.


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## bobpark56 (Jan 6, 2018)

VacationForever said:


> ...and you really think it won't be extended?  Everyone loves a tax cut.  It will be extended and I expect even more reduction at that time because no party at that time will ever let it expire.


But one of our political parties loves to "tax the rich." If and when they have the power, it would not surprise me to to see the tax cuts expire...at least at the upper ends. They have done so before, if you recall.


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## bobpark56 (Jan 6, 2018)

bluehende said:


> The only thing I have been saying is the common comment that the high tax states are finally going to pay their fair share is dead wrong.  In reality they have been paying over their fair share (see links I have posted).  We can argue whether them paying more is good or bad, but at least be honest and not berate them for something they have not done.  I would think if not appreciation for them subsidizing other states at least understand that they do actually do this.
> 
> I do not know what problem I am complaining about was caused by the high tax states.  The only problem you may see is raising their federal taxes.  I do not see that as a problem except if the reason was to politically punish a specific group.  And I will say again it is not really fair to ask the people that already get the least back for their dollars to pay more, but as we can see by this thread taxes are rarely considered fair.


What some see as punishment, others see as incentive.


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## dioxide45 (Jan 6, 2018)

mdurette said:


> This article states nobody will be grandfathered:
> https://www.forbes.com/sites/nickcl...-lose-home-equity-tax-deduction/#60f203546cdf
> 
> With current mortgage rates below current prime rate (which HELOCs are based off of) then I can see people with large HELOC balances moving the debt over.   A lot of people have 30 year mortgages around 3.25%.    It may make sense to consolidate 1st and HELOC to maintain the rate on the 1st.


You are correct. I was confusing this change with the change of mortgage interest deduction on first mortgage loans of 750,000, down from 1,000,000. There was a grandfathering with that change.


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## Panina (Jan 6, 2018)

Reading all the responses I feel the frustration.

I came from a poor family.  I worked my butt off multiple jobs to be able to retire early.  I am not rich but I am a success story in the USA, a child of two immigrants that went to college and made something of myself and instead of poor am comfortable middle class.

With that said, some people I know choose not to work a higher paying job because they do not want to lose entitlements. Lets me add there are many who need our help as they did everything right but hit hard times.

Some friends who were as poor as me growing up and emerged much wealthier then me are also a success story. I do not feel they have to support me with paying higher personnel income taxes as they worked very hard to get where they got. We have to reward success so others strive for it. 

Is there ever going to be an easy solution to taxes, no, but it is very important to see both sides of equation no matter what you believe, thats how productive changes happen, meeting in the middle.

My personal opinion, no personal income tax, flat sales tax on everything else.  For the needy a card that exempts them from the tax.


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## dioxide45 (Jan 6, 2018)

Panina said:


> My personal opinion, no personal income tax, flat sales tax on everything else. For the needy a card that exempts them from the tax.


This has long been proposed as the Fair Tax, but has never gone anywhere. The basic thought is that companies don't pay taxes, customers do. Since in the end, taxes are a cost of doing business and the customer pays for everything. So simply move the taxes to the customer would make sense. Pricing is then taken over by the free market and companies will lower prices to compete since they won't have to pay taxes anymore.


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## VacationForever (Jan 6, 2018)

"Roger" said:


> Just curious about the 95% figure. I would love for it to be true, but the link you provide says that 40% of the water used is reclaimed with 90% of that 40% for indirect use. That is actually very good, but far short of 95%.


I don't know and that link does not say 95%.  That number has been frequently quoted, including a friend working at the Federal water board here.   This one gives me a chuckle... we are drinking toilet water.  https://lasvegassun.com/news/2014/aug/24/how-our-water-goes-toilet-tap/

Tips for California: https://lasvegassun.com/news/2015/apr/27/tips-california-what-nevada-has-done-conserve-wate/


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## WinniWoman (Jan 6, 2018)

One of several reasons I am not crazy about the idea moving out West- water.


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## VacationForever (Jan 6, 2018)

mpumilia said:


> One of several reasons I am not crazy about the idea moving out West- water.


...yeah, but you can't beat the weather, no snow unless you go up to the mountain.


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## WinniWoman (Jan 6, 2018)

VacationForever said:


> ...yeah, but you can't beat the weather, no snow unless you go up to the mountain.



Yes- that certainly is a BIG plus! But you probably could use some for the water.


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## VacationForever (Jan 6, 2018)

mpumilia said:


> Yes- that certainly is a BIG plus! But you probably could use some for the water.



We actually do not have water restrictions here, only that no home owner is allowed to put a real green lawn at the home.  You may put in desert landscape or fake grass.  We can have those long showers and hosing down the driveway etc. 

When we were in California, water restrictions were very severe.  We were not allowed to hose down a driveway or anything outside the home, we were not allowed to wash cars, watering of lawn went down to 1 day before they decided to allow 2 days.  Initially watering of trees and plants were also down to 1 day but it caused the death of many trees and plants, and restrictions were revised to 3 times a week.  Water was not allowed to be run out/down to the pavement and streets otherwise you get fined.  Neighbors were reporting one another to the authorities, reminding us of the communist era of Mao and Stalin.


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## Panina (Jan 6, 2018)

dioxide45 said:


> This has long been proposed as the Fair Tax, but has never gone anywhere. The basic thought is that companies don't pay taxes, customers do. Since in the end, taxes are a cost of doing business and the customer pays for everything. So simply move the taxes to the customer would make sense. Pricing is then taken over by the free market and companies will lower prices to compete since they won't have to pay taxes anymore.


I intentionally said personal income tax. Corporations can have a tax too.  Yes, if they did they just pass the costs to us but many would feel better if corporations weres taxed.  It could be a flat tax for them too.


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## bluehende (Jan 6, 2018)

bobpark56 said:


> What some see as punishment, others see as incentive.



I think we will view the incentive differently.  Is the incentive for high tax states to lower their level of taxes?  Wouldn't this hurt their economies as the services deteriorate and people and companies flee for this reason.  Then the only alternative would be to rely on the federal government like all the other states.

I will use my state as an example.  DE gets the lowest percentage of any state of their budget from the federal government.  For us to get to the average we would need almost 20% of our budget in additional money from the federal government.  So if we bring our taxes in line would you like the Federal Government to give us 500 million dollars a year.  That is what it would take and we are a state of only 1 million.  Imagine if CA or NY demanded the same.


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## bluehende (Jan 6, 2018)

bobpark56 said:


> You missed the point. What gets stashed in banks gets turned over into the economy (via loans, etc.) and primes the economy. It is not hoarded, as the early poster implied.



You are correct for deposits , but not for the banks own money.  Deposits can only be used as reserves or loans.  Profits can be used for many reasons only 1 of which is lending out.  As people have said history shows that profits are much more likely to be returned to shareholders as dividends and buybacks.  When you can borrow from the fed at about 1% why would you use corporate profits for this.  Most shareholders would be upset if the corporation used money to save 1%.


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## bluehende (Jan 6, 2018)

dioxide45 said:


> This has long been proposed as the Fair Tax, but has never gone anywhere. The basic thought is that companies don't pay taxes, customers do. Since in the end, taxes are a cost of doing business and the customer pays for everything. So simply move the taxes to the customer would make sense. Pricing is then taken over by the free market and companies will lower prices to compete since they won't have to pay taxes anymore.



Thanks for posting this.  It made the old researcher in me go try to figure out what the sales tax would have to be.  Here is my very high level estimate.

Average tax rate in the us is around 15%. 

Savings rate is about 6 and would of course not be in the sales tax  This only takes it to 16%

Now for the real problem.  Person income taxes only account for 47% of revenues.  So now the sales tax has to be about 35%. 

If you exclude lower incomes then it has to go up.  I did not take the time to figure this out, but the lowest quarter of our incomes does have an effective rate around 6% not including payroll taxes.  I think very conservatively the sales tax rate would have be 40% to gain the same amount of revenue.  So tomorrow every bill (since we used savings rate) goes up 40%.  Mortgage, Health care, etc.



A few interesting things I learned in my research.

1.  Corporate taxes only represent 11% of federal revenue

2 all taxes income, corporate , and payroll are 95% of revenue.  SO all those other taxes we pay only represent 5% of revenues.  These are all excise, lease fees, tariffs etc are only 5%.


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## dioxide45 (Jan 6, 2018)

Panina said:


> I intentionally said personal income tax. Corporations can have a tax too.  Yes, if they did they just pass the costs to us but many would feel better if corporations weres taxed.  It could be a flat tax for them too.


Corporations are consumers too, buying products and services to run their operations. So they too would pay a consumption tax just like end consumers.


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## dioxide45 (Jan 6, 2018)

bluehende said:


> So tomorrow every bill (since we used savings rate) goes up 40%. Mortgage, Health care, etc.


Not necessarily. Every product today has payroll and corporate income tax built in to its ticketed price. There are also many other taxes built in to the price of a product that we buy that are not seen on the ticket. If you strip all those taxes out of the price and then tack the 40% back on, the increase in product price may not necessarily be 40% higher. Also consider that about 45% of households pay no personal income tax. However all of those people are consumers and would be taxed under a consumption tax except those 15% under the poverty level that wouldn't be subject to the consumption tax. There is another 30% that would be paying taxes under such a proposal, so that would be new revenue.


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## bluehende (Jan 6, 2018)

dioxide45 said:


> Not necessarily. Every product today has payroll and corporate income tax built in to its ticketed price. There are also many other taxes built in to the price of a product that we buy that are not seen on the ticket. If you strip all those taxes out of the price and then tack the 40% back on, the increase in product price may not necessarily be 40% higher. Also consider that about 45% of households pay no personal income tax. However all of those people are consumers and would be taxed under a consumption tax except those 15% under the poverty level that wouldn't be subject to the consumption tax. There is another 30% that would be paying taxes under such a proposal, so that would be new revenue.



Thanks for reading and trying to poke holes.  I think of this like a peer reviewed paper.  My analysis was way oversimplified.  The gorilla in the room with all of this are the payroll taxes.  These are a lot of the revenues of the government.  If you do not get rid of these with this type of tax  system becomes very regressive.  I will push back in that if prices fall would not the sales tax need to increase to make up the revenue?


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## isisdave (Jan 6, 2018)

Well, deductibility of home equity loans seems to be a murky area. The Forbes article says "no." This Orange County Register article says yes if it's "Acquisition indebtedness — mortgage debt used to acquire, build or substantially improve the residence". That's a funny definition of acquisition, since you can't get a HELOC until you HAVE equity. I've seen other articles, from just after the law was passed, that said that interest for home improvement was, but interest for other purposes, including tuition, wasn't. I guess we'll have to see which gurus prevail.


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## klpca (Jan 6, 2018)

Panina said:


> My personal opinion, no personal income tax, flat sales tax on everything else.  For the needy a card that exempts them from the tax.



Now there's your simplification!

Btw, we were on food stamps back (for about a year) in the 70's. What I remember most from that time was the terrible attitude of the people who we interacted with at that time, especially the checkers at the grocery store (a close second would be some of our neighbors). There was a *ton* of judgement about us and who we were, without any real knowledge. (Back story - dad left, mom lost her job, grandparents refused to help in order to teach my mom a lesson - "you made your bed, now lie in it"). So I have a soft heart for those who are at that point in their lives, especially hungry children. I also benefited from government financial aid during college, (I went through on a combination of Pell grants, Cal grants, academic scholarships, private scholarships, and student loans). Those two things - food stamps and financial aid - were life changing for me, and since I have never been unemployed and have raised three kids who went through school with no student debt and are all employed and paying taxes, I think that my debt to society has long since been repaid, but I am good with paying things forward. My motivation for personal success was to never be treated the way were were during those tough years. We are comfortable, not rich (although by some standards we are, I suppose) and I will hopefully work for a long, long time. I don't ever want to be poor again. I honestly don't care that much about how much tax we have to pay because I know what a difference the safety nets made in my life. On a policy level, I am concerned about the national debt, and our crumbling infrastructure. I truly believe that we as a country have the financial wherewithal to fix both problems, but lack the political will.


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## klpca (Jan 6, 2018)

isisdave said:


> Well, deductibility of home equity loans seems to be a murky area. The Forbes article says "no." This Orange County Register article says yes if it's "Acquisition indebtedness — mortgage debt used to acquire, build or substantially improve the residence". That's a funny definition of acquisition, since you can't get a HELOC until you HAVE equity. I've seen other articles, from just after the law was passed, that said that interest for home improvement was, but interest for other purposes, including tuition, wasn't. I guess we'll have to see which gurus prevail.


Heloc for personal expenses - no bueno. Heloc to add a room - good to go.


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## VacationForever (Jan 7, 2018)

We are terrified of being in debt that we don't have a mortgage, don't have HELOC, and I closed a short-term line of credit taken against my investments account so that I could borrow money to help my son pay for his home, while awaiting for my Californian home to be sold.  Once my house was sold, I closed the line of credit.  Making life simple is good.


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## klpca (Jan 7, 2018)

dioxide45 said:


> Not necessarily. Every product today has payroll and corporate income tax built in to its ticketed price. There are also many other taxes built in to the price of a product that we buy that are not seen on the ticket. If you strip all those taxes out of the price and then tack the 40% back on, the increase in product price may not necessarily be 40% higher. *Also consider that about 45% of households pay no personal income tax.* However all of those people are consumers and would be taxed under a consumption tax except those 15% under the poverty level that wouldn't be subject to the consumption tax. There is another 30% that would be paying taxes under such a proposal, so that would be new revenue.



I was surprised to see 45%. I did a quick google search and came up with this article: https://www.marketwatch.com/story/45-of-americans-pay-no-federal-income-tax-2016-02-24

_Roughly half pay no federal income tax because they have no taxable income, and the other roughly half get enough tax breaks to erase their tax liability, explains Roberton Williams, a senior fellow at the Tax Policy Center._

I suspect that a large chunk of the no taxable income people are retirees living on SSA only. No tax there when your AGI is low enough. The other half are most likely the working poor. They pay payroll tax (FICA, medicare etc) but probably receive an earned income tax credit to offset some of these taxes. I'm not making any particular statement here, just fleshing out who those people are, because it's easy to see them as lazy people sitting around doing nothing. I am sure that those people are out there, no doubt, but there are other less obvious reasons that people show up in this statistic.


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## bluehende (Jan 7, 2018)

klpca said:


> Now there's your simplification!
> 
> Btw, we were on food stamps back in the 70's. What I remember most from that time was the terrible attitude of the people who we interacted with at that time, especially the checkers at the grocery store (a close second would be some of our neighbors). There was a *ton* of judgement about us and who we were, without any real knowledge. (Back story - dad left, mom lost her job, grandparents refused to help in order to teach my mom a lesson - "you made your bed, now lie in it"). So I have a soft heart for those who are at that point in their lives, especially hungry children. I also benefited from government financial aid during college, (I went through on a combination of Pell grants, Cal grants, academic scholarships, private scholarships, and student loans). Those two things - food stamps and financial aid - were life changing for me, and since I have never been unemployed and have raised three kids who went through school with no student debt and are all employed and paying taxes, I think that my debt to society has long since been repaid, but I am good with paying things forward. My motivation for personal success was to never be treated the way were were during those tough years. We are comfortable, not rich (although by some standards we are, I suppose) and I will hopefully work for a long, long time. I don't ever want to be poor again. I honestly don't care that much about how much tax we have to pay because I know what a difference the safety nets made in my life. On a policy level, I am concerned about the national debt, and our crumbling infrastructure. I truly believe that we as a country have the financial wherewithal to fix both problems, but lack the political will.



Thank you so much for sharing.  I hear you about cashiers and their attitude.  I was behind a women with 2 kids buying groceries with food stamps.  She came up short by 6 something.  The cashier announced in a very loud voice how much she was short and in a very condescending voice asks her if she has the money.  I could tell by the look that she did not.  I stepped up and said I had 6 dollars at about the same volume and tone.  My checkout wasn't exactly friendly.  I have been very fortunate in my life and stories like yours remind me to thank god that I do not have the struggles that others have to endure.


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## dioxide45 (Jan 7, 2018)

klpca said:


> I was surprised to see 45%. I did a quick google search and came up with this article: https://www.marketwatch.com/story/45-of-americans-pay-no-federal-income-tax-2016-02-24
> 
> _Roughly half pay no federal income tax because they have no taxable income, and the other roughly half get enough tax breaks to erase their tax liability, explains Roberton Williams, a senior fellow at the Tax Policy Center._
> 
> I suspect that a large chunk of the no taxable income people are retirees living on SSA only. No tax there when your AGI is low enough. The other half are most likely the working poor. They pay payroll tax (FICA, medicare etc) but probably receive an earned income tax credit to offset some of these taxes. I'm not making any particular statement here, just fleshing out who those people are, because it's easy to see them as lazy people sitting around doing nothing. I am sure that those people are out there, no doubt, but there are other less obvious reasons that people show up in this statistic.


Interesting article, it does appear that about the lowest 40% actually get more back in the form of refundable tax credits. So instead of paying tax, they get money back?


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## klpca (Jan 7, 2018)

dioxide45 said:


> Interesting article, it does appear that about the lowest 40% actually get more back in the form of refundable tax credits. So instead of paying tax, they get money back?


Yes, EITC is a refundable credit. Another form of welfare, but targeted at the working poor.


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## lizap (Jan 7, 2018)

VacationForever said:


> We are terrified of being in debt that we don't have a mortgage, don't have HELOC, and I closed a short-term line of credit taken against my investments account so that I could borrow money to help my son pay for his home, while awaiting for my Californian home to be sold.  Once my house was sold, I closed the line of credit.  Making life simple is good.



We don't like debt either.


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## Panina (Jan 7, 2018)

klpca said:


> Now there's your simplification!
> 
> Btw, we were on food stamps back in the 70's. What I remember most from that time was the terrible attitude of the people who we interacted with at that time, especially the checkers at the grocery store (a close second would be some of our neighbors). There was a *ton* of judgement about us and who we were, without any real knowledge. (Back story - dad left, mom lost her job, grandparents refused to help in order to teach my mom a lesson - "you made your bed, now lie in it"). So I have a soft heart for those who are at that point in their lives, especially hungry children. I also benefited from government financial aid during college, (I went through on a combination of Pell grants, Cal grants, academic scholarships, private scholarships, and student loans). Those two things - food stamps and financial aid - were life changing for me, and since I have never been unemployed and have raised three kids who went through school with no student debt and are all employed and paying taxes, I think that my debt to society has long since been repaid, but I am good with paying things forward. My motivation for personal success was to never be treated the way were were during those tough years. We are comfortable, not rich (although by some standards we are, I suppose) and I will hopefully work for a long, long time. I don't ever want to be poor again. I honestly don't care that much about how much tax we have to pay because I know what a difference the safety nets made in my life. On a policy level, I am concerned about the national debt, and our crumbling infrastructure. I truly believe that we as a country have the financial wherewithal to fix both problems, but lack the political will.


You had no debt to society.  No one should be hungry and an education helps with success.  Your story is an example when help is needed we must have that safety net.  

Maybe my opinion is too simple but the complex system does not work and you are right when you say we lack the politic will.  Just think as long as our representatives have better medical,  pensions , etc. then most of us they will not have the political will to change things.


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## mdurette (Jan 7, 2018)

isisdave said:


> Well, deductibility of home equity loans seems to be a murky area. The Forbes article says "no." This Orange County Register article says yes if it's "Acquisition indebtedness — mortgage debt used to acquire, build or substantially improve the residence". That's a funny definition of acquisition, since you can't get a HELOC until you HAVE equity. I've seen other articles, from just after the law was passed, that said that interest for home improvement was, but interest for other purposes, including tuition, wasn't. I guess we'll have to see which gurus prevail.



Technically you can use a home equity to acquire a property.   Some blended mortgage programs back in the day were all about that 80/20 mortgages.   80% 1st mortgage and 20% Home Equity to avoid PMI.   Even now you can blend a mortgage to avoid higher rates that may be associated with jumbo loans.


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## rapmarks (Jan 7, 2018)

I am not overly concerned about my tax liability.  I am not living paycheck to paycheck.  I am worried about people like my children, decent jobs but not high pay.  My son can't afford to live where he teaches, he drives about an hour each way and even then has a huge mortgae.  He itemizes and the rise in the standard deduction won't help him, I just hope the tax bracket changes enough to offset the loss of the personal exemptions.   There have to be a lot of young families in this situation.  Someone said only thirty percent itemize, as if that is insignificant.  What percent voted in the last election, and what percent did it take to win.  I think thirty percent is very significant.


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## CalGalTraveler (Jan 7, 2018)

This article is from 2013 but indicates that the most personal bankruptcies are caused by medical bills - even for some who have insurance. Bad luck not laziness. This could happen to anyone.

https://www.cnbc.com/id/100840148


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## Talent312 (Jan 7, 2018)

VacationForever said:


> We are terrified of being in debt that we don't have a mortgage, don't have HELOC, and I closed a short-term line of credit taken against my investments account so that I could borrow money to help my son pay for his home...



I don't like debt, either; however, there are situations where common sense should prevail. When I have a return on investments averaging ~11% (incl. bonds), it simply makes more sense to keep my $$ parked there than to pay-down a car loan at -0-% or a mortgage at 3.25%. Also, as the last poster said, the day may come when it's needed for an unexpected expense, and better to have a rainy-day fund.

.


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## klpca (Jan 7, 2018)

rapmarks said:


> I am not overly concerned about my tax liability.  I am not living paycheck to paycheck.  I am worried about people like my children, decent jobs but not high pay.  My son can't afford to live where he teaches, he drives about an hour each way and even then has a huge mortgae.  He itemizes and the rise in the standard deduction won't help him, I just hope the tax bracket changes enough to offset the loss of the personal exemptions.   There have to be a lot of young families in this situation.  Someone said only thirty percent itemize, as if that is insignificant.  What percent voted in the last election, and what percent did it take to win.  I think thirty percent is very significant.


I honestly believe that the bracket shifts and increased child credit will result in a net decrease in tax for most of these young middle class families. (Not that I support this bill, just trying to be fair). I'm not sure what will happen in the high tax states where both spouses work full time in order to afford the mortgage and property taxes on their expensive "starter" home (expensive because of the high cost of real estate in urban areas). Those folks stand to get hurt a lot and I am not sure that the bracket changes and child credit (if applicable) will be enough to offset the loss of deductions.


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## rickandcindy23 (Jan 7, 2018)

One-income households do benefit greatly by not having to pay federal income taxes.  It's great for them, and I applaud the government for not charging them anything.  

I know because our son takes care of our granddaughter, while our daughter-in-law travels to other states as a Wells Fargo auditor.  She makes okay money, Wells Fargo is notorious for not paying people well, but her income is decent enough to pay the bills and buy groceries.  There is very little left after paying bills.  They don't really pay income tax after deducting their house interest and other expenses.  It helps a lot.  

Rick's stepmom pays a tiny bit of income tax.  She makes about $60K a year in retirement and lives alone.  It's a lot of money for her, with Rick's dad's retirement income and her retirement income and her SS.  She has no bills and always tells people she is on a fixed income.  Whatever.    

My stepdad gets $1,800 or so per month in SS.  He pays no tax and has his house paid off as well.  My daughter thinks that is a lot of money to just pay utilities and food.  It definitely is not a lot of money.  What Colorado did for seniors is they only pay half of the property taxes.  So once we are 65, we will benefit from that, which saves $1,200 per year for my stepdad and will be about the same for us.  

Our son is looking for a job, now that the little one is old enough for preschool.  He had his own issues a year ago, if you all remember.  He is dealing with alcoholism and no longer drinks, but he has other behaviors that are just odd.  He is brilliant and has a degree from School of Mines, then he did get his master's degree project management as a followup, and he earned his PE in civil engineering.  He just has strange behaviors and habits, but he can do math formulas in his head.  I cannot explain our son.  But I know of many other engineers who are just as odd.  Most put their energies somewhere else, usually work.


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## mdurette (Jan 7, 2018)

VacationForever said:


> We are terrified of being in debt that we don't have a mortgage, don't have HELOC, and I closed a short-term line of credit taken against my investments account so that I could borrow money to help my son pay for his home, while awaiting for my Californian home to be sold.  Once my house was sold, I closed the line of credit.  Making life simple is good.




I understand and don't try to carry debt myself.    Just my opinion though....every *financially responsible* person should have a HELOC out on their house for easy access to quick funds in an emergency.    I carry maximum HELOC on my house at all times.  It cost me $50 per year in an annual fee, but worth it.    It never gets used, but I know it is there in case of an emergency.


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## CalGalTraveler (Jan 7, 2018)

isisdave said:


> Well, deductibility of home equity loans seems to be a murky area. The Forbes article says "no." This Orange County Register article says yes if it's "Acquisition indebtedness — mortgage debt used to acquire, build or substantially improve the residence". That's a funny definition of acquisition, since you can't get a HELOC until you HAVE equity. I've seen other articles, from just after the law was passed, that said that interest for home improvement was, but interest for other purposes, including tuition, wasn't. I guess we'll have to see which gurus prevail.



We used our Heloc to add solar to our home. Hope we can still write this interest off.  It's a great for home improvements like this that we don't want to roll into a 30 year mortgage.  It is also good to have a Heloc available in case of emergency.


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## VacationForever (Jan 7, 2018)

mdurette said:


> I understand and don't try to carry debt myself.    Just my opinion though....every *financially responsible* person should have a HELOC out on their house for easy access to quick funds in an emergency.    I carry maximum HELOC on my house at all times.  It cost me $50 per year in an annual fee, but worth it.    It never gets used, but I know it is there in case of an emergency.


We hold one year's expense worth of money in our checking account and one year's in our savings account.  If needed I can email my wealth manager to get a line of credit against my investments which will get completed within a couple of days.  If we have unexpected spending, he will sell some of our investments.


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## rickandcindy23 (Jan 7, 2018)

I never thought about a HELOC as a way to get money quickly.  I know that taking money out of our retirement account is very expensive for us.  We took a large amount for our son's rehab last year, and it meant a huge tax bill mid-April.  Wish I had thought of a HELOC instead.  We could have paid 1/3 of it off with the income tax liability on that money.


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## rapmarks (Jan 7, 2018)

I am fiscally responsible, but I don't ever know what a heloc is.  
Cindy I am happy about your son


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## VacationForever (Jan 7, 2018)

We have to stay away from HELOC because now that we are retired we have no income and it will be a difficult process.  We had no income in 2017.


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## Luanne (Jan 7, 2018)

rapmarks said:


> I am fiscally responsible, but I don't ever know what a heloc is.
> Cindy I am happy about your son


HELOC = home equity line of credit 

This is money you can get from the equity in your home.  You usually apply for a line of credit, say $10,000, but don't have to access the entire amount at one time.  You can draw from it as you need it.  We've taken several out over the years.


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## lizap (Jan 7, 2018)

VacationForever said:


> We have to stay away from HELOC because now that we are retired we have no income and it will be a difficult process.  We had no income in 2017.



HELOCs are great in times like this when interest rates are low. There are interest only HELOCs where your payments are relatively low. In my opinion, this is desirable to reverse mortgages for older people when they have much home equity and need $. We have one and use it as an emergency fund, but thankfully never use it. Easy to get with no closing costs.


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## CalGalTraveler (Jan 7, 2018)

VacationForever said:


> We hold one year's expense worth of money in our checking account and one year's in our savings account.  If needed I can email my wealth manager to get a line of credit against my investments which will get completed within a couple of days.  If we have unexpected spending, he will sell some of our investments.



I've never explored a line of credit against investments. What's the interest rate?

Selling investments results in a taxable event which means that you must sell more to cover taxes to get the money that you actually need.  We use the HELOC for short term major expenses (such as adding solar) or minor home improvements with a goal to pay off within 5 - 10 years vs. 30 years. Our HELOC is prime + 0 so with the write-off is almost free money.


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## VacationForever (Jan 7, 2018)

CalGalTraveler said:


> I've never explored a line of credit against investments. What's the interest rate?
> 
> Selling investments results in a taxable event which means that you must sell more to cover taxes to get the money that you actually need.  We use the HELOC for short term major expenses (such as adding Solar) or minor home improvements with a goal to pay off within 5 - 10 years vs. 30 years. Our HELOC is prime + 0 so with the write-off is almost free money.



Since we don't have earned income anymore, whether it is HELOC or LOC against investments, they still need to be paid off through selling investments unless we can raise money in other ways.  

Merrill Lynch's line of credit (LMA) against investment link here: https://www.ml.com/solutions/lma-account.html

The rate is not as good as HELOC but I also get a 0.5% discount against their regular LMA rate as they are also my money manager.  When I borrowed against it for 4 months last year, my rate was around 4%.  The only reason why I used LMA was that I would have cash to repay it after my home was sold.  Otherwise if we need money, we would just ask the financial advisor to sell off some of our investments.


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## rapmarks (Jan 7, 2018)

VacationForever said:


> We have to stay away from HELOC because now that we are retired we have no income and it will be a difficult process.  We had no income in 2017.


No earned income or no total income?


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## VacationForever (Jan 7, 2018)

rapmarks said:


> No earned income or no total income?


No earned income and hardly any total income.  Let's put it this way, I qualified for both premium subsidies and lowest share of cost for a silver plan under ACA last year.  

This year is when my husband will start his Social Security and Required Minimum Distribution and we will still need money beyond that  for the next 7 years.  An annuity that I bought starts in 5 years and Social Security in 7.  I structured 2 of my investments that mature and pay out in 2018 and 2022 and these investments will fund the next 7 years.


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## geekette (Jan 7, 2018)

I don't understand being terrified of debt.  It has its use.  For those of us without generous benefactors, it is how we finance education and reliable wheels (even for used cars I have generally taken at least a short term loan).  I also have a home, which would not have been possible without debt.  I've never run the numbers on how many decades of renting it would have taken to have cash for a house.   Without the education and reliable car, it would certainly have taken even longer.  

I'm scared of tornadoes and spiders, but not debt instruments.  Numbers have never been scary to me, just temporary mileposts along the way.


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## rickandcindy23 (Jan 7, 2018)

rapmarks said:


> I am fiscally responsible, but I don't ever know what a heloc is.
> Cindy I am happy about your son


Thank you.  We are always worried, but he seems to have gotten out of the darkness of addiction.


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## geekette (Jan 7, 2018)

rickandcindy23 said:


> One-income households do benefit greatly by not having to pay federal income taxes.  It's great for them, and I applaud the government for not charging them anything.



This varies widely. 

I was married in a one-income household and did indeed pay income taxes.  I am now divorced in a one-income household and most definitely pay income taxes.  My elderly mother is a one-income household and pays taxes on her pension and SS. 

Govt charges everyone.   Some folks qualify for exemptions, deductions and credits that may offset tax owed, but there is no exclusion for one-income households.


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## VacationForever (Jan 7, 2018)

geekette said:


> I don't understand being terrified of debt.  It has its use.  For those of us without generous benefactors, it is how we finance education and reliable wheels (even for used cars I have generally taken at least a short term loan).  I also have a home, which would not have been possible without debt.  I've never run the numbers on how many decades of renting it would have taken to have cash for a house.   Without the education and reliable car, it would certainly have taken even longer.
> 
> I'm scared of tornadoes and spiders, but not debt instruments.  Numbers have never been scary to me, just temporary mileposts along the way.


Not everyone is as responsible as you with regards to debt.  We have always paid off our credit cards in full each month, even when I was fresh out of university and that was when I first got a credit card.  Did we have a loan early in our lives?  Yes.  But when one can afford to pay off and not a carry a loan, one should not have a loan.  That is our mantra.  Loans and debts can get out of control.  Someone mentioned investments returns of 11% in 2017 and loan interest is way below that.  But if the stock market is upside down, then not only one has a loan but sinking investments, that is too much stress that I want on myself.


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## lizap (Jan 7, 2018)

geekette said:


> I don't understand being terrified of debt.  It has its use.  For those of us without generous benefactors, it is how we finance education and reliable wheels (even for used cars I have generally taken at least a short term loan).  I also have a home, which would not have been possible without debt.  I've never run the numbers on how many decades of renting it would have taken to have cash for a house.   Without the education and reliable car, it would certainly have taken even longer.
> 
> I'm scared of tornadoes and spiders, but not debt instruments.  Numbers have never been scary to me, just temporary mileposts along the way.



My mother (now deceased) used to talk about how wonderful it was to be debt-free. As we've gotten older and are debt-free, it is truly a wonderful feeling.  I see what she was talking about..


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## dioxide45 (Jan 7, 2018)

geekette said:


> This varies widely.
> 
> I was married in a one-income household and did indeed pay income taxes.  I am now divorced in a one-income household and most definitely pay income taxes.  My elderly mother is a one-income household and pays taxes on her pension and SS.
> 
> Govt charges everyone.   Some folks qualify for exemptions, deductions and credits that may offset tax owed, but there is no exclusion for one-income households.


It depends on how high that single income is. If one's AGI is lower than all their credits, deductions and exemptions, then they would end up paying no income tax. It would be easier for a single income household to have its income offset by credits, deductions and exemptions than that of a multiple income household.


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## CalGalTraveler (Jan 7, 2018)

VacationForever said:


> Since we don't have earned income anymore, whether it is HELOC or LOC against investments, they still need to be paid off through selling investments unless we can raise money in other ways.
> 
> Merrill Lynch's line of credit (LMA) against investment link here: https://www.ml.com/solutions/lma-account.html
> 
> The rate is not as good as HELOC but I also get a 0.5% discount against their regular LMA rate as they are also my money manager.  When I borrowed against it for 4 months last year, my rate was around 4%.  The only reason why I used LMA was that I would have cash to repay it after my home was sold.  Otherwise if we need money, we would just ask the financial advisor to sell off some of our investments.



4% is a great rate. Prime (used for Heloc) is now at 4.5% (up from 3.75) from our bank.  How long do you have to repay investment loans?  What is the max size of such loans?  I will have to look into this.


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## VacationForever (Jan 7, 2018)

CalGalTraveler said:


> 4% is a great rate. Prime (used for Heloc) is now at 4.5% (up from 3.75) from our bank.  How long do you have to repay investment loans?  What is the max size of such loans?  I will have to look into this.


The terms would vary depending on the bank/investment house.  I do not believe there is a maximum size as it fluctuates day by day depending on the value of the investment account.  I think mine was about 2/3 of the value of the account.  I don't believe there is a time limit on when it must be paid.  Each month it would show the amount of interest accrued.  I think that has to be paid off each month, much like HELOC.  I did not check with my financial advisor as I simply paid it off with money from my checking account.


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## lizap (Jan 7, 2018)

VacationForever said:


> The terms would vary depending on the bank/investment house.  I do not believe there is a maximum size as it fluctuates day by day depending on the value of the investment account.  I think mine was about 2/3 of the value of the account.  I don't believe there is a time limit on when it must be paid.  Each month it would show the amount of interest accrued.  I think that has to be paid off each month, much like HELOC.  I did not check with my financial advisor as I simply paid it off with money from my checking account.



Our HELOC can be up to 90% of appraised value. You only pay interest. It can be an adjustable or fixed rate.


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## geekette (Jan 7, 2018)

VacationForever said:


> Not everyone is as responsible as you with regards to debt.  We have always paid off our credit cards in full each month, even when I was fresh out of university and that was when I first got a credit card.  Did we have a loan early in our lives?  Yes.  But when one can afford to pay off and not a carry a loan, one should not have a loan.  That is our mantra.  Loans and debts can get out of control.  Someone mentioned that investments returns of 11% in 2017 and loan interest is way below that.  But if the stock market is upside down, then not only one has a loan but sinking investments, that is too much stress that I want on myself.


Sure, I get it, but that's not terror.  You seem to fall into the Healthy Respect category for the good and bad debt.  That's Awareness, a good thing that is unfortunately not generally taught except by experience.   

I am not at all saying that I am the most responsible user of debt, as the implication is that I should just pay off my mortgage if I have the funds somewhere while I don't see the point of retiring a low rate.   Absolutely my investments are earning me far more than I pay in interest.   If I wanted a new car (I don't), I would take 0% financing vs take the cash from elsewhere.   Coming out ahead is more important to me than being debt free.  I use debt vs wallow in it.  

Stock market...  "returns" aren't an issue for me, I'm a dividend income investor.  2017 was very good in that regard as many Special Dividends came in.  Probably I have decent return given the sea of green numbers but I don't track it.  I have always tried to be a "streams of revenue" person, which many real estate investors are as well.  Stocks and RE can get hammered but I have more confidence in giant blue chips to keep the divs flowing than for a tenant to keep the rent coming.  It is also a lot easier to sell shares of stock at will than to liquidate RE.   I don't get stressed by market gyrations and definitely do not consider quarterly dividends to be sinking investments.   I would have no issues retiring during a market downer but I do not forecast and have no idea where the market will be at my retirement in 7 years (when I will indeed be debt-free; I do insist on entering retirement "clean").  

We all have our unique relationships with money.


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## lizap (Jan 7, 2018)

I think your last sentence is key. Many people retirement age like the idea of being debt-free for peace of mind.


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## VacationForever (Jan 7, 2018)

lizap said:


> Our HELOC can be up to 90% of appraised value. You only pay interest. It can be an adjustable or fixed rate.


HELOC lending ratio is higher because value of home is seen as being less volatile than the stock market, although as we have seen in the 2008 housing crash that value of homes can be just as volatile. 

I have used HELOC once against my first home when we needed money to cover losses in our business the first couple of years.  I got that paid off when I sold my home overseas and repatriated money back.  Then my husband wanted to buy a second/retirement home and I took a HELOC against that home again in addition to liquidating some of my investments.  When I sold that home, the balance of the money went back to my investment account.   Then the last shuffle was I needed money to help pay for my son's home while awaiting for my (2nd) California home to be sold.  I am just glad that I no longer need to play shuffling money around.  I know loans and debts and I don't like it.


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## VacationForever (Jan 7, 2018)

lizap said:


> I think your last sentence is key. Many people retirement age like the idea of being debt-free for peace of mind.


It brings to mind what our current financial advisor said.  We had our account transferred over to him after our move.  In the first meeting he said, ok, you no longer have income and it will be a while before you both have income coming in to cover your expenses.  How are you going to fund it?  We explained to him about the plan to pull a chunk of money out here and there.  Then he said he was impressed that we had no debt entering into retirement.  He said a majority of his clients still had debts when they entered retirement and in his opinion not a good place to be in.  Obviously he was talking about small potatoes like us and not like those megabucks folks who use debt to create more wealth.


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## rapmarks (Jan 7, 2018)

geekette said:


> This varies widely.
> 
> I was married in a one-income household and did indeed pay income taxes.  I am now divorced in a one-income household and most definitely pay income taxes.  My elderly mother is a one-income household and pays taxes on her pension and SS.
> 
> Govt charges everyone.   Some folks qualify for exemptions, deductions and credits that may offset tax owed, but there is no exclusion for one-income households.


I agree, I never heard that said before.  My daughter has been raising her three boys alone with no child support and she still gets taxed


----------



## rapmarks (Jan 7, 2018)

VacationForever said:


> It brings to mind what our current financial advisor said.  We had our account transferred over to him after our move.  In the first meeting he said, ok, you no longer have income and it will be a while before you both have income coming in to cover your expenses.  How are you going to fund it?  We explained to him about the plan to pull a chunk of money out here and there.  Then he said he was impressed that we had no debt entering into retirement.  He said a majority of his clients still had debts when they entered retirement and in his opinion not a good place to be in.  Obviously he was talking about small potatoes like us and not like those megabucks folks who use debt to create more wealth.


When my mother in law was still alive her accountant told me that most retirees have no savings and don't leave an estate.


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## bluehende (Jan 7, 2018)

rapmarks said:


> When my mother in law was still alive her accountant told me that most retirees have no savings and don't leave an estate.



I didn't fit the first part, but my kids are doing well so I hope to fit the last part.


----------



## VacationForever (Jan 7, 2018)

rapmarks said:


> When my mother in law was still alive her accountant told me that most retirees have no savings and don't leave an estate.


It is sad.  Whether one has savings or not is dependent on so many factors, opportunities to make more money than from hand to mouth, life's fortunes/mis-fortunes, wisdom, inherently a saver or a spender...

I did lose alot of money in the 2000 dot.com cash, so much that it is embarrassing, with something called margin loans.  I recovered and never gambled again.  I told my financial advisor the story and I said easy come easy go as I used to make a lot of money.  He cringed and said I could have been retired a long time ago..  I hunkered down, kept working and while I am not rich, here I am and retired.  So when I said I am terrified of debt, that is from real scars.


----------



## lizap (Jan 7, 2018)

VacationForever said:


> It is sad.  Whether one has savings or not is dependent on so many factors, opportunities to make more money than from hand to mouth, life's fortunes/mis-fortunes, wisdom, inherently a saver or a spender...
> 
> I did lose alot of money in the 2000 dot.com cash, so much that it is embarrassing, with something called margin loans.  I recovered and never gambled again.  I told my financial advisor the story and I said easy come easy go as I used to make a lot of money.  He cringed and said I could have been retired a long time ago..  I hunkered down, kept working and while I am not rich, here I am and retired.  So when I said I am terrified of debt, that is from real scars.



We made a huge mistake by sending our daughter to an expensive private school. Her schooling did no good. She has a Masters degree in the medical field and doesn't want to work. Problem is her husband is out of work and they have two kids.


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## VacationForever (Jan 7, 2018)

lizap said:


> We made a huge mistake by sending our daughter to an expensive private school. Her schooling did no good. She has a Masters degree in the medical field and doesn't want to work. Problem is her husband is out of work and they have two kids.


Parents usually want the best for their children and please do not look at it as a mistake. Most of us want the best for our children and provide them the opportunities with what our resources will allow.  Everyone has a core in them and we really do not know what it is until they are older.  I often say having children is a gamble, you never know what they will be at birth and when they grow up.


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## klpca (Jan 7, 2018)

It is interesting reading these stories. I don't feel so alone. Although my kids are working, two are seriously considering career changes and the other one certainly isn't making the big bucks. I'm not ok with a job you love, it should be the job with the highest salary. Bonus points if you love it. My kids are kind of idealistic, as are my husband and my in laws. Obviously I'm very pragmatic. Btw, two are prolific savers so that's good. We aren't supporting anyone financially, but I can't see anyone being able to buy a house here. I'm secretly hoping that the tax bill will cause real estate prices to drop in CA, lol.


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## PigsDad (Jan 8, 2018)

Several here have been speculating how the tax bill will affect their taxes for this year, but have any plugged numbers into some of the calculators on the web?  This calculator below is simple and takes your state of residence into consideration:

http://taxplancalculator.com/

According to that one, even though my taxable income will _increase_ by ~$13K, my tax bill will _decrease_ by ~$4K, and will switch from itemizing to using the standard deduction.  It is interesting seeing how changing the state affects the outcome.

Kurt


----------



## klpca (Jan 8, 2018)

PigsDad said:


> Several here have been speculating how the tax bill will affect their taxes for this year, but have any plugged numbers into some of the calculators on the web?  This calculator below is simple and takes your state of residence into consideration:
> 
> http://taxplancalculator.com/
> 
> ...


It was very interesting to play with the numbers. Some unexpected results at the higher ranges, but there is probably some interplay with the AMT, so it may not be quite as easy to determine the real number. We will probably be using the standard deduction as well. Kind of glad to not worry about substantiating deductions - especially charitable contributions. It will also allow the IRS to limit their audit focus.


----------



## rapmarks (Jan 8, 2018)

PigsDad said:


> Several here have been speculating how the tax bill will affect their taxes for this year, but have any plugged numbers into some of the calculators on the web?  This calculator below is simple and takes your state of residence into consideration:
> 
> http://taxplancalculator.com/
> 
> ...


It looks like I will save a real bundle, hope it is accurate


----------



## bobpark56 (Jan 8, 2018)

bluehende said:


> I think we will view the incentive differently.  Is the incentive for high tax states to lower their level of taxes?  Wouldn't this hurt their economies as the services deteriorate and people and companies flee for this reason.  Then the only alternative would be to rely on the federal government like all the other states.
> 
> I will use my state as an example.  DE gets the lowest percentage of any state of their budget from the federal government.  For us to get to the average we would need almost 20% of our budget in additional money from the federal government.  So if we bring our taxes in line would you like the Federal Government to give us 500 million dollars a year.  That is what it would take and we are a state of only 1 million.  Imagine if CA or NY demanded the same.


Hmmmm....Some states seem to be keeping their expenditures at manageable levels. Why is it Delaware can't do likewise? And NJ, NY, & Cal? Are these states simply too wedded to the idea that providing personal benefits is better than providing the basics of roads, schools, bridges, etc.?


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## bluehende (Jan 8, 2018)

I think the biggest change especially for high earners. is the bracket change (maybe upward creep of brackets is better term).  Here is a good comparison of old vs new

https://www.factcheck.org/2017/12/guide-tax-changes/

Both of my kids are saving considerable.  They live in higher tax states but not much beyond the limits.  The original elimination of salt would have hurt them a lot.  With the limits it hurts a little.  They both fall under being hurt by the most visible changes.  They gain a lot by the bracket changes.  I think the 15% that will not get a tax break fall under specific scenarios unique to a few percent of tax payers.  The one I have heard about was the head of household break.  Specifically single parents with kids in low incomes get hurt.


----------



## bobpark56 (Jan 8, 2018)

bluehende said:


> The high tax states CA,NY, and NJ do not get back as much per dollar on their tax dollars than the low tax states.  I do not live in a high tax state but that seems unfair also.  They would argue that they pay more than their fair share.


Ahhh...But that's not a tax issue. It's a federal spending issue.


----------



## bobpark56 (Jan 8, 2018)

VacationForever said:


> 2 certainties in life, death and taxes.


Not necessarily true. We just completed a 2-week stay in Merida, Mexico. While there, we learned that not paying personal income taxes is not illegal. This seems to be the safety valve for indigenous rural families who live off the land and for those elsewhere who individually provide service functions, etc. If you work for a business (not sure where the boundaries are here), the business is required to pay taxes on what they pay you.


----------



## bluehende (Jan 8, 2018)

bobpark56 said:


> Hmmmm....Some states seem to be keeping their expenditures at manageable levels. Why is it Delaware can't do likewise? And NJ, NY, & Cal? Are these states simply too wedded to the idea that providing personal benefits is better than providing the basics of roads, schools, bridges, etc.?



I think you misunderstand.  I never said our budget was particularly high.  I am saying we get less of it from the federal government.  Delaware gets 31 cents back for every dollar we pay in federal taxes.  West Virginia gets 1.40.  Why doesn't the low tax state of WV get their act together and stop stealing (hyperbole not my actual opinion)  Delawares money.    I never said personal benefits.  I did specifically surmise (opinion not fact) that they provide services that add to their GDP.  It could even be personal benefits.  If so then the high tax states should just have the feds pay for it like the rest of the states.  My high tax state does not get any particular perks that my family in WV does not  gets.  In fact they seem to get more.

Can you site anything that says lower tax states manage their costs better?  It would be great if NY could pay AL wages but they cann't.


----------



## bluehende (Jan 8, 2018)

bobpark56 said:


> Ahhh...But that's not a tax issue. It's a federal spending issue.



So you are saying that the Federal Government should be spending a lot more in NJ,NY,and CA so they are not cheated?


----------



## CalGalTraveler (Jan 8, 2018)

The notion of "low tax states" may possibly be a misnomer as the end of the article below states that 22 states get taxes for public funding of schools etc. from charitable write-offs (shifts the spend from "personal income tax" to "charity.") - it's a shell game -  everybody pays a lot of taxes to their state but it is classified in different categories.

The interesting idea here is if the big states move to such a scheme and the IRS fights it, the "sacred cows" of school vouchers and conservation easements which are protected by this loophole in the charitable giving by 22 other states by precedent of law would also have to be thrown out as well.

https://www.usatoday.com/story/news...tax-states-consider-charity-worka/1003733001/


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## isisdave (Jan 8, 2018)

PigsDad said:


> Several here have been speculating how the tax bill will affect their taxes for this year, but have any plugged numbers into some of the calculators on the web?  This calculator below is simple and takes your state of residence into consideration:
> 
> http://taxplancalculator.com/
> 
> Kurt



Note the info circle next to the Income box - you need to use the Adjusted Gross Income. The author has been tweaking this site since the bill passed, and I think it's gotten more accurate and covered more cases.  I believe it has underestimated our State Tax deduction -- it only added $1100 to  the property tax number we supplied -- but it doesn't matter as we're now clearly in the Standard Deduction camp. 

That made me wonder -- does it assume states will adopt the same standard deduction? Not gonna happen in CA -- maybe that's why the SALT was so low. Some states assess state tax (or at least start) as a percentage of federal tax ... are they going to continue with that?


----------



## PigsDad (Jan 8, 2018)

klpca said:


> It was very interesting to play with the numbers. Some unexpected results at the higher ranges, but there is probably some interplay with the AMT, so it may not be quite as easy to determine the real number. We will probably be using the standard deduction as well. Kind of glad to not worry about substantiating deductions - especially charitable contributions. It will also allow the IRS to limit their audit focus.


Indeed, it was interesting.  Seeing the breakdown of the old tax brackets (and total tax based on each of those brackets) compared to the new brackets was very enlightening.  We will see if assumptions the calculator makes are accurate.

Taking the standard deduction will be nice, especially if we know we for sure would be better off with it vs. itemizing.  I always hate putting together and organizing all of the little deductions (auto registration tax, timeshare property taxes, miscellaneous charitable contributions, etc.).  It will take some getting used to (have been itemizing for almost all my working life), but it should make getting ready for taxes easier.

Kurt


----------



## klpca (Jan 8, 2018)

PigsDad said:


> Indeed, it was interesting.  Seeing the breakdown of the old tax brackets (and total tax based on each of those brackets) compared to the new brackets was very enlightening.  We will see if assumptions the calculator makes are accurate.
> 
> Taking the standard deduction will be nice, especially if we know we for sure would be better off with it vs. itemizing.  I always hate putting together and organizing all of the little deductions (auto registration tax, timeshare property taxes, miscellaneous charitable contributions, etc.).  It will take some getting used to (have been itemizing for almost all my working life), but it should make getting ready for taxes easier.
> 
> Kurt


After I posted that I realized that I still need to do it for my state return. Ugh. How does Colorado compute their itemized deductions? Do they use actual expenses, percentage of Federal, or standard deduction?

When I went to high AGI and standard deduction using the calculator, it seemed that there were tax increases, but I suspect that the high income/high tax folks were in the AMT (their state taxes weren't deductible in the first place, lol), so I suspect that their AMT liability was significantly higher than the regular tax, therefore they will actually get tax relief from the new system.


----------



## PigsDad (Jan 8, 2018)

klpca said:


> After I posted that I realized that I still need to do it for my state return. Ugh. How does Colorado compute their itemized deductions? Do they use actual expenses, percentage of Federal, or standard deduction?


Colorado's income tax is driven off of the federal return; specifically the "Federal Taxable Income" (1040 line 43).  That amount is after the standard deduction / itemized deductions and exemptions.  That amount is the starting point for the CO tax form, and then it adds back the state income tax deduction from Schedule A.  After that, there are a few miscellaneous state-specific deductions and credits (529 contributions, solar, etc.).  Then our tax is a flat 4.63%.  Pretty simple, overall.

We also file North Dakota and Montana state taxes (due to some farm & oil lease revenue), and those states use a very similar process.

Kurt


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## bogey21 (Jan 8, 2018)

rapmarks said:


> When my mother in law was still alive her accountant told me that most retirees have no savings and don't leave an estate.



I have purposely set things us so as not to leave an estate.   My children are aware of this and are fine with this because of the way I have supported them financially over the years.


----------



## bogey21 (Jan 8, 2018)

lizap said:


> We made a huge mistake by sending our daughter to an expensive private school. Her schooling did no good. She has a Masters degree in the medical field and doesn't want to work. Problem is her husband is out of work and they have two kids.



I spent about $250,000 paying my Daughter's way all the way through a Masters degree.  She has never had a career other than being the Mother of 3 great kids.  Despite the cost I think her education has been a plus and have never second guessed the expense.

George


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## Panina (Jan 8, 2018)

bogey21 said:


> I spent about $250,000 paying my Daughter's way all the way through a Masters degree.  She has never had a career other than being the Mother of 3 great kids.  Despite the cost I think her education has been a plus and have never second guessed the expense.
> 
> George


An education is priceless.  Being a mother of 3 is a demanding career but if life ever changes and she has to work outside the home her degree will get her to interviews and give her a good chance on getting a job.


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## klpca (Jan 8, 2018)

PigsDad said:


> Colorado's income tax is driven off of the federal return; specifically the "Federal Taxable Income" (1040 line 43).  That amount is after the standard deduction / itemized deductions and exemptions.  That amount is the starting point for the CO tax form, and then it adds back the state income tax deduction from Schedule A.  After that, there are a few miscellaneous state-specific deductions and credits (529 contributions, solar, etc.).  Then our tax is a flat 4.63%.  Pretty simple, overall.
> 
> We also file North Dakota and Montana state taxes (due to some farm & oil lease revenue), and those states use a very similar process.
> 
> Kurt


Will your Colorado taxable income be higher now? If so are they adjusting the rates?


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## Passepartout (Jan 8, 2018)

FRONT PAGE NEWS! New Tax Plan to cost Idahoans $100M. Buried deep in the article, it said that people were of the (mis)conception that there was going to be a tax reduction! HAH! Let's see now. Up is down, Peace is war, health care freedom is no health care, tax reduction nets government more money. AMAZING! Hold your wallet, because somebody else already has a firm grip on it.

Jim


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## VacationForever (Jan 8, 2018)

Passepartout said:


> FRONT PAGE NEWS! New Tax Plan to cost Idahoans $100M. Buried deep in the article, it said that people were of the (mis)conception that there was going to be a tax reduction! HAH! Let's see now. Up is down, Peace is war, health care freedom is no health care, tax reduction nets government more money. AMAZING! Hold your wallet, because somebody else already has a firm grip on it.
> 
> Jim


What makes Idaho different?


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## Passepartout (Jan 8, 2018)

VacationForever said:


> What makes Idaho different?


Idaho is certainly a different sort of place than Somewhere Out There, but for the the current discussion, my comment was the result of an article in my local fishwrapper.


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## PigsDad (Jan 8, 2018)

klpca said:


> Will your Colorado taxable income be higher now? If so are they adjusting the rates?


Great question!  I haven't heard of any adjustments being talked about, but since (according to the calculator I posted above) my taxable income is increasing, I would expect my state taxes to go up a bit (~$500 in my case).  But Colorado has a law that says if the state runs a surplus, the $$ must be returned to the citizens.  AND our state expenditures cannot increase more than a set percentage -- so they can't just spend the extra revenue.  We had that case for a few years about 10 years ago, so if the overall tax revenue goes up I would expect a refund (it was in the form of a tax credit) in the coming years.

Kurt


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## ace2000 (Jan 8, 2018)

And I'm sure since your local "fishwrapper" says it, it HAS to be true, and there's absolutely no way that they could be distorting or exaggerating anything to sell more papers or views???  Naw... it has to be true.  Nevermind, how could I even think such a thing.


----------



## MULTIZ321 (Jan 8, 2018)

ace2000 said:


> And I'm sure since your local "fishwrapper" says it, it HAS to be true, and there's absolutely no way that they could be distorting or exaggerating anything to sell more papers or views???  Naw... it has to be true.  Nevermind, how could I even think such a thing.


Hi Ace,

Don't tell me you're going over to the Fake News Camp.

Richard


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## ace2000 (Jan 8, 2018)

MULTIZ321 said:


> Hi Ace,
> 
> Don't tell me you're going over to the Fake News Camp.
> 
> Richard




Of course not, I'm still kicking myself for even thinking such a thing.  Sometimes my worst thoughts just get the better of me...


----------



## bluehende (Jan 8, 2018)

Passepartout said:


> FRONT PAGE NEWS! New Tax Plan to cost Idahoans $100M. Buried deep in the article, it said that people were of the (mis)conception that there was going to be a tax reduction! HAH! Let's see now. Up is down, Peace is war, health care freedom is no health care, tax reduction nets government more money. AMAZING! Hold your wallet, because somebody else already has a firm grip on it.
> 
> Jim





I read the article.  It was saying that the new tax bill will change the amounts of state taxes if state tax laws stay as they are.  The tax man in Idaho was saying if nothing else changes Idaho residents would pay 97 million more in state taxes.  The interesting thing is that the new federal tax law takes effect mid fiscal year for Idaho complicating what they can do.


----------



## PigsDad (Jan 8, 2018)

bluehende said:


> I read the article.  It was saying that the new tax bill will change the amounts of state taxes if state tax laws stay as they are.  The tax man in Idaho was saying if nothing else changes Idaho residents would pay 97 million more in state taxes.  The interesting thing is that the new federal tax law takes effect mid fiscal year for Idaho complicating what they can do.


Well, if an Idaho resident's income tax is calculated similar to Colorado (based on form 1040 line 43: Federal Taxable Income), that would make sense.  Because of the general reduction of deductions, exemptions, etc., a lot of taxpayer's Taxable Income will go up.  But their Federal income tax will be less in most cases because of changes to the tax brackets and rates.  I think it will be interesting for a lot of states.

However, getting back to the newspaper headline:  Sure, the tax bill may cost Idahoans $97 million more (as a whole) in state taxes, I would bet they will be saving *way *more than that in Federal taxes (as a whole).  But that headline probably wouldn't sell newspapers... 

Kurt


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## CalGalTraveler (Jan 8, 2018)

Panina said:


> An education is priceless.  Being a mother of 3 is a demanding career but if life ever changes and she has to work outside the home her degree will get her to interviews and give her a good chance on getting a job.



There is a mode of thought that says that the best legacy you can leave your children is their education, and for their retired parents to be self-sufficient. Any inheritance they receive beyond that is unexpected gravy.

With rising college, tax, and healthcare costs, this will certainly be the case!


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## isisdave (Jan 8, 2018)

The effect on state taxes is something I have not seen discussed anywhere until this thread. There is bound to be some really negative consequences for states that base their tax on the federal Taxable Income line, which is AFTER deductions and (formerly) exemptions. Hence, if taxable income goes down because of the doubling of SD (for example, for retired couples with no kids), they're going to collect less tax.

Here in California, taxes start with federal Adjusted Gross Income, tweaked for things that are or aren't taxable in CA (mostly SS isn't taxed, and state taxes aren't deductible). Then the generous Standard Deduction ($8472 for couples) is applied.  We have an "exemption" of $114 per person, double that for seniors, but it's actually a credit on the calculated tax. So there shouldn't be any significant effect on our tax collections.


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## mdurette (Jan 9, 2018)

Panina said:


> An education is priceless.  Being a mother of 3 is a demanding career but if life ever changes and she has to work outside the home her degree will get her to interviews and give her a good chance on getting a job.



Someone once told me....nobody will ever take away your education.   So true.

On an education note and back to the topic if this thread.   I just learned today that parents can now withdraw $10,000 per year from their kids 529 college savings plan for private education for grades k-12.    It is getting a lot of flack, but personally I'm happy with the option just in case I need it.


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## bobpark56 (Jan 9, 2018)

bluehende said:


> So you are saying that the Federal Government should be spending a lot more in NJ,NY,and CA so they are not cheated?


No. I think that spending issues are a topic for another thread.


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## rapmarks (Jan 9, 2018)

How many yearschavecinheard a baby born before the end of the year a little tax deduction.  No longer, now it's a little tax credit.


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## CalGalTraveler (Jan 14, 2018)

Below is an article comparing California and NY to low tax states. Biggest difference appears to be the high cost of living which drives higher wages for teachers, police, fire etc and the bargaining power of the public unions for retirement benefits. Not sure there is much that can be done to manage lower wages of public servants given the high cost of living here.  Appears to be systemic problems tied to the cost of living and union negotiations that are not easily solved by cutting budgets - lest we hire fewer teachers and firefighters. 

I would like to see a comparison of overhead percentages between the states which is not included in this report.

https://www.mercurynews.com/2018/01...s-pay-more-state-and-local-taxes-than-texans/


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## VacationForever (Jan 14, 2018)

CalGalTraveler said:


> Below is an article comparing California and NY to low tax states. Biggest difference appears to be the high cost of living which drives higher wages for teachers, police, fire etc and the bargaining power of the public unions for retirement benefits. Not sure there is much that can be done to manage lower wages of public servants given the high cost of living here.  Appears to be systemic problems tied to the cost of living and union negotiations that are not easily solved by cutting budgets - lest we hire fewer teachers and firefighters.
> 
> I would like to see a comparison of overhead percentages between the states which is not included in this report.
> 
> ...


The brunt of CA's problem related to collecting more tax money but fewer services is due to increasing contributions to the large underfunded public pension funds from unrealistic expectations of pension investment growth estimates.  Unions negotiated nice terms and the state approved them years ago.  See Jerry Brown lamenting that in the next round of recession, pension will be on the cutting board. 

http://www.sacbee.com/news/politics-government/the-state-worker/article194434479.html


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## rapmarks (Jan 14, 2018)

Interesting article in New York Times about doubling your charitable donations every other year, taking the year off the next, therefore itemizing every other year.


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## PigsDad (Jan 15, 2018)

rapmarks said:


> Interesting article in New York Times about doubling your charitable donations every other year, taking the year off the next, therefore itemizing every other year.


We may look into this.  Because of the new tax bill, we did accelerate most of our planned 2018 charitable giving into 2017 so we could claim the deduction.  With the new tax bill, we will not itemize any more, but if we double-up on charitable giving every-other year, we may benefit by itemizing on those years.  I'll have to play with the numbers, but it won't affect us until at least 2019 so I have some time.

Kurt


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## Roger830 (Jan 15, 2018)

When employeed, I did something similar with the property  tax. Paid three payments, Jan July Dec, in one year to itemize, then pay only July the next year and take the standard deduction.


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## bobpark56 (Jan 18, 2018)

It appears that the big nanny / PC states are the ones with the highest costs of living. Folks in live-and-let-live states seem to elect politicians that manage to get along more frugally. Perhaps Ny/Cal etc should try electing politician/parties of the more frugal bent.


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## VacationForever (Jan 18, 2018)

bobpark56 said:


> It appears that the big nanny / PC states are the ones with the highest costs of living. Folks in live-and-let-live states seem to elect politicians that manage to get along more frugally. Perhaps Ny/Cal etc should try electing politician/parties of the more frugal bent.


The state with the highest poverty level... is California (#1)... NY (#4).  https://www.bizjournals.com/sanjose...highest-poverty-rates-calif-fla-la-ny-az.html

Being more frugal does not help these states.  They need fundamental change and if I get into it more it will become political.


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## bobpark56 (Jan 19, 2018)

Tax laws (abetted by local practices) do seem to affect voting by the feet. Here are the current forecasts for the changes in congressional representation we are likely to see in 2020...with Illinois leading in the race to lose 2 congressional seats.:


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## Brett (Jan 19, 2018)

VacationForever said:


> The state with the highest poverty level... is California (#1)... NY (#4).  https://www.bizjournals.com/sanjose...highest-poverty-rates-calif-fla-la-ny-az.html
> 
> Being more frugal does not help these states.  They need fundamental change and if I get into it more it will become political.



LOL!!
just* google* "The state with the highest poverty level" 

but I suppose there can be a difference of opinion on "poverty level"  ... fake news or real


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## klpca (Jan 19, 2018)

Circling back to the (long ago) original topic, I had an opportunity yesterday to calculate our taxes for 2018 using the actual brackets. Unlike the result from the calculator, we receive no tax cut, in fact we have an increase (although one I am not going to lose any sleep over). In our case, the calculator linked above was off by over $1,500 so be forewarned and do not use the numbers presented on the calculator when determining your estimated taxes for example. (I'm linking this article strictly for the brackets/rates. I can't vouch for the other content). https://www.fool.com/taxes/2018/01/18/your-complete-guide-to-the-2018-tax-changes.aspx


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## CalGalTraveler (Jan 24, 2018)

It appears that my earlier prediction here on Tug is happening. California has just introduced a bill to increase corporate taxes on businesses over $1 million in revenue to offset the tax cuts.  

http://www.latimes.com/politics/ess...-pitch-business-tax-1516315691-htmlstory.html

(Calif. businesses never left the state when taxes were higher, so they probably wouldn't leave with this tax. As someone who will pay thousands in higher taxes with the SALT deduction cap, I am in favor of this if they give relief to our personal SALT deduction loss.)


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## Roger830 (Jan 24, 2018)

New taxes generate new spending.

CT didn't have an income tax until about 25 years ago. 
It was supposed to reduce property tax because of grants to towns.
Now there is a $2 billion deficit, higher income tax, high property tax, small town grants, and business leaving the state.


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## CalGalTraveler (Jan 24, 2018)

Roger830 said:


> New taxes generate new spending.
> 
> CT didn't have an income tax until about 25 years ago.
> It was supposed to reduce property tax because of grants to towns.
> Now there is a $2 billion deficit, higher income tax, high property tax, small town grants, and business leaving the state.



True.  My biggest concern is that they will pass this and not give any relief on SALT.  I am glad we are within reach of retirement and can work remotely because we may be establishing residency out of state if there is no SALT relief. 

The people in charge in Washington may experience unintended consequences as Californians/NY/NJ etc. flood into low tax states disrupting carefully drawn election districts/electoral votes and adding cost pressure to local infrastructure. Baby boomers retiring and businesses moving out of state with their personnel will add to this tidal wave.

http://thehill.com/opinion/finance/369536-census-data-show-people-flocking-to-low-tax-states

As the saying goes...be careful what you wish for...you might just get it!


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## VacationForever (Jan 24, 2018)

CalGalTraveler said:


> True.  My biggest concern is that they will pass this and not give any relief on SALT.  I am glad we are within reach of retirement and can work remotely because we may be establishing residency out of state if there is no SALT relief.



The taxes raised are supposed to go help the poor and those on welfare.  I highly doubt any of the raised taxes would be used to give relief on SALT.


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## fillde (Jan 24, 2018)

Well, anybody contemplating moving to Florida, please carefully take into consideration the following TUG thread before making your decision. Especially the negative remarks.

https://tugbbs.com/forums/index.php?threads/would-you-move-to-florida.262186/


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## CalGalTraveler (Jan 24, 2018)

This California gal cannot stand humidity.  Will likely establish residence in Reno or Vegas and rent the rest of the year in Calif or Hawaii as a "snowbird."

If we can swing it by establishing a property LLC, we may rent back our own properties in Calif. to get the full SALT deduction and write off all our maintenance fees and property costs to boot as a small business.  We can VRBO them when we are in Nevada to offset costs.


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## VacationForever (Jan 24, 2018)

CalGalTraveler said:


> This California gal cannot stand humidity.  Will likely establish residence in Reno or Vegas and rent the rest of the year in Calif or Hawaii.


+1

When my husband really wanted to retire outside of California, he wanted to check out Florida, Georgia, South Carolina and Texas.  I said, no, hell no - precisely, as I don't do well with humidity and don't want to live in hurricane or tornado country.  He said to check it out anyway as I might change my mind.  We happened to have a conference in Orlando Florida and added on a few days on the front end in a coastal area north of Orlando (don't remember which part).  After 1 day, my husband said "This is so humid and dreary."  We cancelled an appointment with a realtor and spent the time feeling miserable before heading down to Orlando.


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## CalGalTraveler (Jan 24, 2018)

+1 agree on Florida humidity, however winter is nice. Austin area of Texas is nice - looks like Northern California with oak trees.  I don't know about summer weather, but rest of the year is nice.


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## geekette (Jan 24, 2018)

VacationForever said:


> +1
> 
> When my husband really wanted to retire outside of California, he wanted to check out Florida, Georgia, South Carolina and Texas.  I said, no, hell no - precisely, as I don't do well with humidity and don't want live in hurricane or tornado country.  He said to check it out anyway as I might change my mind.  We happened to have a conference in Orlando Florida and added on a few days on the front end in a coastal area north of Orlando (don't remember which part).  After 1 day, my husband said "This is so humid and dreary."  We cancelled an appointment with a realtor and spent the time feeling miserable before heading down to Orlando.


I have never understood the appeal of Florida.  Humidity is indeed terrible, but probably my larger fear is to get eaten by a gator.    

I also am apparently an oddball that enjoys change of seasons.  Today is unexpected ice driving.  I don't mind adventures in driving, keeps me sharp, but this was a dicey go of it that I would not have attempted were it not for important med appts today.  When retired, I will have the choice of leaving home or not, my mother cancels appts when she can't leave home safely.  I like snow driving but usually remain parked with ice unless I really must go out.  I prefer this to having to consider AC as a critical need.   I can get by without electricity here for days, even in -40 temps.   

In the past few years I have come to the conclusion that this is my home and I don't want to leave home for the final chapter of my life.


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## CalGalTraveler (Jan 24, 2018)

Our Minnesota relatives feel the same way; they are puzzled why we don't want to visit them during Christmas holidays!


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## geekette (Jan 24, 2018)

CalGalTraveler said:


> Our Minnesota relatives feel the same way; they are puzzled why we don't want to visit them during Christmas holidays!


lol.  I would visit!   It has been odd for me the years I have gone to Houston for Christmas (sis moved there in the 80s).  Using an outdoor pool in winter is plain strange to me.  

Cold just requires the right gear.  I love my long washable down coat and get a lot of use out of it (Burlington Coat Factory has long been my go-to in coat selection; huge variety, excellent prices).  -40 doesn't bother me but at the start of every winter, I put my ankle-length wool cape, extra socks and extra shoes into the trunk.  In my family, "foul weather gear" is just something you have on hand so it's there in case you need it.   I know I will drive in any weather and may get stuck on the road for any number of reasons.  I want to be able to hike out of trouble if necessary.  Sure, I look like Grim Reaper in that giant black cape, but, hypothermia won't get me since I can put it on over even the bulkiest coat.


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