Author Topic: Future US tax policy  (Read 23909 times)

Offline aygart

  • Dansdeals Lifetime 10K Presidential Platinum Elite
  • *******
  • Join Date: May 2008
  • Posts: 17400
  • Total likes: 14339
  • DansDeals.com Hat Tips 14
    • View Profile
    • Lower Watt Energy Brokers
  • Programs: www.lowerwatt.com
Re: Future US tax policy
« Reply #20 on: January 25, 2019, 12:28:17 PM »
This is the bottom line. It doesn't matter what makes sense, but what is the political reality. I think ppl thought Trump would be different, since they thought he wouldn't be beholden to anyone, but he hasn't turned out to be much better than any other politician, and his hands are somewhat tied by Congress.
I never understood how people thought that. I have said from day one that he is a politician like every other.
Feelings don't care about your facts

Offline yitzgar

  • Dansdeals Presidential Platinum Elite
  • ********
  • Join Date: Dec 2016
  • Posts: 3078
  • Total likes: 1277
  • DansDeals.com Hat Tips 1
    • View Profile
Re: Future US tax policy
« Reply #21 on: January 25, 2019, 12:32:41 PM »
I never understood how people thought that. I have said from day one that he is a politician like every other.
I agree, but I think that was definitely some people's thought process

Offline Yitzshpitz

  • Dansdeals Platinum Elite + Lifetime Silver Elite
  • *****
  • Join Date: Oct 2014
  • Posts: 662
  • Total likes: 55
  • DansDeals.com Hat Tips 0
    • View Profile
Re: Future US tax policy
« Reply #22 on: January 25, 2019, 12:39:20 PM »
The first 2 are (the same) cherry picked data choosing one year and the ones paying the least taxes that year. It is also done by an agenda based organization.

Didn't read the last one yet, but are you sure it makes your point?

1) I havent seen companies denying or proving otherwise about their tax avoidance. Even you argue if some data is cherry picked, it doesnt explain the energy and gas sectors that certainly receive huge breaks. I do hear your point about the organizations that are running these numbers.

2) The article describes different ways of tax avoidance and uses IBM as an example of a company that their taxes paid is not in proportion at all with their income and earnings.

Offline ExGingi

  • Dansdeals Lifetime 10K Presidential Platinum Elite
  • *******
  • Join Date: Nov 2015
  • Posts: 15620
  • Total likes: 7712
  • DansDeals.com Hat Tips 19
    • View Profile
  • Location: 770
  • Programs: בשורת הגאולה. From Exile to Redemption. GIYF. AAdvantage Executive Platinum®
Re: Future US tax policy
« Reply #23 on: January 25, 2019, 12:41:22 PM »
This is the bottom line. It doesn't matter what makes sense, but what is the political reality. I think ppl thought Trump would be different, since they thought he wouldn't be beholden to anyone, but he hasn't turned out to be much better than any other politician, and his hands are somewhat tied by Congress.

The reality is that the current situation isn't sustainable. Major reform needs to happen, and that will be on both the entitlement side (no politician is touching that - is the political third rail) and the revenue side.

On the revenue side, tinkering with rates doesn't do much. From what I've seen economists say that the base needs to be broadened.

There are supposedly two new ways to increase revenue: 1. A Value Added Tax (or some other sort of consumption tax, though a VAT has some special advantages). 2. A wealth tax. IMHO one or both of those is in our future. I would much rather see something enacted in a way that can't be easily expanded by small government advocates, rather than having it enacted by the big government crowd.
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Offline yitzgar

  • Dansdeals Presidential Platinum Elite
  • ********
  • Join Date: Dec 2016
  • Posts: 3078
  • Total likes: 1277
  • DansDeals.com Hat Tips 1
    • View Profile
Re: Future US tax policy
« Reply #24 on: January 25, 2019, 01:04:52 PM »
The reality is that the current situation isn't sustainable. Major reform needs to happen, and that will be on both the entitlement side (no politician is touching that - is the political third rail) and the revenue side.

On the revenue side, tinkering with rates doesn't do much. From what I've seen economists say that the base needs to be broadened.

There are supposedly two new ways to increase revenue: 1. A Value Added Tax (or some other sort of consumption tax, though a VAT has some special advantages). 2. A wealth tax. IMHO one or both of those is in our future. I would much rather see something enacted in a way that can't be easily expanded by small government advocates, rather than having it enacted by the big government crowd.
I hear. Consumption based tax is fairer in a sense, however I don't like seeing new taxes introduced. Maybe if it replaced a different tax which would be completely repealed?

Offline aygart

  • Dansdeals Lifetime 10K Presidential Platinum Elite
  • *******
  • Join Date: May 2008
  • Posts: 17400
  • Total likes: 14339
  • DansDeals.com Hat Tips 14
    • View Profile
    • Lower Watt Energy Brokers
  • Programs: www.lowerwatt.com
Re: Future US tax policy
« Reply #25 on: January 25, 2019, 01:06:01 PM »
Maybe if it replaced a different tax which would be completely repealed?
LOL
Feelings don't care about your facts

Offline yitzgar

  • Dansdeals Presidential Platinum Elite
  • ********
  • Join Date: Dec 2016
  • Posts: 3078
  • Total likes: 1277
  • DansDeals.com Hat Tips 1
    • View Profile
Re: Future US tax policy
« Reply #26 on: January 25, 2019, 01:06:17 PM »

Offline yitzgar

  • Dansdeals Presidential Platinum Elite
  • ********
  • Join Date: Dec 2016
  • Posts: 3078
  • Total likes: 1277
  • DansDeals.com Hat Tips 1
    • View Profile
Re: Future US tax policy
« Reply #27 on: January 25, 2019, 01:08:55 PM »
What will probably actually end up happening is a wealth tax, since they are an easier target. I wonder if big donors matter less nowadays to politicians in the age of social media? Either way, they can always give breaks and loopholes to the corporations they want, so it's a win win

Offline ExGingi

  • Dansdeals Lifetime 10K Presidential Platinum Elite
  • *******
  • Join Date: Nov 2015
  • Posts: 15620
  • Total likes: 7712
  • DansDeals.com Hat Tips 19
    • View Profile
  • Location: 770
  • Programs: בשורת הגאולה. From Exile to Redemption. GIYF. AAdvantage Executive Platinum®
Re: Future US tax policy
« Reply #28 on: January 25, 2019, 01:30:00 PM »
What will probably actually end up happening is a wealth tax, since they are an easier target. I wonder if big donors matter less nowadays to politicians in the age of social media? Either way, they can always give breaks and loopholes to the corporations they want, so it's a win win

Transactional based taxes are much easier to enforce. Which is why I think we might also see a financial transaction tax.

Politically, and from a populous standpoint, a wealth tax is a much easier sell for the D's.

In addition to the fiscal problems, there is also a social consideration. Substantial economic and inequality breeds social (and other) instability.
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Offline ExGingi

  • Dansdeals Lifetime 10K Presidential Platinum Elite
  • *******
  • Join Date: Nov 2015
  • Posts: 15620
  • Total likes: 7712
  • DansDeals.com Hat Tips 19
    • View Profile
  • Location: 770
  • Programs: בשורת הגאולה. From Exile to Redemption. GIYF. AAdvantage Executive Platinum®
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Offline ExGingi

  • Dansdeals Lifetime 10K Presidential Platinum Elite
  • *******
  • Join Date: Nov 2015
  • Posts: 15620
  • Total likes: 7712
  • DansDeals.com Hat Tips 19
    • View Profile
  • Location: 770
  • Programs: בשורת הגאולה. From Exile to Redemption. GIYF. AAdvantage Executive Platinum®
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Online CountValentine

  • Dansdeals Lifetime 10K Presidential Platinum Elite
  • *******
  • Join Date: Mar 2013
  • Posts: 15788
  • Total likes: 7317
  • DansDeals.com Hat Tips -1
  • Gender: Female
    • View Profile
  • Location: Poland - Exiled
  • Programs: DAOTYA, DDF Level 3, 5K Lounge
Only on DDF does 24/6 mean 24/5/half/half

Offline ExGingi

  • Dansdeals Lifetime 10K Presidential Platinum Elite
  • *******
  • Join Date: Nov 2015
  • Posts: 15620
  • Total likes: 7712
  • DansDeals.com Hat Tips 19
    • View Profile
  • Location: 770
  • Programs: בשורת הגאולה. From Exile to Redemption. GIYF. AAdvantage Executive Platinum®
Re: Future US tax policy
« Reply #32 on: July 10, 2019, 07:40:36 AM »
Not working.
Congress Is Coming for Your IRA
The Secure Act would upend 20 years of retirement planning and stick it to the middle class.

By Philip DeMuth
July 9, 2019 7:06 pm ET

Like grave robbers opening King Tut’s tomb, Congress can’t wait to get its hands on America’s retirement-account assets. The House passed the Setting Every Community Up for Retirement Enhancement Act, known by the acronym Secure, in May. The vote was 417-3. The Secure Act is widely expected to pass the Senate by unanimous consent. While ostensibly helping Americans save for retirement, the bill would actually reduce the value of all retirement savings plans: individual retirement accounts, 401(k)s, Roth IRAs, the works.

The main problem with the Secure Act is that it eliminates the stretch IRA, the fixed star in the financial-planning firmament since 1999. The stretch IRA lets savers leave their retirement accounts to children, grandchildren or other beneficiaries. Under current rules, the recipients can parcel out the required minimum distributions from the accounts over the course of their actuarial lifetimes. Payouts tend to be relatively small for children but grow in size over the decades until the inherited IRA might comfortably provide for the child’s retirement through the power of tax-deferred compounding. A parent could die with the knowledge that, whatever vicissitudes their children might experience in life, they won’t have to worry about retirement.

Congress wants to kill this. The Secure Act gives nonspouse beneficiaries 10 years to pull out all the money in an IRA. The effect would be to make more of an IRA subject to higher taxes sooner, as distributions are made in supersize chunks. As much as one-third more of an inherited IRA would get gobbled up by taxes than under current rules. When the Tax Cuts and Jobs Act expires in 2025, taxes will rise across the board. If President Trump signs the Secure Act into law, the stage will be set for a taxpocalypse sometime in the next decade.

In exchange for its windfall under the Secure Act, Congress will push back the age at which retirees must take their first required minimum IRA distributions from 70½ to 72. This isn’t the deal American savers were promised when they made contributions to their IRAs the last 20 years. Before, the optimal approach was for savers to leave their IRAs to their children or grandchildren and stretch the payouts over decades.

Under the Secure Act, an IRA owner could still leave the account to a surviving spouse, who’d remain exempt from the 10-year clock. But the widow would be paying taxes in the higher “filing single” bracket. The bracket can easily jump from 12% to 25% or from 24% to 35% as the mandatory payout ratios automatically increase with age. For example, the required minimum distribution for a 70-year-old is 3.7% of the retirement-account balance; for a 90-year-old it is 8.8%.

Should a $1 million IRA pass to a high-earning adult daughter, at best she would have to take payouts adding $100,000 of annual income on top of her salary for a decade. If she lives in a high-tax state, half the annual payout’s value could be lost to taxes.

It gets worse. The Secure Act would be a college planning nightmare for middle-income parents. If the parents of college-age children inherit a $500,000 IRA, the resulting highly taxed mandatory distributions—say, $50,000 a year for 10 years—would make them richer on paper than they actually are, eviscerating their ability to qualify for need-based financial aid. If those parents decide to postpone taking the distributions for four years to avoid the financial-aid effect, they would need to double up on distributions after graduation to compensate, which would land them in a higher tax bracket. If the grandparents skip a generation and leave the IRA directly to the college-bound grandchild, the “kiddie tax” would require the distributions to be taxed at the parents’ rates. Whichever way the family turns, they lose.

The Secure Act would be an estate-planning catastrophe for people with significant IRAs. It would take the sensible planning done up until now and stand it on its head. In the past, an IRA owner might have established a trust if his intended beneficiaries were young. Under the Secure Act, IRAs will no longer be subject to annual required minimum distributions, so an IRA of $1 million placed in a trust for the benefit of an 8-year-old could conceivably receive nothing for nine years. Then at year 10, by law, the IRA would have to pay out everything. Now the young beneficiary turns 18, and suddenly he gets a windfall. With a decade of additional compound growth, the original IRA could have grown to $2 million or more. All is delivered in one year, so most of it is taxed in the highest brackets. If the trust language allows the trustee to keep the money in the trust, it will be taxed at the exorbitant federal trust tax rate of 37% on income over $12,500. And don’t forget state taxes.

The insurance industry loves the Secure Act’s mandate that annuities be offered as a payout option in all retirement plans. Insurance companies sold more than $230 billion worth of annuities in 2018, and they would like to push that figure higher. Annuitizing retirement-plan assets is generally a bad idea unless the retiree needs all the cash for living expenses and can find a very low-cost annuity that is indexed to CPI-E—the inflation rate facing senior citizens that includes their increasingly expensive medical care. Unfortunately, such an annuity doesn’t exist.

The mandatory offer of an annuity is a first step that could lead to the mandatory annuitization of all retirement accounts. This would shoehorn the distributions into higher brackets, accelerate the collection of tax revenue, and eliminate the “problem” of the inherited IRA. Best of all, politicians would get to accomplish all this without voting to raise taxes.

Ted Cruz of Texas is the Senate’s main holdout against the Secure Act. His concern is that the House version dropped a niche provision that would allow tax-advantaged 529 Plans to pay for home schooling. He might be able to hold out, but it’ll be a stretch.

Mr. DeMuth is author of “The Overtaxed Investor: Slash Your Tax Bill and Be a Tax Alpha Dog.”
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Offline 12HRS

  • Dansdeals Lifetime Presidential Platinum Elite
  • *********
  • Join Date: Jun 2013
  • Posts: 5108
  • Total likes: 575
  • DansDeals.com Hat Tips 6
    • View Profile
Re: Future US tax policy
« Reply #33 on: July 10, 2019, 08:42:56 AM »
This isn’t the deal American savers were promised when they made contributions to their IRAs the last 20 years.

I wonder if there could be a way to challenge it based on this. Bait and Switch by congress?

Offline ExGingi

  • Dansdeals Lifetime 10K Presidential Platinum Elite
  • *******
  • Join Date: Nov 2015
  • Posts: 15620
  • Total likes: 7712
  • DansDeals.com Hat Tips 19
    • View Profile
  • Location: 770
  • Programs: בשורת הגאולה. From Exile to Redemption. GIYF. AAdvantage Executive Platinum®
Re: Future US tax policy
« Reply #34 on: July 10, 2019, 08:48:42 AM »
I wonder if there could be a way to challenge it based on this. Bait and Switch by congress?

Congress giveth, congress taketh.

What was the rule prior to 1999? I find it hard to believe that ANYONE contributed to a tax deductible (or pre-tax) account based on the Stretch IRA possibility.
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Offline skyguy918

  • Dansdeals Presidential Platinum Elite
  • ********
  • Join Date: Mar 2011
  • Posts: 3810
  • Total likes: 826
  • DansDeals.com Hat Tips 1
  • Gender: Male
    • View Profile
  • Location: Queens, NY
Re: Future US tax policy
« Reply #35 on: July 10, 2019, 08:57:43 AM »
Congress giveth, congress taketh.

What was the rule prior to 1999? I find it hard to believe that ANYONE contributed to a tax deductible (or pre-tax) account based on the Stretch IRA possibility.
+1. The article frames it as a middle class issue, but it's really not - way upper middle class at best.

Online CountValentine

  • Dansdeals Lifetime 10K Presidential Platinum Elite
  • *******
  • Join Date: Mar 2013
  • Posts: 15788
  • Total likes: 7317
  • DansDeals.com Hat Tips -1
  • Gender: Female
    • View Profile
  • Location: Poland - Exiled
  • Programs: DAOTYA, DDF Level 3, 5K Lounge
Re: Future US tax policy
« Reply #36 on: July 10, 2019, 09:02:21 AM »
I find it hard to believe that ANYONE contributed to a tax deductible (or pre-tax) account based on the Stretch IRA possibility.
Exactly.
Only on DDF does 24/6 mean 24/5/half/half

Online CountValentine

  • Dansdeals Lifetime 10K Presidential Platinum Elite
  • *******
  • Join Date: Mar 2013
  • Posts: 15788
  • Total likes: 7317
  • DansDeals.com Hat Tips -1
  • Gender: Female
    • View Profile
  • Location: Poland - Exiled
  • Programs: DAOTYA, DDF Level 3, 5K Lounge
Re: Future US tax policy
« Reply #37 on: July 10, 2019, 09:03:23 AM »
The article frames it as a middle class issue, but it's really not - way upper middle class at best.
Actually it is. DW is taking advantage of this currently.
Only on DDF does 24/6 mean 24/5/half/half

Offline skyguy918

  • Dansdeals Presidential Platinum Elite
  • ********
  • Join Date: Mar 2011
  • Posts: 3810
  • Total likes: 826
  • DansDeals.com Hat Tips 1
  • Gender: Male
    • View Profile
  • Location: Queens, NY
Re: Future US tax policy
« Reply #38 on: July 10, 2019, 09:32:09 AM »
Actually it is. DW is taking advantage of this currently.
That doesn't make it a middle class issue. The vast majority of the middle class would probably say that the limiting of a way to save for one's children's retirements, or for one's grandkids college education, is rich people problems.

Tax advantaged retirement accounts were meant to help people save for retirement. All this other shtick past retirement years (ie what happens with the account once you die) was gravy.

I'm not saying this doesn't unduly burden anyone. I was reacting to the super click-baity title/opening line. Congress is not 'coming for your IRA'. And they're not sticking it to the middle class - this primarily affects rich people, even if there is some collateral damage.

Offline aygart

  • Dansdeals Lifetime 10K Presidential Platinum Elite
  • *******
  • Join Date: May 2008
  • Posts: 17400
  • Total likes: 14339
  • DansDeals.com Hat Tips 14
    • View Profile
    • Lower Watt Energy Brokers
  • Programs: www.lowerwatt.com
Re: Future US tax policy
« Reply #39 on: July 10, 2019, 09:34:34 AM »
Congress giveth, congress taketh.

What was the rule prior to 1999? I find it hard to believe that ANYONE contributed to a tax deductible (or pre-tax) account based on the Stretch IRA possibility.
Exactly.
Maybe not directly, but any choice to invest in an IRA or a choice of which investments to withdraw from during retirement will (should?) include this as a part of the calculation. Standard investment accounts have the benefit that they have a step up in basis upon inheritance while IRAs are only taxable upon withdrawal, among other differences. These are all part of the calculation of how to plan for a long life in retirement as well as estate planning. THis would turn that whole calculation on its head.
Feelings don't care about your facts