Prepaying taxes

[plowhog]

Got an email from my accountant today, he is at a two day seminar for this new tax bill ( can't really call it a plan, can you?). Anyway, no one knows exactly what is in this bill, how it will effect most of us, ( working stiffs ), and how to prepare for it. He says wait a few months till it all shakes out...

Sounds odd. If he needs a few months to know what is in the tax bill, why is he even attending that seminar?

 

[dragoneggs]

It has never made sense to me that you could not deduct dollar for dollar your local and state taxes from your federal taxes. You don稚 have the money, the state and local governments do, so why should you be taxed on it? I sure hope this tax restructuring works out or it will test my conservative roots.

I remain convinced that taxes should be based on consumption/use not on income. Seems to me this is much more equitable.

 

[buckeyefarmer]

I remain convinced that taxes should be based on consumption/use not on income. Seems to me this is much more equitable.

And voting should incorporate geographic area weighting. Why should 1 city dictate everything in a state.

 

[ultrarunner]

I think income and consumption is OK...

Property Tax is insidious when it goes above the basic cost for snow removal and local road maintenance...

None of my Austrian Co-Workers ever worry about property tax... the government wants people to have a home... they pay consumption and income... but you do have some input... with property... someone in the neighborhood buys in and your taxes go up 80% like mine did in Washington... I have no more utility in a more "Expensive" home and in fact rising values can be the catalyst for losing my home...

 

[dragoneggs]

So you are saying that the higher standard deduction will cover everything other than your charitable contributions (i.e. you plan to keep that all for yourself)? In reality nothing has changed for most people other than you are given a lump sum of money with no questions asked. Say for a married couple with the new standard deduction of $24,000, you are maxed at $10,000 on taxes, leaving $14,000. Your medical is already limited via a "haircut" depending on your AGI (but say barring any dramatic out of pocket expenses might work out to $10,000 when you run through the numbers). That leaves $4,000 to play with (or keep). I'm hardly a fan of this tax bill #1 it failed big time on simplification (Turbo tax is still alive and well because it still has a number of "side calculations") and #2 the "fa軋de" of the higher standard deduction is largely offset by the loss of the personal exemptions but it is the reality.

Huh? I played in the tax cesspool for 30+ years so I know how the stuff works (in retrospect I should have chosen plumbing). Sorry that I didn't state that the tax benefit of the $4,000 was yours to keep...might be 0, might be $1,200 depending on your tax bracket. Nothing has changed though...the old standard deduction (or itemized deductions) were also in pre-tax dollars. Any more questions?

Depends on your particular situation. For many still deductible but now buried in the higher standard deduction so you won't see it itemized as taxes. Preliminary estimates are that most people won't get beyond the new standard deduction. But step back and figure that to exceed the standard deduction you have to spend the money. Depending on your tax bracket that might return zero, might return 35 cents. I'd rather have the dollar I had to spend.

Huh? On the federal level there is no such thing. On the state/local level (like Wisconsin) nothing has changed unless your state/local people did something in the past month and we'll still get our property tax credit against our Wisconsin taxes. On that point, I'll repeat that this law FAILED on "simplification". We will most likely have to produce a "pro-forma" Federal schedule A to attach to the Wisconsin form (so much for that postcard thing).

Hi teejk, I have read your posts a few times to try to understand where you are coming from. You seem to say it is a failure but you also say most people will not meet the standard deduction. If more people do now that didn't use to meet it, then doesn't that mean it will be simpler for more folks? Also doesn't that also mean that for those not meeting the higher standard deduction, more will pay less income tax?

The most important aspect is the corporate tax rate reduction that will make large and small mom & pop companies more competitive globally thus encouraging growth and hiring. Less people on the dole and more people contributing. Just my :2cents:

 

[MossRoad]

I remain convinced that taxes should be based on consumption/use not on income. Seems to me this is much more equitable.

Family of 4 with a single bread winner making, say $40k per year.... for example.

They'll pay 50% higher percentage of their income in consumption tax than, say, the same family that makes $80K per year, if they both purchase the same items.

Is that fair?

Well, of course it's fair! Dude shouldn't have had 2 kids if he couldn't afford them, right?

That's tongue in cheek, of course.

But if you had a flat income tax with NO exemptions and no caps, everyone would be paying the same percentage of their income into the system.

 

[dasranger]

Why the same percentage? And why is it based on income? Everybody over 21 should have to pay the same amount.

 

[dragoneggs]

Family of 4 with a single bread winner making, say $40k per year.... for example.

They'll pay 50% higher percentage of their income in consumption tax than, say, the same family that makes $80K per year, if they both purchase the same items.

Is that fair?

Well, of course it's fair! Dude shouldn't have had 2 kids if he couldn't afford them, right?

That's tongue in cheek, of course.

But if you had a flat income tax with NO exemptions and no caps, everyone would be paying the same percentage of their income into the system.

I'm definitely in favor of a flat income tax vs. a progressive rate tax. I also think that people that have higher incomes consume a lot more use more resources as a result. I would rather tax that than to penalize them for earning.

Federal government should be funded by everyone and then perhaps those that traditionally don't have to pay any tax would appreciate the services and be more aware of what those services are costing them.

Washington State has a relatively high sales tax rate and no state income tax. I am a fan of that. I just don't understand why I should pay more or less than any other citizen when it comes to funding the federal government.

 

[MossRoad]

... I just don't understand why I should pay more or less than any other citizen when it comes to funding the federal government.

If you could even the pay scale for all jobs, that might be correct.

However, some people aren't mentally wired to work in jobs that pay more money than others. They simply can not do that kind of work.

 

[sseelhoff]

Family of 4 with a single bread winner making, say $40k per year.... for example.

They'll pay 50% higher percentage of their income in consumption tax than, say, the same family that makes $80K per year, if they both purchase the same items.

Is that fair?

Well, of course it's fair! Dude shouldn't have had 2 kids if he couldn't afford them, right?

That's tongue in cheek, of course.

But if you had a flat income tax with NO exemptions and no caps, everyone would be paying the same percentage of their income into the system.

That's now how the fair tax works. As it has been proposed, there would be a pre-bate for sales tax received at the beginning of each month.

Get a Tax Refund in Advance on Purchases of Basic Necessities

The FairTax provides a progressive program called a prebate. This gives every legal resident household an “advance refund” at the beginning of each month so that purchases made up to the poverty level are tax-free. The prebate prevents an unfair burden on low-income families. Learn more .

How FAIRtax Works | FAIRtax

So it's possible that the family you describe would pay a 0% effective tax rate because all of their taxes on basic items (food, clothing, et. al.) would be refunded to them before they even paid it.

In order of preference, I would go:

1. Fair tax
2. Flat Tax
1000000000000. Current system.