On the mortgage interest deduction: if you make interest nondeductible for individuals parity would be to do the same for corporations. Think about the effect that would have on capital markets…
With the maximum SALT deduction at $10k and standard deduction at $12k, this plan could be bad for anyone paying over $12k in SALT (township, state, property taxes, etc.). Of course, this will have limited effect on plenty of people who are subject to AMT (usually earning between $200k and $500k). AMT is basically a surtax on high-income people in high-income tax states anyway.
Personally, I believe there needs to be more calculus (to start) in the US tax code. We are making it too easy on tax accountants.
I disagree. You’re confusing an “ordinary and necessary” business expense with a personal living expense.
Mortgage interest would still deductible for individuals, as long as it’s an ordinary and necessary expense related to a trade or business or a rental property. But it wouldn’t be deductible as an itemized deduction (for personal expenses).
To me, this makes perfect sense. If we allow people to deduct mortgage interest on their residence (on the assumption that this helps one achieve “the American Dream”), then why isn’t a vehicle interest deductible? (After all, it is somewhat necessary for the American Dream.) Why can’t we deduct food?
Agreed. The bar is quite low. That’s why I have lobbied for multivariate calculus and partial differential equations to be on the CPA exam.
No, not confused at all. Debt in business is not necessary in any way. I have personally started business without any debt. Five Below (shout out Philly) has no long-term debt. FB has no long-term debt. Many companies take on debt because it is more tax efficient than repatriating cash. So, it is not “necessary” and allowing corporate debt interest to be deductible encourages borrowing, making it more “ordinary.”
Actually, for the average person it is much more “necessary” to take on a mortgage to buy a house. Most people don’t have ~$200k (median US home price) to spend on a place to live or the ability to save that kind of money over any reasonable time frame. People cannot issue shares to raise capital.
Bottom line: we are in an economy that is shaped by the current tax treatment of mortgage and corporate debt interest. Any wholesale changes to that treatment will create tidal waves throughout the economy. What we feel is “right” is subjective. What we think is “best” is probably more important.
To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.
In my professional opinion, mortgage interest (such as on a commercial building or rental house) is common, accepted in your trade or business, helpful, and appropriate. It is not indispensable, but the IRS guidelines clearly state that indispensability is not a requisite for deductibility.
MLA, how are you in favor of no corporate tax and yet have all these socialist views about safety nets? What do you want the individual tax rates to be? Or am I am conflating your Canadian essence with your actual beliefs?
I feel bad for people who only watch fake news. The Trump movement is for all Americans, so they will be helped regardless if they believe it or not and despite the fact a lot of them voted for that commie crazy Bernie or crooked H.
if employment income, dividend income and capital gains income were all taxed at the same rate, the corporate tax doesn’t really matter and you would pull a lot of inefficiencies out of the system if corporate tax was zero. you may need some provision wherein capital gains are deemed as realized every so often, which already exists in the Canadian trust rules.
and yeah, obviously personal tax rates would likely need to be higher to offset a zero corporate tax rate but wouldn’t it be nice to not have all these municipalities basically bribing Amazon to come to their city by offering your tax dollars as a lure? and i’m not sure personal tax rates would need to be higher if dividend income and capital gains are taxed at the same rate as employment income. some math would need to be done to verify. they could still discount property tax but why not rid the world of property tax too? just personal tax with equal rates across the board. simple simple. no tax games on behalf of corporations, no tax games on behalf of people, no tax credits, no bs. it is tough to argue that we should just make our tax system as transparent as possible. at the end of the day, we are the corporations so that income gets taxed in our hands any way. why separate the two?
I was actually surprised how most of the people in this video are open to having their minds changed and admit that they misunderstood many aspects of the tax plan. Refreshing!
The public is largely misinformed about the plan. For instance, only 25% of voters believed their taxes would be lower. In reality, some 85% of people will get a tax cut. It’s likely that some people will still oppose the changes, due to future fiscal effects or other issues. However, public opinion might have been different if people were aware of the actual effects.
whats interesting is cutting taxes like this is essentially just a short term move to tell everyone how great you are for cutting their taxes. As PA loves to point out the US deficit is quite large, im not sold on his sky is falling worldview but during Obama & now as well its something to monitor. If we dont make drastic cuts to military & entitlements the deficit will explode and/or individual taxes will go back to normal in 10 years - so youve likely pawned off the negatives of this tax bill on the next administration to figure out (because people usually blame the current administration) while getting to claim the glory of next years “tax cut” for middle america. Smart politics, still an abomination of a bill to screw people who you dont like. Would be as if Dems next time would establish a policy that transfers wealth from the south/middle america red states to blue. Im sure that would go over with calls of revolt by the breitbart crowd
Yes, but that was not what we were discussing, which is that 1) People don’t know what’s in the plan, and 2) They will likely change their opinions and support the plan, once they realize their paychecks have grown.
The allocation of tax benefits from Blue to Red states in this plan is entirely sensible. Why were local taxes subsidized in the first place? Or mortgages? They absolutely should be rolled back.