2017 Politics open thread, April 23-29

You can speak your mind here.

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26 thoughts on “2017 Politics open thread, April 23-29

  1. If y’all aren’t listening to Nate Silver’s 538 podcast, you need to be. Best weekly political analysis I’ve found.

  2. Thanks for the suggestion Lark. I was reading some of his work earlier today, and I value that he seems to be pretty nonpartisan.

  3. I like Vox’s two poscasts – the Weeds, and Ezra Klein’s own podcast. They are deep dives into all kinds of policy issues. They do a lot of healthcare in particular. I really think that complex issues deserve complex discussion.

  4. I regularly listen to the Vox Weeds podcast. I like the analysis and the “white paper of the week”.

  5. So this 15% tax on pass-though entities. Does that mean if I went back to corp-corp, rather than W2, I would only have to pay 15%?

  6. So, I’ve been paid (in the past) as a independent contractor (to a company called Ada MD, Inc.). After I maximize deductions, everything gets added to my AGI on the personal return, right? And then taxed at my marginal rate, right. I really try not to touch the financial papers too much.

    This implies that Ada MD could disburse profits to me and only pay 15%, right? While I like a tax break, I’m not sure more $$ to me is what is going to MAGA.

  7. Also, the LLC that holds our rentals – Slumlord Ada & Co – it could disburse profit to us with minimal tax as well? MAGA!

  8. Interesting. Dh and I were just musing this a.m about what if we sold our house, moved to Cape Cod and he just becomes a contract attorney. He was saying there’s one or two contract attorneys now and they are making way more $ than they were as W-2 employees. Maybe this is a sign!:)

  9. Yeah, it’s interesting. Technically, we are all “shareholders” in a P.C. As of now, we get W-2 wages. But I wonder if we could rejigger things to be paid as dividends.” Probably not — we all basically have one share of stock, and a pay scale that ranges from 1X to @4X, so to mirror that payout, we’d have to issue different numbers of shares of stock to employees, which in turn would be a taxable event, and then we’d have to vary the numbers every year to correspond to people moving up or down the ladder. So it strikes me that you’re just replacing “W-2 salary” with “more shares of stock” that is taxed at my rate anyway.

    Assuming that we could figure this out (e.g., allocate dividends based on different classes of stock based on where you are in the ladder), then we’d get paid as dividends, and then we’d still have to pay our, what is it, 20% tax on that. And when you consider the 15% corporate tax that came off the top, it’s back to a @32% marginal rate. And if it’s not earned income, could I still do a 401(k)? That’s close to $60K worth of tax shelter every year. We’d have to figure out/rework that, too.

    Tl;dr: IDK if I would actually benefit from this even if we did try to take advantage of it.

  10. LfB,

    That seems to be the main reason it wouldn’t work. You wouldn’t be able to vary the compensation a given partner would always get X% of the profit regardless of how much revenue they brought in.

    What about changing it from a law firm to a staffing agency were all the partners are 1099 contractors? Is there some law that law firms have to be partnerships or is it just tradition/the way things are done?

  11. What about changing it from a law firm to a staffing agency were all the partners are 1099 contractors?

    1099 contractors have to pay self employment tax (essentially both the employer and employee portion of social security) and then pay income tax on their income.

    Where are you guys finding the tax proposal?

  12. 1099 contractors have to pay self employment tax (essentially both the employer and employee portion of social security) and then pay income tax on their income.

    Not under Trump’s plan. There would be only one 15% tax is my understanding. It’s what they did for state taxes in Kansas.

    Among the nearly 334,000 Kansas businesses that owe no state income taxes thanks to the Brownback administration’s 2012 tax cuts is one called BCLT II, LLC.

    BCLT II happens to be owned by Bill Self, the legendary University of Kansas men’s basketball head coach.

    Under his 2012 contract with KU, Self pulls down a salary of $230,000 a year. But that’s just a small part of his compensation.

    He also gets at least $2.75 million annually for “professional services rendered,” including “educational, public relations, and promotional duties as assigned by the athletics director.

    That $2.75 million is paid to BCLT II (the name comes from the first initials of Self and his family) by Kansas Athletics Inc., the entity that operates intercollegiate sports for KU. Which means that Self, who owes his employment to the state of Kansas and is the state’s highest paid employee, owes no Kansas income taxes on the bulk of his pay.

    http://kcur.org/post/thanks-tax-cuts-bill-self-highest-paid-state-employee-owes-little-kansas-income-taxes#stream/0

  13. One 15% tax? How is that possible, self employment tax alone is approximately 15%

    It would be a 15% income tax, I assume self employment would be in addition.

  14. I have scanned the limited data available, and let’s start with personal income tax.

    A big component of the proposed simplification is eliminating personal exemptions, head of household status and increasing the standard deduction. That means that all middle class large families will pay more in taxes, and also most lower/middle income single parent families. Rich candidate stickin’ it to his base.

    No deduction for state income or sales taxes. However, elimination of AMT may offset that in the states that matter.

    Big reduction for high earners and those with high investment income. Lower bracket. Medicare surcharge eliminated on investment income. 15% cap on pass thru earnings of partnerships, S corps. professional corps. (possibly paid by the entity – not by the pass thru owners, but then maybe there would be a qualified dividend type tax on actual non salary distributions). Unclear how single member LLCs and sole proprietorships where self employment tax factors in would be treated.

    As a retiree, I would likely pay more, but the devil is in the details.

  15. “15% cap on pass thru earnings of partnerships, S corps. professional corps.”

    Wow. Yeah, that would fix my problem. Rhett: we are a P.C., which is a corporation that is taxed like a partnership (i.e., pass-through). In the early days, professionals weren’t able to be corporations and so were stuck with sole proprietorships or partnerships and thus personally liable for all debt. Then states developed a variety of PC or LLC laws that provide a corporate form but are still taxed like partnerships.

    Holy shit. At a 15% “real” tax rate, I’m saving so much more it might move up my retirement by a year every year. Which, you know, would be good, because someone will have to pay the piper at some point, and I’d prefer not to have to rely on earned income by that point.

    Not that I actually support this or think it has a snowball’s chance anyway. I’m just sort of amazed at how many people are out there looking out for my financial interests.

  16. Yeah, it would be cool not to pay six figures to the IRS anymore, but it would be terrible for the country. And all the screaming about deficit spending suddenly stops when it’s the Republicans pushing for it.

  17. Because the elimination of state income tax on pass through entities has just done wonders for the state of Kansas and its economy. Not.

  18. Corporate tax reform, which is mentioned as a throwaway at the end of most articles, is the fantasy dream of most multinationals. 15% tax rate, territorial taxation (no taxation of overseas earnings, ever), repatriation holiday for current overseas low taxed earnings (I would guess 5 to 7.5% on all the billions of dollars overseas, limited duration to repatriate – so lots of money in the coffers in the early years to mask the long term change). No list yet of eliminated deductions and preferences (oil industry is gearing up to fight it). A big one, of course, would be the exclusion of employer provided health insurance from deduction on the corporate side and income exclusion on the recipient side. So the companies would just have to increase salaries (probably at 30 cents on health premium dollar – ha!), which would be deductible to them at 15%, and the employees would shop on the free market (for the unicorn – affordable decent coverage family policy) and pay tax on the increased salary (at marginal rate – likely 25%, plus state tax).

    None of this is going to go through easily. And if it did, young tax accountants and lawyers would no longer go into estate and trust (estate tax is eliminated, too, btw), or the US side of foreign tax planning, and partnerships would for a generation be the place to make your money. The regs are already arcane, and figuring out what pass thrus qualify, what is a distribution and what is a salary, it makes my head spin.

  19. So Big law partners making 7 figure incomes will be taxed at 15%, while their secretaries who earn five-figures (maybe low 6 in NYC) are taxed at 25%. MAGA indeed.

  20. So the new rates are 10%, 25% and 35%. What are the income brackets for each? Combined with the 15% tax, this proposed tax plan is most excellent for my household. Thanks Trump!

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