Face It: You (Probably) Got a Tax Cut

[Anonymous]

Anonymous wrote:
The OP said that 1 out of 10 got a tax increase. Well, we happen to live in an area where it was probably more like 5 out of 10.

+1 That would be my sibling's case in NJ whom I just spoke to yesterday about this.

Also, I'd rather my taxes be the same (high) if it meant Trump was out of office.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The only reason ours didn’t go up was because we put an extra $50k in a retirement account to shield income. Had to restructure retirement vehicles to do it. We lost $120k in SALT deductions so not insignificant.

Again, if you're paying $120k in state and local taxes, just pipe down. You should have seen a massive tax increase, in a rational world.

We pay about about a 50% effective rate now (37% federal + 9.5% state +15% SS on a portion + 2.9% medicare on all - I am self employed so pay both sides of SS and medicare). A massive tax increase would not be effective because the additional work required to earn the marginal income wouldn't be worth it if I was paying at 60-70% tax rate on that income.

Rich people claim this all the time, and it's nonsense. Say the top two tax brackets went to 40% and 45%, respectively. You're suggesting that you would just say, "that's it - I'm only working enough to accrue 200,000 in taxable income. It's just not worth it otherwise!"

That's complete nonsense. You're full of it.

Also, to reiterate, if you lost $120k in SALT deductions, you had $130k in SALT. At 9.5% state tax, you had taxable income of what, $900,000, with a property tax bill of $44,500?

Yeah, I'm sure you'd just throw it all away because your taxes went up.

[Anonymous]

Our accountant said our tax went down slightly. Fine. Tell me why this administration is so inept that they couldn't warn people about how they changed withholding back in February 2018. That's the main thing - people are being taken by surprise because they trusted their government to tell them what they are doing when they are doing it.

Inept.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The only reason ours didn’t go up was because we put an extra $50k in a retirement account to shield income. Had to restructure retirement vehicles to do it. We lost $120k in SALT deductions so not insignificant.

Again, if you're paying $120k in state and local taxes, just pipe down. You should have seen a massive tax increase, in a rational world.

We pay about about a 50% effective rate now (37% federal + 9.5% state +15% SS on a portion + 2.9% medicare on all - I am self employed so pay both sides of SS and medicare). A massive tax increase would not be effective because the additional work required to earn the marginal income wouldn't be worth it if I was paying at 60-70% tax rate on that income.

Rich people claim this all the time, and it's nonsense. Say the top two tax brackets went to 40% and 45%, respectively. You're suggesting that you would just say, "that's it - I'm only working enough to accrue 200,000 in taxable income. It's just not worth it otherwise!"

That's complete nonsense. You're full of it.

Also, to reiterate, if you lost $120k in SALT deductions, you had $130k in SALT. At 9.5% state tax, you had taxable income of what, $900,000, with a property tax bill of $44,500?

Yeah, I'm sure you'd just throw it all away because your taxes went up.

Yep. And my household and just about every household in my tax bracket is proof positive. I went from a salary of 750K last year to 850K. I have been averaging the same increase for 8 years now. Not once did I ever say to myself, gee. I better quit because i might get into a higher tax bracket and it won't be worth it. Nope.

I always come out ahead enough, and besides. My career trajectory and goals aren't purely about income.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The only reason ours didn’t go up was because we put an extra $50k in a retirement account to shield income. Had to restructure retirement vehicles to do it. We lost $120k in SALT deductions so not insignificant.

Again, if you're paying $120k in state and local taxes, just pipe down. You should have seen a massive tax increase, in a rational world.

We pay about about a 50% effective rate now (37% federal + 9.5% state +15% SS on a portion + 2.9% medicare on all - I am self employed so pay both sides of SS and medicare). A massive tax increase would not be effective because the additional work required to earn the marginal income wouldn't be worth it if I was paying at 60-70% tax rate on that income.

Rich people claim this all the time, and it's nonsense. Say the top two tax brackets went to 40% and 45%, respectively. You're suggesting that you would just say, "that's it - I'm only working enough to accrue 200,000 in taxable income. It's just not worth it otherwise!"

That's complete nonsense. You're full of it.

Also, to reiterate, if you lost $120k in SALT deductions, you had $130k in SALT. At 9.5% state tax, you had taxable income of what, $900,000, with a property tax bill of $44,500?

Yeah, I'm sure you'd just throw it all away because your taxes went up.

Higher income and much lower property taxes. I am not talking about 5% increases, which I agree doesn't influence behavior, but some of the proposals out there are for a 70% marginal tax rate. There are economists who have looked at a 70% rate and don't think it produces the right outcome. My situation may be somewhat unique because I am self employed so I look at the relative value of working an extra hour vs free time. At a certain point if my return on that hour is only 30 cents on the dollar, I value free time. At a high income the marginal $ are worth less to me since they aren't covering basic needs. So yes, i would work less, and pay less in taxes. If I were paid a salary obviously the incentives are much different.

Also the premise of this thread is that everyone is getting a tax cut. Well I did not, and the reason is that we live in a high tax state. I totally get the reason why SALT deductions don't actually make sense and are unfair to those in lower tax states, but that doesn't make the transition any easier.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The only reason ours didn’t go up was because we put an extra $50k in a retirement account to shield income. Had to restructure retirement vehicles to do it. We lost $120k in SALT deductions so not insignificant.

Again, if you're paying $120k in state and local taxes, just pipe down. You should have seen a massive tax increase, in a rational world.

We pay about about a 50% effective rate now (37% federal + 9.5% state +15% SS on a portion + 2.9% medicare on all - I am self employed so pay both sides of SS and medicare). A massive tax increase would not be effective because the additional work required to earn the marginal income wouldn't be worth it if I was paying at 60-70% tax rate on that income.

Rich people claim this all the time, and it's nonsense. Say the top two tax brackets went to 40% and 45%, respectively. You're suggesting that you would just say, "that's it - I'm only working enough to accrue 200,000 in taxable income. It's just not worth it otherwise!"

That's complete nonsense. You're full of it.

Also, to reiterate, if you lost $120k in SALT deductions, you had $130k in SALT. At 9.5% state tax, you had taxable income of what, $900,000, with a property tax bill of $44,500?

Yeah, I'm sure you'd just throw it all away because your taxes went up.

Higher income and much lower property taxes. I am not talking about 5% increases, which I agree doesn't influence behavior, but some of the proposals out there are for a 70% marginal tax rate. There are economists who have looked at a 70% rate and don't think it produces the right outcome. My situation may be somewhat unique because I am self employed so I look at the relative value of working an extra hour vs free time. At a certain point if my return on that hour is only 30 cents on the dollar, I value free time. At a high income the marginal $ are worth less to me since they aren't covering basic needs. So yes, i would work less, and pay less in taxes. If I were paid a salary obviously the incentives are much different.

Also the premise of this thread is that everyone is getting a tax cut. Well I did not, and the reason is that we live in a high tax state. I totally get the reason why SALT deductions don't actually make sense and are unfair to those in lower tax states, but that doesn't make the transition any easier.

Yeah, that is tough. Hope you'll find the strength to muddle through.

[Anonymous]

Anonymous wrote:Face It: You (Probably) Got a Tax Cut

https://www.nytimes.com/2019/04/14/business/economy/income-tax-cut.html

If you’re an American taxpayer, you probably got a tax cut last year. And there’s a good chance you don’t believe it.

Yet as the first tax filing season under the new law wraps up on Monday, taxpayers are skeptical. A survey conducted in early April for The New York Times by the online research platform SurveyMonkey found that just 40 percent of Americans believed they had received a tax cut under the law. Just 20 percent were certain they had done so. That’s consistent with previous polls finding that most Americans felt they hadn’t gotten a tax cut, and that a large minority thought their taxes had risen — though not even one in 10 households actually got a tax increase.

To a large degree, the gap between perception and reality on the tax cuts appears to flow from a sustained — and misleading — effort by liberal opponents of the law to brand it as a broad middle-class tax increase.

...

The Tax Policy Center estimates that 65 percent of people paid less under the law and that just 6 percent paid more. (The rest saw little change to their taxes.)

I guess we are i the 6%. We paid more.

[Anonymous]

Anonymous wrote:Our accountant said our tax went down slightly. Fine. Tell me why this administration is so inept that they couldn't warn people about how they changed withholding back in February 2018. That's the main thing - people are being taken by surprise because they trusted their government to tell them what they are doing when they are doing it.

Inept.

I am one of those people who got caught by surprise. I owed about the same amount of tax as in 2017, but the change in withholding meant I had to write a check for several thousand yesterday. Oops.

But you were warned in January 2018:

https://www.irs.gov/newsroom/2018-withholding-tables-now-available

And there were news articles about it:
https://www.cnbc.com/2018/08/01/30-million-americans-are-not-withholding-enough-pay-for-taxes.html
https://www.cnbc.com/2018/03/01/a-tax-related-action-every-employee-should-take-in-2018.html
https://www.npr.org/2018/08/01/634474267/more-taxpayers-will-owe-the-irs-in-april-due-to-under-withholding-report-says
https://www.forbes.com/sites/kellyphillipserb/2018/08/30/irs-continues-to-urge-taxpayers-to-doublecheck-their-withholding-as-tax-pros-express-concern-over-draft-form-w-4/#22e7800550c0
https://www.forbes.com/sites/kellyphillipserb/2018/08/04/report-suggests-more-taxpayers-will-owe-tax-in-2019-due-to-withholding/#50177b565f0f

I just checked and even my employer sent a warning in March 2018 for all employees to check their withholding.

We're all busy. But I blame myself for not noticing. My ineptitude. I screwed up. Nobody else.

[Anonymous]

Compared to last year, I owed $3,500 less in tax on $42,000 more in income. Not complaining!

[Anonymous]

Anonymous wrote:Compared to last year, I owed $3,500 less in tax on $42,000 more in income. Not complaining!

Very similar here

[Anonymous]

We paid a lot more this year because our AGI was Higher this year, but we actually made less money than the year before. Miss those deductions.

[Anonymous]

Same income as last year ... paid $10K more in taxes.

Not the way I wanted to be in the top 6%.

[Anonymous]

Anonymous wrote:Same income as last year ... paid $10K more in taxes.

Not the way I wanted to be in the top 6%.

Wow, that’s terrible.

[Anonymous]

Anonymous wrote:For all the endless bellyaching about how people were getting killed by loss of SALT, all, nearly all of your taxes went down.

I admit there is a doughnut hold around $200-$250K in HHI with high deductions where some do pay more.

1- It's not that much more.
2- If it is, count me as a fan of not paying for $30% of your mortgages and property taxes.
3- Any tax reform has distributional winners and losers.
4- As shockingly few people understand, information on refunds, marginal rate, or changes in deductions are not sufficient to determine change in tax liability. The only way to do this is to redo your 2017 taxes with 2018 numbers (even comparing average rates is uninformative if level or type of income changed).

That is me and I paid $10K more and I don't know anybody that thinks $800/month is "not that much".

I did not have mortgage or property tax write offs. I agree... buy the house you can afford and don't expect people to subsidize it.

[Anonymous]

Our effective rate went WAY down this year - we were at 15% for federal, even through our income increased substantially. We made 300K+ from various sources (two working spouses). What made the difference was: child tax credit, elimination of AMT and marriage penalty at our income level, and some increased ability to contribute more to retirement. I think last year we were at 24% effective rate. Very pleased.