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Pass-Thru Income Deduction

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Re: Pass-Thru Income Deduction

#71

Post by meritt »

CPLX wrote: post #47
tunesmith wrote: post #16

Does this change the incentives on how S-Corps structure salary versus distribution? Sometimes people keep salary low (but still "reasonable") and distributions high to limit FICA. Other times people inflate their salary (and keep distributions low) to be able to contribute more to 401k profit-matches and social security. Since it's a pass-through, it seems like taxable income might be roughly the same either way, so…

> to be able to contribute more to... social security I don't think that makes a whole lot of sense. Do people actually do that?

Why do you think that's absurd? Social Security is basically a very inefficient (and potentially insolvent) retirement plan. The more you put into it, the more you should get out. That's why people would want to maximize contributions.

Re: Pass-Thru Income Deduction

#72

Post by meritt »

munk-a wrote: post #57
pascalxus wrote: post #56

Earlier quoted context omitted.

First of all, this bill mainly helps those earning less than 315K per family If you're making a big salary working for tech, your not as well off as you think. You may be earning x10 more than a the average "poor" person, but after income taxes, sales tax, property tax, etc, it's barely x5 to x6. And if google forces you to live on the penninsula, then your living costs are x5 to x10. I'm sure there are plenty of hig…

Granted, everything about this is in constant flux but... I thought the child exemptions were back in and stronger than before? Also, are you getting value out of living on the penninsula? If so, is it worth the cost you're paying? If not... move. There are plenty of companies outside of SV and now quite a few of the companies there have very flexible remote working options. As for your 10x income being reduced to 6x…

Exemptions have been removed entirely. That's a deduction of $4,050 per child that went away. However, Child Tax Credits increased from $1,000 to $2,000 (with $1,400 being fully refundable).

For someone in a 25% tax bracket, the additional $1,000 credit is basically the same as a $4,000 exemption.

Re: Pass-Thru Income Deduction

#73

Post by CPLX »

meritt wrote: post #71
CPLX wrote: post #47

Earlier quoted context omitted.

> to be able to contribute more to... social security I don't think that makes a whole lot of sense. Do people actually do that?

Why do you think that's absurd? Social Security is basically a very inefficient (and potentially insolvent) retirement plan. The more you put into it, the more you should get out. That's why people would want to maximize contributions.

I guess you'd have to do the math and maybe there's an edge case but it seems almost totally and completely inconceivable that you'd be better off increasing your rate of payroll income (which also adds the 2.9% Medicare tax as well) in hopes of one day getting larger social security checks, rather than the alternative of keeping and saving it now.

Re: Pass-Thru Income Deduction

#74

Post by jfaucett »

emodendroket wrote: post #65
jfaucett wrote: post #54

Earlier quoted context omitted.

Yes, I'd like to see experimenting with only a sales tax as well, so no income tax at all. You could then test a combination of the sales tax only with a flat corporate tax. These are all things hypothesized about and there has been a little bit of testing, but we really need to get on the ball with actually applying the scientific method to policy if we want to build more rapid progress in improving our societies.

Sales tax is even more regressive because the poorer you are the more likely you are to spend essentially all of your income. Sales taxes would have to go way up for that to work. We don't need to run an "experiment" to know the likely effects of this policy.

> We don't need to run an "experiment" to know this would be bad.

That's the kind of armchair philosophizing that leads to all kinds of problems, we need more scientific method and less philosophy if we want to get anywhere in a productive manner.

There's plenty of counter points to be made about the sales tax. Here's two.

1. Its the most efficient tax.

2. It has the lowest economic damage.

For point #2, the idea is that if you can increase the wealth everyone benefits, since economics is not a zero sum game. Also you can get around whatever you deem vital needs/rights i.e. food, shelter, in your society through subsidizing. Here's some other information from an economic perspective as well (https://www.taxanalysts.org/content/economic-analysis-can-st...).

Anyway, to say its even more regressive and we don't need to experiment is not progressive. We have ostensibly the same goals (more wealth for everyone, fewer people in poverty/elimination of poverty,etc) and the only way to get at social systems that optimally give us our goals is to apply a more rigorous scientific method and get out of the political philosophy camp - IMHO :)

How would we ever make any progress in medicine if we never conducted any experiments and relied instead purely on observational studies? How much slower would our progress be?

see: https://www.thoughtco.com/the-economics-of-sales-taxes-11475...

Re: Pass-Thru Income Deduction

#75

Post by the_cat_kittles »

pascalxus wrote: post #56
the_cat_kittles wrote: post #33

if you are happy that you can save some money this way, i think you are super lame. i am sad that over paid people like me and most of yall are now even less responsible for helping poor people (among other things, i know... )

First of all, this bill mainly helps those earning less than 315K per family If you're making a big salary working for tech, your not as well off as you think. You may be earning x10 more than a the average "poor" person, but after income taxes, sales tax, property tax, etc, it's barely x5 to x6. And if google forces you to live on the penninsula, then your living costs are x5 to x10. I'm sure there are plenty of hig…

well, to me, making 5x what someone else makes is alot more, and it becomes embarrassing when it means that im able to eat and sleep comfortably and get healthcare when someone else cant. so that kind of bums me out. but hey, i guess we dont all agree on that.

Re: Pass-Thru Income Deduction

#76

Post by wbl »

chii wrote: post #60
wbl wrote: post #45

Earlier quoted context omitted.

Define earned.

Any money, cash, or equivalent, that you are in posession of at time T, that you did not have possession of at time T-1.

So the problem with this is if I spot you a buck at the subway because you are short, you have to remember and report this. That's what the gift exemption is for in current code. Then let's not get into Rabbi trusts and all sorts of other complexities related to when something is earned.

Re: Pass-Thru Income Deduction

#77

Post by snotrockets »

jfaucett wrote: post #74
emodendroket wrote: post #65

Earlier quoted context omitted.

Sales tax is even more regressive because the poorer you are the more likely you are to spend essentially all of your income. Sales taxes would have to go way up for that to work. We don't need to run an "experiment" to know the likely effects of this policy.

> We don't need to run an "experiment" to know this would be bad. That's the kind of armchair philosophizing that leads to all kinds of problems, we need more scientific method and less philosophy if we want to get anywhere in a productive manner. There's plenty of counter points to be made about the sales tax. Here's two. 1. Its the most efficient tax. 2. It has the lowest economic damage. For point #2, the idea is…

> the idea is that if you can increase the wealth everyone benefits

This has been shown wrong since the trickle down economists trickled down on us all.

Re: Pass-Thru Income Deduction

#78

Post by emodendroket »

jfaucett wrote: post #74
emodendroket wrote: post #65

Earlier quoted context omitted.

Sales tax is even more regressive because the poorer you are the more likely you are to spend essentially all of your income. Sales taxes would have to go way up for that to work. We don't need to run an "experiment" to know the likely effects of this policy.

> We don't need to run an "experiment" to know this would be bad. That's the kind of armchair philosophizing that leads to all kinds of problems, we need more scientific method and less philosophy if we want to get anywhere in a productive manner. There's plenty of counter points to be made about the sales tax. Here's two. 1. Its the most efficient tax. 2. It has the lowest economic damage. For point #2, the idea is…

Let's not kid ourselves. No experimentation is needed to understand that such a policy would shift more of the tax burden onto the shoulders of the poor and away from the wealthy. If you want to advocate for that, knock yourself out, but it seems to me like it's manifestly unjust and it's unconscionable to conduct such an "experiment." The framing of science seems dishonest, especially when anyone can view your profile and see you are a fan of Austrian economics. I somehow doubt you'd be equally in the spirit of discovery of the "experiment" were a commune or large-scale nationalization of industries.

Re: Pass-Thru Income Deduction

#79

Post by snotrockets »

techsupporter wrote: post #41
jfaucett wrote: post #15

Earlier quoted context omitted.

completely agree with this sentiment. I've often wished a test city/state would be allowed to just do a flat tax and completely remove all tax code and see what happens. Obviously the convolutedness is a barrier to entry to small startups and a unfair advantage for established market entities. Also I'd love to see an experiment on a zero tax law that basically amounted to no taxes unless the business/person earned a…

> I've often wished a test city/state would be allowed to just do a flat tax I don't want a flat tax (as in "all income taxed at 15%," let's say) because a flat tax has an unfair impact on people at lower income levels. But, otherwise, I agree with your entire post. Here's my ideal law, with the caveat that I have zero legal training beyond six seasons of Law and Order and four seasons of Suits: (1) The following mar…

There's a problem here: one of the goals of taxation is to encourage certain behaviors (like creating new employing in a low-employment region, or saving for retirement) and discourage others (like smoking).

You remove this important policy tool, offering no other tool to replace it.

Re: Pass-Thru Income Deduction

#80

Post by snotrockets »

_m8fo wrote: post #67
bungie4 wrote: post #64

Earlier quoted context omitted.

Your assuming the very rich purchase proportionately more taxable goods and service than the lower classes do.

Well the idea is that the money will eventually be spent or transfered, and then during that event it would be taxed. I mean sure you could just let the money grow but I assume it would either be given to someone or spent eventually .

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