Firstly, I am pleased that you recall my "Goldman call". Nothing all that wrong with it, IMHO. Secondly, again, I just dunno why I always manage to elicit such snarky responses from you, but it's ok, I can deal. Finally, the interpretation I have heard is that the treatment of capex by this tax bill is likely to cause a significant surge in spending by corporates, at least in the first half of 2018. That's what I was mainly referring to.
This does not sound good. But, on the other hand, eliminating estate tax is a good thing. But I don't believe either of them is relevant for the W2 middle class workers.
In the sense that it doesn't do any of the things Trump said he would do, I agree. But it's by no means harmless. It's stealing, raiding of government coffers without providing commensurate benefits in return. The bill as it stands, will amount to accelerated wealth redistribution that, taken together with all the wealth redistribution that has preceded it during the past 36 years, will do additional, long term damage to the Country.. In 2010 there were 235 million people over the age of 18 in the U.S. If 30 million of these haven't a clue, it's a gamble to treat the remaining 205 million as though they haven't a clue either. What are our politicians thinking! When the Australian economist, John Quiggin, called supply-side economics, "Zombie Economics", he had it exactly right. It absolutely refuses to die, no matter how discredited. But it does serve a purpose.
As I mentioned earlier the expensing vs requiring depreciation part of the tax bill is one of the only parts that I think will have a real impact so I agree somewhat there. That said, it's actually one of the least costly parts of the bill since it just shifts when treasury get's it's revenue, not how much it eventually gets like the change in tax rate does. Given the current low cost of capital for the federal govt, that cost is minimal and wouldn't be near the trillions. And while I think it's a good idea, I'm also not sure it will cause that much of a surge since there isn't necessarily pent up demand for capex that is being held back by the current code, it's will just impact a certain percentage of decisions going forward. But not going forward too far, since like the personal tax code changes this one sunsets a few years from now! We had a similar example with bonus depreciation for a few years after the 2008, so there's some precedent for predicting the impact, which obviously was obfuscated by the recession going on at the time. Sadly this stuff is all too nuanced for probably 95% of those in congress and nearly 100% of the people shouting about the bill on both sides.
I hear that the standard deduction is doubling to 12K. But I don't hear about the personal exemption, for the person filing, going away. I think it does go away in the House version (don't know about Senate version). Put the 12K standard deduction together with loss of the personal exemption and you have a very slight net (almost negligible) increase in net deduction. In other words, doubling of the standard deduction and loss of the personal exemption is almost exactly equal to old standard deduction plus the personal exemption. It's a shell game. This does add some slight simplification if you can avoid itemizing, but you may still need a back of the envelop calculation to see if you should itemize or not. Where there may be some substantial simplification, and the Republicans should be lauded for this, is in being able to fully deduct rather than depreciate purchase of many business assets. You will still have to depreciate structures, but most olther expenses you can take off the top. Depreciation is one of the things that does complicate returns and increases record keeping time and effort. You have different depreciation schedules depending on what you are depreciating and you many have to recover all or part of depreciation when you dispose of a depreciated asset. It's a pain in the ass, bigly! So I thoroughly applaud being allowed to expense more items rather than having to depreciate them.
for your 2017 return I think the personal exemption will be $4050, the same as for 2016. What's confusing is the tax bill is being reported as doubling the standard deduction to 12K. (it actually should be 12,700 to exactly double it for single filers.) For married filers, filing jointly, to be doubled, it would have to go to $25,400. The standard deduction for single filers is $6350 (I think) for 2017. The itemized deductions, for which mortgage interest is often the major item is not that different for married or single couples, other deductions are similar as well, so it might be accurate to say that single filers are getting screwed a bit if they have to take the standard deduction. If there is a "marriage penalty, then it seems there is a singles penalty as well, if you're taking the standard deduction. I think the personal exemption is probably going away if the standard deduction is being doubled. No one seems to be talking about it. Politicians love to emphasize tax cuts but pretend tax increases don't exist.
How would you like it to be? (BTW: The plan would cap the portion of a mortgage on which people can deduct their interest at $500,000, down from the current level of $1 million.)
I think either making the single and joint filing standard deduction the same , or adopting a more reasonable ratio, maybe 2/3, would be better, more realistic, more fair. I'm fine with eliminating the personal exemption and just tacking it on to the standard deduction. That's not much of a simplification, but it allows politicians to say they are "simplifying" tax returns, and at the same time make the increase in the standard deduction look like a big deal! There is a lot of smoke and mirrors in the political racket. I like a few actual simplification aspects of the current Bill, namely the reduction in categories that need to be depreciated. Depreciation, because of its complex rules, required record keeping and the way it can add unnecessary complexity to later disposition of depreciated assets, does add complexity. (If you've ever had to "recapture" depreciation on a depreciated asset, you'll know what I mean.) Fewer assets will have to be depreciated now, and that's a welcome simplification. Thank goodness, and frankly the simplification won't affect revenues much in the long run. My main objection to this Bill is that it is supply side orientated. We already know that supply side cuts do not pay for themselves, and it is going to increase deficits beyond what they should be. Small deficits are fine, big ones are not. Deficits can be both too large, leading to inflation, and too small leading to contraction and recessions. This bill will produce deficits that are too large. But because the money is almost all going to the upper end, I haven't convinced myself that these deficits will be as inflationary as they otherwise could be were they focused on the lower middle class. The most serious problem with the current bill is that it will most definitely accelerate income redistribution upward. About this there can be no question. This is highly destabilizing socially and can lead to real trouble down the line. I would much prefer that the emphasis had been on tax cuts for the segment of earners from which Trump supporters are drawn. That would be a demand side stimulus, and at the same time, although not decelerating redistribution of wealth upward, would have at least not accelerated it. I like a more honest economy where there is a little less subsidy of private sector business corporations using tax dollars. (The U.S. isn't drifting toward fascism, it's proceeding full speed.) I prefer higher prices traded off against decreased welfare and transfer payments and lower income tax rates, rather than higher deficits traded off against lower income tax rates for the wealthy. In other words, let Walmart, McDonalds and Home Depot compete for labor by bearing its full cost. I'm fine with capping the mortgage deduction at 500K, but I was also fine with capping it at 1 million. It would be nice to break away from the mortgage deduction altogether, but politically that seems nearly impossible . If we capped a little bit lower it saw 300K or so that would also be beneficial in decelerating the wealth redistribution a bit. It would then at least be a few more years before the guillotines had to be rolled out. But I'm fine with 500K. It's the hardest thing in the world to keep pigs away from a trough.