STUMP » Articles » Taxing Tuesday: OHNOES! The Proles Get More Money! » 13 February 2018, 03:27

Where Stu & MP spout off about everything.

Taxing Tuesday: OHNOES! The Proles Get More Money!  

by

13 February 2018, 03:27

Tax bill beginning to deliver bigger paychecks to workers

The contentious tax overhaul is beginning to deliver a change that many will welcome — bigger paychecks.

Workers are starting to see more take-home pay as employers implement the new withholding guidelines from the IRS, which dictate how much employers withhold from pay for federal taxes. Those whose checks have remained the same shouldn’t fret — employers have until Feb. 15 to make the changes.

Treasury Secretary Steven Mnuchin has estimated that the new rules will mean more take-home pay for about 90 percent of American workers.

….
Wayne Love, who works in managed care in Spring Hill, Florida, got an extra $200 in his paycheck last week, which he said will help offset a $300 increase in the cost of his health insurance.

“I have heard time and again that the middle class is getting crumbs, but I’ll take it!” Love said by email.

Julia Ketchum, a secretary at a public high school in Lancaster, Pennsylvania, said she was pleasantly surprised her pay went up $1.50 a week. She didn’t think her pay would go up at all, let alone this soon. That adds up to $78 a year, which she said will more than cover her Costco membership for the year.

And in my case, it’s helping me pay for Stu’s cancer treatments. I had already optimized my savings/cash flow for before the tax bill, and for right now, before the W-4 gets updated, I’ll get a few hundred more per paycheck.

But for me, it may end up with less once it’s updated, as so much gets siphoned off to CT and NY… and I can’t deduct that all. My property taxes by themselves get me to the SALT tax cap of $10K.

Don’t weep for me, though: I have a lot more financial flexibility than many others … the tax situation may end up a wash.

As long as both New York and Connecticut don’t screw it up.

SNEERING AT THE PEONS

But before I look once again at the desperation of the high tax states, let’s check out the desperation of the Democrats.

Twitchy has been keeping nice tabs on the “crumbs” outbreak.

I remember back when I was still a liberal (20-ish years ago), when I first came slap up against behavior like this. Now, it wasn’t from a politician, who should know better, but somebody who exuded “compassionate politics”, as in “I’m down with the little guy”. We got a call from somebody else who wanted a refund of a donation, and who kept calling; the guy had a strong Southern accent, and the amount of money was a few hundred dollars. He really needed that money back ASAP.

The “compassionate politics” person thought this was a perfect time to mock the guy for being in such dire need of a few hundred dollars back. I told little-compassionate-politics-I-went-to-Harvard-person that yes, some people really need those few hundred dollars. It was a sacrifice for him to donate the amount to begin with, and then circumstances changed and was calling for his money back. Yes, you better believe we gave the money back to him.

But I started noticing the sneering more. I could say I “pass”, because I have the fancy education and can talk like a Yankee, but no, it’s just the base assumption that those in the privileged group never have to watch their speech. What does it matter if they offend a peon? Those yokels should know their place.

Politicians should know better, of course. But if one gets one’s seat on the basis of who your daddy is or who you’re married to….

….speaking of, here is something about lil Miss Nancy: Nancy Pelosi Repeats the ‘Crumbs’ Comment, Here’s Why:

Nancy Pelosi’s father was an old-fashioned Democrat politician and mayor of Baltimore. According to U.S. News and World Report:

Pelosi learned the art of politics from her father, a practitioner of old-school politics. To practice her penmanship, “Little Nancy” was in charge of the book in which her New Deal father kept track of favors done and owed.

Nancy Pelosi’s husband Paul is a San Francisco real estate developer, financier, and businessman. While Nancy Pelosi is only the 15th richest member of Congress, she and her husband are worth 29.3 million dollars.

Now that you know that background, let me explain why I think she keeps repeating “crumbs.”

…..
Her explanation of the middle class as mice and the wealthy as fat cats ready to pounce gives us clues, but what was I missing?

Then, it hit me. Nancy Pelosi (D-CA) doesn’t respect money. That’s important. She doesn’t respect money.

Representative Pelosi learned as a child, from her father, about favors. Trading favors. She kept the book for her dad. The book of “favors done and favors owed.” Baltimore politics is not fought according to the Marquess of Queensbury rules. Baltimore politics is bare-knuckle, last man standing brawling. That is what “Little Nancy” values.

Nancy Pelosi is known as a prolific fund raiser. The money she raises is probably meaningless to her. What she sees is a room full of “favors done and favors owed.”

And, of course, the people who owe her favors now are getting thinner and thinner on the ground. Crumbs, indeed.

And how has that fundraising been going?

The Democratic National Committee entered the midterm elections year “dead broke,” with a paltry $400,000 in party coffers, according to federal records.

The committee finished 2017 with roughly $6.5 million in available cash and about $6.1 million in debt, according to recently released Federal Election Commission filings. That leaves a balance of just $422,582 to start a year that will culminate in midterm elections, in which Democrats are hoping to recapture a majority in the House.

…..
Party officials say the funding figures are not as dire as they may appear, as donors are more likely to give to individual candidates than to monolithic groups like the DNC or its counterpart, the Republican National Committee.

Okay, that’s fair.

But one of the biggest kicks in Pelosi’s ass is that she and her husband may very well have to pony up more in federal taxes. Hey, it’s your patriotic duty, Nancy!

SOUTH CAROLINA IMPACTS

I’ve been getting all sorts of news alerts on this topic, and I’m on many mailing lists.

The linked analysis of the impact of the tax bill on South Carolina found an increase in individual income taxes if the state doesn’t change its tax law. It’s a fairly long analysis, but does a great job of breaking out which taxpayers would get affected.

Here’s an example figure:

Dr. Rebecca Gunnlaugsson of the Palmetto Promise Institute makes recommendations:

Recommendation: Instead of using FTI [Federal Taxable Income] as a starting point, move to AGI [Adjusted Gross Income]. This modification will
set South Carolina in line with most other states and will help to mitigate the extensive changes that occur as a result of the changing Standard Deduction, Personal Exemption and itemized
deductions, as well as future changes to those values.

…..
Recommendation: 1.) Either adopt a custom state-level Standard Deduction or adopt the
federal Standard Deduction AND 2.) adopt a state-level Personal Exemption calculated and set
at a level to minimize the impact on SC taxpayers with families. Use the federal provisions of
the TCJA to modify according to inflation each year.

……
Recommendation: Since components of itemization are being eliminated, made less
advantageous, and affecting a small and shrinking base of individuals, consider eliminating
itemization under state tax code. This change, paired with a reduction in marginal rates, will
have the effect of broadening the tax base and lowering rates for all taxpayers. Further, it
dramatically simplifies state tax code.

I heartily agree with the last item, but much of this is important for all states to consider: states really can’t have state tax policy being driven by federal changes — they need to get control of how they tax and not assume Congress will structure things such that their own state will benefit.

Again, federalism… give it a try.

ABOUT THAT PATHETIC LAWSUIT WASTING MY TAX MONEY

So, I’m hoping this particular lawsuit gets shot down ASAP, so less of my tax money is wasted. I’m not particularly sanguine about this, but it would be fabulous if it was failure all the way, even with venue-shopping.

Let’s check the commentary.

Anti-tax reform lawsuit a waste of time and money

On Feb. 1, the Baltimore Sun reported that Maryland Attorney General Brian Frosh intends to join a lawsuit against the federal government in response to the new tax reform law. Maryland joins other traditionally “blue” states such as New York, New Jersey and Connecticut.

Unfortunately for taxpayers in these states (such as myself), this lawsuit wastes time and money on a hopeless — and misguided — cause.

…..
Yet, the idea that tax policies must affect each state equally is laughable. As Jared Walczak of the Tax Foundation points out, corporate income taxes primarily affect corporate hubs, while manufacturing tax credits benefit primarily states with a large manufacturing presence.

The impact of a federal tax policy on different states will necessarily depend on the demographic variances between the states in question. Frosh and his compatriots will have a difficult time arguing that the SALT deduction is somehow different from all the other elements of the tax code that get reshuffled on an annual basis.

The attorneys general also seem to have overlooked a cap on the SALT deduction that already existed before the new tax law. This precedence further undermines the logic of their case.

The Alternative Minimum Tax (AMT) — added to the tax code in 1969 to make sure that wealthy individuals are not able to use credits and deductions to eliminate their tax liability — already had the effect of a cap on SALT deduction.

Yup, and that’s been around for decades. I’ve been hit by the AMT at least once (I forget which year… I’m a marginal case, so it basically made a difference of a few hundred dollars).

Hell, I still don’t have my taxes done at this point because I’m still waiting for Connecticut to get its version of the AMT form together. Connecticut, get it together, dammit! Or maybe it’s TurboTax’s fault. I don’t care. I just want the damn thing done.

Back to the commentary:

Perhaps most significantly, there is a clear distinction between Congress assessing a targeted tax on individuals from states that have certain economic characteristics and Congress limiting a broad deduction it was under no obligation to provide in the first place.

The Supreme Court has ruled on multiple occasions that federal tax deductions are a matter of “legislative grace,” completely up to Congress to decide whether to impose or retract.

The trouble is this: the states have no way they can “fix” the federal tax bill. The fake charity thing won’t work, the payroll tax would be extremely destructive… so all they’ve really got going for them is a lawsuit. And they can’t possibly win that, either.

The commentator points out what’s pretty evident to all: the whole thing is political theater. But it’s futile political theater, as they’re just playing for their already-heavily-Democratic crowds. How does that do anything?

Attorneys General in Maryland, as in other states leading the charge such as New York, New Jersey and Connecticut, are elected, and thus incumbents have an incentive to push a lawsuit to attack an unpopular Trump administration.

I will not trot out opinion polls, because it’s true that Trump is unpopular… in Maryland, New York, New Jersey, and Connecticut. But he was unpopular in those places already. It’s not like Trump-supporting pols were elected in droves in any of those states.

CONCERN TROLLING: WHAT IF PEOPLE HAVE TO WRITE A CHECK IN 2019?

GOP praises, Dems question tax-cut boost in paychecks

Taxpayers are starting to see bigger paychecks as a result of the new tax law, which Republicans hope will pay off for them in the midterm elections.

Democrats warn that Republicans may be overpromising, and have expressed concerns that a number of taxpayers expecting refunds may instead end up owing the IRS money next year.

I am happy to get as much of my money right now, rather than waiting for the government to give it back to me because I overpaid. I have had to write a large check to the U.S. Treasury before (and no penalties!) because I had a huge variance in my income.

But here’s a thought: what if there was no payroll deductions anymore. What if you had to pay a big check every year?

Yeah, I can imagine what that would do with people’s perceptions of taxation.

This sort of thing is a bit more popular in certain circles… you may not be familiar with it.

I bet it would become a hell of a lot more popular if one were writing checks for thousands of dollars, even if it were quarterly.

Okay, I’m going to ignore what the GOP had to say in this particular piece, and let the Dems explain why people getting their money early is bad:

Key Democrats have raised concerns that Trump administration officials may have put political pressure on the IRS to update the withholding tables so that people see bigger boosts to their paychecks ahead of the midterms than is appropriate.

Senate Finance Committee ranking member Ron Wyden (D-Ore.) and House Ways and Means Committee ranking member Richard Neal (D-Mass.) have asked the Government Accountability Office to take a look at the new withholding tables.

“The real question with respect to withholding is being straight with the American people, and if you play games with this in order to advance a political agenda, [then] Americans get hurt,” Wyden said.

…..
The IRS updated withholding tables to reflect three main elements of the tax law: lower tax rates, the near doubling of the standard deduction and the repeal of personal exemptions. Mnuchin said about 90 percent of wage earners will see bigger paychecks as a result of the new tables.

…..
Withholding is based on taxpayers’ incomes as well as the number of allowances they claim on W-4 forms. Taxpayers claim more allowances, and get less withheld from their paychecks, if they expect to get more benefits from exemptions, deductions and credits.

Taxpayers who claimed a lot of allowances because they benefited greatly from itemized deductions under the old tax law might find that they owe the IRS when they file their 2018 tax returns next year. This may particularly be the case for people who live in high-tax states and relied heavily in the past on the state and local tax deduction, which is capped in the new law at $10,000.
…..
The IRS is planning to release a calculator later this month that will help people figure out if they should adjust their withholding, as well as a new W-4 form that employees use to direct their employers on their withholding. The agency is planning a bigger revamp of the W-4 form for 2019.

All I care about is I don’t get penalized with a fine if either the IRS or New York or Connecticut screw up all these changes. If I have to pay a check to all three next April, I’m fine with that as long as there’s no additional fine.

Also:


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