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  #21  
Old 30 September 2017, 05:28 AM
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Originally Posted by erwins View Post
in the long run, changing the effect of setting up a business in a particular way means that anyone disadvantaged by doing it that way will likely find a different way.
To the best of my knowledge, any other way of setting up the business will run into the same problem. What this would be doing, if I understand it, would be making pass-through businesses non-pass-through: in other words, this alternative would be disappearing.

And the problem that comes to the top of my head about calling it salary instead of profits is that one doesn't know what (if anything) the profit's going to be until the year's over. I don't know that one can get away with saying 'the salary will be whatever the profits are'; and what happens if one sets a salary that the business can't meet? what happens when that salary would be less than minimum legal wage?

ETA: I'm not a lawyer at all, let alone one simultaneously in the fields of tax law and employment law.
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  #22  
Old 30 September 2017, 05:50 PM
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Originally Posted by Sue View Post
Regardless of his true audience or true intent (if the word true even applies to Trump) there were real people affected by this lie who believed what he was saying. They may very well have voted for him anyway but they voted for him at least in part because he lied to them and made them believe he actually cared about their poverty and their hopes ..
Which is frustrating because Hillary was too - just not in the way that miners wanted to hear. They wanted to hear that everything was going to be fine and that coal jobs were coming back and that the cause was due to all that burdensome regulations. Trump told them lies that they wanted to believe.

Hillary didn't do a very good job of explaining that the problem was more nuanced and that coal was dying as an energy source (and no clean coal really isn't a viable thing). She was honest about what to do (transition people to better more sustainable jobs), but people wanted to be lied to. I don't get it.
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  #23  
Old 30 September 2017, 06:16 PM
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The pass through thing is laser focused on helping Trump and people like Trump, and nobody else. He'd be hard pressed to identify normal people coming out significantly ahead from any of this, but even if there are a few corner cases here and there it's very clear that if his true goal was was tax relief for middle income earners, he'd be going about it completely differently. The fact that he'd be the biggest beneficiary isn't a coincidence it's the point.

Republicans talk about income tax because they know that's what their actual voters are likely to pay and care about. But their rich donors are paying other taxes, and the real meat of these tax proposals is always in those other rules that they play down and average voters ignore. Those rules tend to be things that are huge to wealthy people and nobody else.

I have some pass through income, but I would barely benefit anyway. I'm an employee but with significant equity, and the dividends are passed through as personal income at 33%. But then I actually pay AMT which is 28% anyway, so we're talking a 3% difference on a portion of income, which is trivial in comparison to the state and local income tax deduction being eliminated.

Scrapping the state and local income tax deduction to pay for it would far more than cancel out any benefit, and would be devastating for middle class people in California or New York (unless like Trump your accountants can claim your income in whatever state they like). That particular tax increase is a middle finger from Republicans to the states that don't vote for them. There are some Republican congressmen in blue states, and if they vote for that aspect of it along party lines their constituents will not love them for it.
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  #24  
Old 30 September 2017, 06:59 PM
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The AMT would be eliminated under this tax proposal.
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  #25  
Old 30 September 2017, 07:01 PM
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Originally Posted by thorny locust View Post
To the best of my knowledge, any other way of setting up the business will run into the same problem. What this would be doing, if I understand it, would be making pass-through businesses non-pass-through: in other words, this alternative would be disappearing.
Yes, if this happens, it seems that the pass through method would be gone. My point was not that an equally advantageous way to set up a business already exists, but that people for whom it became disadvantageous, they would use the next best way of setting it up. And no doubt there would be pushes to create new ways of setting things up that would have some of the same advantages.

My comment isn't meant to say that what you've pointed out is not a problem. My point is that people with money will keep findings ways to try to keep more of it. Some of what they do might be useful to people with less money. But the people who will lose the most are those who have less money and who have already set up their businesses under the current rules.
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  #26  
Old 30 September 2017, 07:01 PM
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Quote:
Originally Posted by thorny locust View Post
To the best of my knowledge, any other way of setting up the business will run into the same problem. What this would be doing, if I understand it, would be making pass-through businesses non-pass-through: in other words, this alternative would be disappearing.

And the problem that comes to the top of my head about calling it salary instead of profits is that one doesn't know what (if anything) the profit's going to be until the year's over. I don't know that one can get away with saying 'the salary will be whatever the profits are'; and what happens if one sets a salary that the business can't meet? what happens when that salary would be less than minimum legal wage?...
Speaking as an owner of a pass-through business, an LLC, calling it salary instead of profit is nonsense. If I disburse money to any of the owners of the business, including myself, there are two choices (from an accounting and tax perspective). I could call it an equity withdrawal, or a 'guaranteed payment', the latter is effectively a salary. The former has a series of complex rules associated with how it is taxed. From the payee's perspective these are very different things.

I'm not sure how the tax law would be implemented. If they just make guaranteed payments taxable on the corporation and tax free to the payee, it would depend on payees tax bracket and how the corporation decided to handle it. As an example; We pay one of the co-owners to coach our team. Let's say we pay him $1000 a year. If his effective tax rate is 10%, he would clear $900 after Federal taxes (there is an issue of how this would be treated with state and local taxes too). If the law was changed as mentioned above, the corporation would pay $250 in taxes on the payment, and our coach would clear $1000. He would come out ahead, the rest of us co-owners would come out behind. The US government would come out head though.

If, on the other hand, they include guaranteed payments in profit, things would be very different. My business, like many business takes a loss on paper every year. If we currently lose $1000 a year, the guaranteed payment would be absorbed. We would have no tax liability, nor would our coach. He would come out ahead. The LLC would wash and the US government would get $100 less in tax revenues.

Trump's plan must be the latter, as that would be both a tax cut and an advantage to most pass through businesses, including his own.
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  #27  
Old 30 September 2017, 07:10 PM
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Originally Posted by GenYus234 View Post
The AMT would be eliminated under this tax proposal.
Any future benefit would be relative to the current status quo. Without the state and local deduction, the AMT would probably be irrelevant anyway.
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  #28  
Old 30 September 2017, 07:36 PM
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Quote:
Originally Posted by thorny locust View Post
Only for the small percentage who are making lots of money.
Perhaps in the US. In Canada, it works well in many other circumstances.

My Dad, when he retired from his government job, became a contractor (he was a technical editor). He grossed the same amount, but his take home was greater as he was able to start claiming expenses for part of the house which became his office, his car, computer, phone line, meals while travelling etc. This also allowed for a better negotiating position come renewal time, where as a government employee, he was fixed to his pay grade. Now he could use his reputation to help him get paid more.

While his tax rate remained the same, however, due to all the expenses he could claim (all completely legal too) he took home perhaps 15% more (which is not too shabby).**

You don't need to be making millions to be the benefit of being a contractor.

**While the contractor benefits, so does the business. No need to pay for employment insurance, or keep withholdings for income tax or Canada Pension Plan, and no requirement to offer health and dental insurance programmes. They also do not necessarily have to provide computers, vehicles or even office space (although many do). Also, a non-performer is very easy to replace, all they have to do is just wait for renewal time. For the same amount of money, the business reduces its cost, maintains its productivity and increases its bottom line.

I will, however, note that this won't work for all businesses or business models.
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  #29  
Old 03 October 2017, 06:52 PM
jimmy101_again jimmy101_again is offline
 
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If the Turnip is actually worth anywhere near what he claims he is worth then ending the inheritance tax would be worth somewhere around a billion dollars to his beneficiaries. So, technically, he wouldn't benefit from the change in tax law.

Another thing, the whole idea of a "35% tax rate" for businesses is kind of misleading to start with. Yes, that is the rate, but what it is a percentage of is completely different for a business versus the average person. Businesses pay taxes on profits, not income. People pay taxes on income. If you figure business tax the same way individual taxes are, then the maximum corporate tax rate is more like 3~6%, not 35%. Or, if people were taxed the way business are, they would only owe taxes on money they saved and not on money for housing, food, car, clothing, etc.
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  #30  
Old 03 October 2017, 07:50 PM
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Originally Posted by diddy View Post
Hillary didn't do a very good job of explaining that the problem was more nuanced and that coal was dying as an energy source (and no clean coal really isn't a viable thing). She was honest about what to do (transition people to better more sustainable jobs), but people wanted to be lied to. I don't get it.
Attempting to explain nuance was the problem, IMO.

Quote:
Originally Posted by UEL View Post
Perhaps in the US. In Canada, it works well in many other circumstances.
A big part of the difference may be that our health insurance is tied to employment, and that affordable policies (worth having) for the self-employed are difficult to come by.
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  #31  
Old 03 October 2017, 08:11 PM
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Originally Posted by Lainie View Post
A big part of the difference may be that our health insurance is tied to employment, and that affordable policies (worth having) for the self-employed are difficult to come by.
Ah, very valid point made.

Thanks for informing me. I do know my cousin's husband has his own business in Maine, and health insurance was eating up his entire bottom line just for him and his family (they have no employees other than him and my cousin).

I consider myself a little wiser.
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  #32  
Old 03 October 2017, 08:20 PM
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It's very unfortunate, overall, that we ever tied health insurance to employment. Besides situations like that, it's also helped create the mentality that health care is something you need to earn.
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  #33  
Old 04 October 2017, 08:12 AM
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When I read what Lanie wrote, "tied health insurance to employment", I suddenly realised an important point about the Japanese system: Here, health insurance was tied to ID in the way that a driver's license is in the US (or more generally the DMV which issues ID's as well these days in the US). Even though we've never had picture ID's for health insurance, the insurance card was the default ID card for many decades so it was something everyone had to have anyway. There are obligations for individuals and for employees as well but smaller companies and the self employed can rely on national (public) insurance. Maybe in the US they should tie health insurance to having a driver's license. Just a thought! (I know. Not a good thought. Not having a license is not an option but that would just end up penalising twice...)
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  #34  
Old 04 October 2017, 01:18 PM
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ganzfeld, that might work. Then all we'd have to do is make sure the poor and unemployed don't get a license!
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  #35  
Old 04 October 2017, 01:47 PM
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Here, at birth registration, every person is given a health card (has to be renewed every 5 years). It is another piece of ID.

That might work in the US.
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  #36  
Old 04 October 2017, 02:01 PM
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Maybe, if we don't make the mistake of calling it a "national ID card". People get worked up about that concept.
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  #37  
Old 04 October 2017, 02:35 PM
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I'm posting just to say that this headline drives me nuts. What's with the "could actually"? Of course it's going to benefit him and his cronies. He has neither the conscience nor the balls to raise the tax rates for the rich. The headline should say "is going" not "could actually" (as if it were a surprise).

Seaboe
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  #38  
Old 04 October 2017, 02:37 PM
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Originally Posted by Lainie View Post
Maybe, if we don't make the mistake of calling it a "national ID card". People get worked up about that concept.
Call it a patriotism card?
"Having it shows you're a patriotic american! Not having one is worse than taking a knee during the anthem! Denying someone his right to one is like burning the flag!"
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  #39  
Old 04 October 2017, 02:46 PM
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I like that Alarm. It won't stop some from calling it the "Mark of the Beast", but it'd be worth a try. And Seaboe, I've been thinking since I first read that title, and every time since: Well Duh! Not terribly articulate but it's what actually goes through my mind every time.
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  #40  
Old 05 October 2017, 01:26 AM
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Originally Posted by Sylvanz View Post
I like that Alarm. It won't stop some from calling it the "Mark of the Beast", but it'd be worth a try. And Seaboe, I've been thinking since I first read that title, and every time since: Well Duh! Not terribly articulate but it's what actually goes through my mind every time.
Same! "Gosh!! That doesn't sound anything like him, could it really be true?"
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