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CNBC: There is one big silver lining that comes with Trump’s troubles: Tax cut odds may be going UP

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http://www.cnbc.com/2017/08/21/tax-cut-odds-may-be-going-up-with...

A few quotes:

  • After a week of turmoil in Washington, a number of analysts see better odds for tax legislation.
  • Congress is expected to run with the ball on tax reform, as members fear losing races in the 2018 election, threatening the Republican majority in the House.
  • Analysts say it's more likely a modified tax cut plan would go through rather than the tax reform plan originally envisioned.

"Presidential difficulties may be a catalyst for Republican agreement on tax reform, with some bipartisan aspects as a means of survival in front of the 2018 midterms," wrote Stifel equity strategist Barry Bannister. "Congressional Republicans recognize that, as well as a fractious party and an administration that poses a risk to them, so they may now push for reconciliation with dynamic scoring to cut taxes, offset ACA's [Obamacare] tax burden and stimulate growth before the 2018 midterm."The analysts said as the GOP House representatives distance themselves from the president, they could be pressured to act on taxes and pro-growth items ahead of the midterms."There is a very good case to be made that the probability of tax [cuts] may have gone up, not down, with last week's events," wrote Morgan Stanley equity analysts.

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But what affect does the Sec Treasury's wife acting like a modern day marie Antoinette have??

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When they say tax cuts, they only mean for the very financial healthy and corporations simply because that is where the majority of tax collections and contributions to political campaigns come from.
People like you and me have little hope of any meaningful help or reform. They were even considering aloud taxing 401k from the get go.

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JW10 said:   When they say tax cuts, they only mean for the very financial healthy and corporations simply because that is where the majority of tax collections and contributions to political campaigns come from.
People like you and me have little hope of any meaningful help or reform. They were even considering aloud taxing 401k from the get go.

   I've read study after study that have shown that historically, lower taxes on the haves has contributed to a less healthy fiscal situation both in terms of government debt and long term growth. Tax reform that does not result in lower effective rates for the haves may produce benefit but this is highly complex and thus unlikely. What is likely to happen if anything, is that rates may be cut with little/no other changes. This might result in slightly more money in peoples paychecks but more than likely also spur greater government debt and worse long term growth. Terrible idea but may fool the low info voters enough to help the GOP in 2018.

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bucksandreds2185 said:   
What is likely to happen if anything, is that rates may be cut with little/no other changes. This might result in slightly more money in peoples paychecks but more than likely also spur greater government debt and worse long term growth. Terrible idea but may fool the low info voters enough to help the GOP in 2018.

I'm also guessing stuff like forcing Roth-ifying of IRAs and 401ks may be used. It'd almost be a zero-sum game. Something that temporarily brings in more tax revenues at the expense of future ones to balance current budgets... when it comes to roost, it'll be the budget problem of someone else in office. And that would help pay for tax cuts that people would notice immediately.

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bucksandreds2185 said:   
JW10 said:   When they say tax cuts, they only mean for the very financial healthy and corporations simply because that is where the majority of tax collections and contributions to political campaigns come from.
People like you and me have little hope of any meaningful help or reform. They were even considering aloud taxing 401k from the get go.

   I've read study after study that have shown that historically, lower taxes on the haves has contributed to a less healthy fiscal situation both in terms of government debt and long term growth. Tax reform that does not result in lower effective rates for the haves may produce benefit but this is highly complex and thus unlikely. What is likely to happen if anything, is that rates may be cut with little/no other changes. This might result in slightly more money in peoples paychecks but more than likely also spur greater government debt and worse long term growth. Terrible idea but may fool the low info voters enough to help the GOP in 2018.

  
Tax cuts can lower the burden of the national debt. How do you reduce Debt to GDP? Either reduce the debt or increase GDP. Remember, taxes are a restraint on the economy. The higher taxes are the less productive the economy will be since there is less incentive to work hard (each individual gets less benefit from their labor and investment). After the Reagan tax cuts the debt to GDP ratio fell because the economy improved so much.
 

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brettdoyle said:   
The higher taxes are the less productive the economy will be since there is less incentive to work hard (each individual gets less benefit from their labor and investment). 

  As there's only 168 hrs in a week, the wealthy's marginal work hard input is already small

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brettdoyle said:   Tax cuts can lower the burden of the national debt. How do you reduce Debt to GDP? Either reduce the debt or increase GDP. Remember, taxes are a restraint on the economy. The higher taxes are the less productive the economy will be since there is less incentive to work hard (each individual gets less benefit from their labor and investment). After the Reagan tax cuts the debt to GDP ratio fell because the economy improved so much.
So, I take it recreational cannabis is legal in the state where you live ?
 

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brettdoyle said:   
bucksandreds2185 said:   
JW10 said:   When they say tax cuts, they only mean for the very financial healthy and corporations simply because that is where the majority of tax collections and contributions to political campaigns come from.
People like you and me have little hope of any meaningful help or reform. They were even considering aloud taxing 401k from the get go.

   I've read study after study that have shown that historically, lower taxes on the haves has contributed to a less healthy fiscal situation both in terms of government debt and long term growth. Tax reform that does not result in lower effective rates for the haves may produce benefit but this is highly complex and thus unlikely. What is likely to happen if anything, is that rates may be cut with little/no other changes. This might result in slightly more money in peoples paychecks but more than likely also spur greater government debt and worse long term growth. Terrible idea but may fool the low info voters enough to help the GOP in 2018.

  
Tax cuts can lower the burden of the national debt. How do you reduce Debt to GDP? Either reduce the debt or increase GDP. Remember, taxes are a restraint on the economy. The higher taxes are the less productive the economy will be since there is less incentive to work hard (each individual gets less benefit from their labor and investment). After the Reagan tax cuts the debt to GDP ratio fell because the economy improved so much.

Given that the name of the current president is in the thread title, I'm less hesitant to politicize this thread than I normally would be.  I pissed off a friend of mine tonight when I explained to him that I think after Hugo Chavez, the two biggest communists in the history of the western hemisphere are FDR and BHO.  Anyone who's not a fiscal conservative simply won't understand and will be offended.  There's no way around it.;

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While I am a pretty solid conservative, I am not a fan of the plans being floated around Washington at this time.

They seem to benefit the poor, lower middle class, and the very wealthy at the expense of the middle and upper middle class. We are currently in the 28% tax bracket and make heavy use of deductions to lower our amount due - we usually have around $25k-$30k in itemized deductions each year. If the ability to deduct mortgage interest and state sales tax/property tax both go away, our tax burden is going to increase by thousands each year. That 25% bracket being thrown around amounts to another tax increase for us, as many of the smaller brackets will vanish and instead be taxed at a higher 25% marginal rate.

This is a great way to get people like me to just not bother showing up to the polls in 2018.

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In a related news item, a gamma ray burst may hit Earth any second now.

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DTASFAB said:   
brettdoyle said:   
bucksandreds2185 said:   
JW10 said:   When they say tax cuts, they only mean for the very financial healthy and corporations simply because that is where the majority of tax collections and contributions to political campaigns come from.
People like you and me have little hope of any meaningful help or reform. They were even considering aloud taxing 401k from the get go.

   I've read study after study that have shown that historically, lower taxes on the haves has contributed to a less healthy fiscal situation both in terms of government debt and long term growth. Tax reform that does not result in lower effective rates for the haves may produce benefit but this is highly complex and thus unlikely. What is likely to happen if anything, is that rates may be cut with little/no other changes. This might result in slightly more money in peoples paychecks but more than likely also spur greater government debt and worse long term growth. Terrible idea but may fool the low info voters enough to help the GOP in 2018.

  
Tax cuts can lower the burden of the national debt. How do you reduce Debt to GDP? Either reduce the debt or increase GDP. Remember, taxes are a restraint on the economy. The higher taxes are the less productive the economy will be since there is less incentive to work hard (each individual gets less benefit from their labor and investment). After the Reagan tax cuts the debt to GDP ratio fell because the economy improved so much.

Given that the name of the current president is in the thread title, I'm less hesitant to politicize this thread than I normally would be.  I pissed off a friend of mine tonight when I explained to him that I think after Hugo Chavez, the two biggest communists in the history of the western hemisphere are FDR and BHO.  Anyone who's not a fiscal conservative simply won't understand and will be offended.  There's no way around it.;

  
I think you are making the common (in the US) mistake of confusing Communism and Socialism.  Change your statement to them being the biggest SOCIALISTs and I will agree with you.  Limited socialism isn't a bad thing.

And yes, I consider Social Security, UI, Medicare, and the Insurance Subsidy programs all to be socialist.  The "entitlement because I paid into it" is how you disguise a Socialist program to sell it to capitalists.  But like all taxes -- what you pay in has no bearing on what is paid OUT.  

The US has mixed the two terms for political reasons all during the Cold War -- but Communism is specifically where all/most property/businesses are owned by the STATE.  All the post-USSR billionaires in Russia got there by seizing/taking control of previously state owned industries and resources.  (and why they are sometimes referred to as Kleptocrats)   

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rufflesinc said:   But what affect does the Sec Treasury's wife acting like a modern day marie Antoinette have??
  and here is an answer
The Finance 202: Here's how Louise Linton could change the tax debate

Here, in two Instagram posts, is a senior administration official's spouse stepping off a taxpayer-funded plane, swathed head to toe in pricey couture, bragging about it, and snarking to somebody who pointed out the distastefulness of the scene by making fun of her for not being rich. And her husband, co-architect of a tax policy the administration promises will benefit lower and middle-income workers, represents what Democrats believe is an Achilles heal for Trump with his own base.

https://www.washingtonpost.com/news/powerpost/paloma/the-finance-202/2017/08/23/the-finance-202-here-s-how-louise-linton-could-change-the-tax-debate/599c773030fb0435b8208f83/?utm_term=.7d4ccb7c3077 

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RedWolfe01 said:     
I think you are making the common (in the US) mistake of confusing Communism and Socialism.  Change your statement to them being the biggest SOCIALISTs and I will agree with you.  Limited socialism isn't a bad thing.

And yes, I consider Social Security, UI, Medicare, and the Insurance Subsidy programs all to be socialist.  The "entitlement because I paid into it" is how you disguise a Socialist program to sell it to capitalists.  But like all taxes -- what you pay in has no bearing on what is paid OUT.  

The US has mixed the two terms for political reasons all during the Cold War -- but Communism is specifically where all/most property/businesses are owned by the STATE.  All the post-USSR billionaires in Russia got there by seizing/taking control of previously state owned industries and resources.  (and why they are sometimes referred to as Kleptocrats)   

That was actually a significant part of the conversation I had over drinks with this friend of mine.  He's very liberal and dyed blue democrapt.  You're totally correct about all of this, and it's not that I don't understand the differences.  I just see socialism and communism as both being so far removed from any realistically honest form of capitalism that I've regressed to a point of using the two words interchangeably.  I'm not really a fan of capitalism either, but that's mostly because I'm not a fan of human beings, and human beings in a capitalistic environment are way too callous and self-serving for my altruistic and empathetic sensibilities.  But having Big Brother babysit all my financial dealings in a socialist environment is not an acceptable answer as far as I'm concerned, primarily because Big Brother, ultimately, is controlled by human beings who are just as uncaring as unrestrained capitalists with none of the efficiency.

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What's missing is that the thrust of this entire story is based upon the agreement of the "gang of six" who have proposed attacking the following deductions in order to garner the funds to "help" pay for massive tax cuts for the Rich & Corporate:

* Modifying the mortgage interest deduction

* Eliminating the state & local tax deductions

* Eliminating the ability for business to deduct interest

* Taxing the money that workers put into 401(k) plans

The 'optimism' and 'increased odds' are emanating from the 'gang of six'. Once any of these hit the floor of Congress and the big-time lobbyist get involved, do I have to say it ?, these are all Dead On Arrival.

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Remember, the mortgage interest deduction and the state and local tax deductions primarily benefit people upper middle class and upper class people in blue states, and the Republican Party, as a whole, doesn't really care about them. There are Republican reps from those states, however (NY, NJ, CT, CA), and they'll catch hell from their constituents if those provisions go away.

Fundamentally, the Republicans feel like they NEED to do something on tax reform, since, without it, they'll be going into the 2018 midterms with absolutely nothing to show for two years of controlling the Presidency and both houses of Congress.

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cestmoi123 said:   Remember, the mortgage interest deduction and the state and local tax deductions primarily benefit people upper middle class and upper class people in blue states, and the Republican Party, as a whole, doesn't really care about them. There are Republican reps from those states, however (NY, NJ, CT, CA), and they'll catch hell from their constituents if those provisions go away.
  Do people in red states magically not have to pay mortgage interest?

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rufflesinc said:   
cestmoi123 said:   Remember, the mortgage interest deduction and the state and local tax deductions primarily benefit people upper middle class and upper class people in blue states, and the Republican Party, as a whole, doesn't really care about them. There are Republican reps from those states, however (NY, NJ, CT, CA), and they'll catch hell from their constituents if those provisions go away.
  Do people in red states magically not have to pay mortgage interest?

  

They do of course.      However the highest cost of living places (CA & NY) are blue states so the most mortgage interest is paid in blue states.    

The map of states that benefit the most from the mortgage interest deduction mostly matches the political landscape. 

https://taxfoundation.org/home-mortgage-interest-deduction-state...
 

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I, for one, welcome removing the mortgage interest deduction and state tax deduction!!

There is no "good" reason to distort the free market with these.

Yes - I know they will be used to benefit the 0.1%! But that is a separate battle (to make sure top 0.1% pay their fair share) that can be fought next time the political wheel of fortune turns.

And yes! I know I will pay more in taxes when they are taken away! But I also don't like being priced out of housing markets with good schools within 1 hour of Manhattan - to some extend driven by this useless, market distorting SOP's from the government!!

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puddonhead said:   I, for one, welcome removing the mortgage interest deduction and state tax deduction!!

There is no "good" reason to distort the free market with these.

Yes - I know they will be used to benefit the 0.1%! But that is a separate battle (to make sure top 0.1% pay their fair share) that can be fought next time the political wheel of fortune turns.

And yes! I know I will pay more in taxes when they are taken away! But I also don't like being priced out of housing markets with good schools within 1 hour of Manhattan - to some extend driven by this useless, market distorting SOP's from the government!!

  
There's a good argument to getting rid of the mortgage interest deduction, but it would really need to be phased in over an extended period of time, since people have made major purchases based on the expectation that it would be in place.  

As for your concern about being priced out, why would eliminating the mortgage deduction change that?  It would (in theory) lower the cost of homes, but, at the same time, raise the effective cost of borrowing to purchase a home.  So, largely comes out in the wash when it comes to effective affordability.  

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jerosen said:   
rufflesinc said:   
cestmoi123 said:   Remember, the mortgage interest deduction and the state and local tax deductions primarily benefit people upper middle class and upper class people in blue states, and the Republican Party, as a whole, doesn't really care about them. There are Republican reps from those states, however (NY, NJ, CT, CA), and they'll catch hell from their constituents if those provisions go away.
  Do people in red states magically not have to pay mortgage interest?

  

They do of course.      However the highest cost of living places (CA & NY) are blue states so the most mortgage interest is paid in blue states.    

The map of states that benefit the most from the mortgage interest deduction mostly matches the political landscape. 

https://taxfoundation.org/home-mortgage-interest-deduction-state-2017/

  The state income taxes in places like CA & NY also means that many people already itemize their taxes, and so can benefit more immediately from the mortgage interest deduction. (Otherwise, you need a much bigger mortgage for the deduction to be worth it.)

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The mortgage interest deduction should go away. The government shouldn't be favoring home ownership over renting. They should be completely neutral in the decision.

The state tax deduction has to stay in place, however. Let's say you earn $100, and your state taxes you at 5%, leaving you with $95. What was your federal taxable income? It's the $95, since you never received the full $100.

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Basically, eliminating the state/local tax deduction and the mortgage interest deduction would helping the 1% to the detriment of the next 19%.

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cestmoi123 said:   Basically, eliminating the state/local tax deduction and the mortgage interest deduction would helping the 1% to the detriment of the next 19%.
  
How would it help the 1%? 

 

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ZenNUTS said:   In a related news item, a gamma ray burst may hit Earth any second now.
Do I get to turn into an unstoppable angry green superheo?

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cestmoi123 said:   
puddonhead said:   I, for one, welcome removing the mortgage interest deduction and state tax deduction!!

There is no "good" reason to distort the free market with these.

Yes - I know they will be used to benefit the 0.1%! But that is a separate battle (to make sure top 0.1% pay their fair share) that can be fought next time the political wheel of fortune turns.

And yes! I know I will pay more in taxes when they are taken away! But I also don't like being priced out of housing markets with good schools within 1 hour of Manhattan - to some extend driven by this useless, market distorting SOP's from the government!!

  
There's a good argument to getting rid of the mortgage interest deduction, but it would really need to be phased in over an extended period of time, since people have made major purchases based on the expectation that it would be in place.  

As for your concern about being priced out, why would eliminating the mortgage deduction change that?  It would (in theory) lower the cost of homes, but, at the same time, raise the effective cost of borrowing to purchase a home.  So, largely comes out in the wash when it comes to effective affordability.  


>> raise the effective cost of borrowing

As a net investor - I welcome the prospect of higher cost to borrow!!
Higher cost to borrow -> lower cost to buy!
I'd simply have purchased a house outright - thereby not having to worry about the 10% mortgage rates.
Maybe I'd have waited another 5 years to buy!

Tangential topic:
Cost to borrow going up due to higher yield is even more beneficial!!
I wish the mortgage rates were 10%+. Side effect : inflation protected and almost risk free instruments (e.g. TIPS) yielding in double digits -> retirement planning becomes so drab, low-volatility and simple!
And don't forget that my additional 5 years of wait to buy a house would be so worth it with my savings accumulating in 10%+ yielding TIPS!!
 

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If interest rates are higher, that raises the cost of borrowing for companies too

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It also increases the risk free income that AAPL gets from it's stockpile, or GOOGL, or MSFT, or INTC before the high profile acquisitions.

Current, low interest environment punishes the high quality cash flow businesses. I don't see that as particularly fair. I'm not sure it's economically efficient either - as it is, in effect, corporate welfare favoring high leverage industries.

Fed rate setting is a complex topic that I don't fully understand! However, I don't need to understand that to know mortgage deduction, or the artificially low yield is against net investors like me.

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jerosen said:   
cestmoi123 said:   Basically, eliminating the state/local tax deduction and the mortgage interest deduction would helping the 1% to the detriment of the next 19%.
  
How would it help the 1%? 

 

  I was assuming that the increased revenue would be used to fund some of the priorities listed, including cutting corporate tax rates, and potentially cutting the pass through rate.  The benefit of both of those would heavily skew to the top 1% of earners.  

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puddonhead said:   It also increases the risk free income that AAPL gets from it's stockpile, or GOOGL, or MSFT, or INTC before the high profile acquisitions.

Current, low interest environment punishes the high quality cash flow businesses. I don't see that as particularly fair. I'm not sure it's economically efficient either - as it is, in effect, corporate welfare favoring high leverage industries.

Fed rate setting is a complex topic that I don't fully understand! However, I don't need to understand that to know mortgage deduction, or the artificially low yield is against net investors like me.

  
In theory, eliminating the mortgage interest deduction would result in lower rates, on balance, since it would reduce the demand for mortgage borrowing.  So, wouldn't help you there.

Regarding the deductibility of interest, there's an argument to treat interest and dividends similarly from a corporate income tax perspective and a personal tax perspective, so as not to have the tax code effectively encourage one source of capital (debt) over another (equity). 
PS AAPL is a net payor of interest, not a recipient - they have about $30B in net debt ($105B in debt less $75B in cash).  Also, they only have that massive cash hoard because they have huge overseas earnings that they don't want to bring back to the US because they'd have to pay tax on it.  It's wildly inefficient for them to be sitting on $75 billion in cash.  

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DTASFAB said:   brettdoyle said:   
bucksandreds2185 said:   
JW10 said:   When they say tax cuts, they only mean for the very financial healthy and corporations simply because that is where the majority of tax collections and contributions to political campaigns come from.
People like you and me have little hope of any meaningful help or reform. They were even considering aloud taxing 401k from the get go.

   I've read study after study that have shown that historically, lower taxes on the haves has contributed to a less healthy fiscal situation both in terms of government debt and long term growth. Tax reform that does not result in lower effective rates for the haves may produce benefit but this is highly complex and thus unlikely. What is likely to happen if anything, is that rates may be cut with little/no other changes. This might result in slightly more money in peoples paychecks but more than likely also spur greater government debt and worse long term growth. Terrible idea but may fool the low info voters enough to help the GOP in 2018.

  
Tax cuts can lower the burden of the national debt. How do you reduce Debt to GDP? Either reduce the debt or increase GDP. Remember, taxes are a restraint on the economy. The higher taxes are the less productive the economy will be since there is less incentive to work hard (each individual gets less benefit from their labor and investment). After the Reagan tax cuts the debt to GDP ratio fell because the economy improved so much.

Given that the name of the current president is in the thread title, I'm less hesitant to politicize this thread than I normally would be.  I pissed off a friend of mine tonight when I explained to him that I think after Hugo Chavez, the two biggest communists in the history of the western hemisphere are FDR and BHO.  Anyone who's not a fiscal conservative simply won't understand and will be offended.  There's no way around it.;


You have an amazingly poor understanding of western hemisphere history.

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brettdoyle said:   
bucksandreds2185 said:   
JW10 said:   When they say tax cuts, they only mean for the very financial healthy and corporations simply because that is where the majority of tax collections and contributions to political campaigns come from.
People like you and me have little hope of any meaningful help or reform. They were even considering aloud taxing 401k from the get go.

   I've read study after study that have shown that historically, lower taxes on the haves has contributed to a less healthy fiscal situation both in terms of government debt and long term growth. Tax reform that does not result in lower effective rates for the haves may produce benefit but this is highly complex and thus unlikely. What is likely to happen if anything, is that rates may be cut with little/no other changes. This might result in slightly more money in peoples paychecks but more than likely also spur greater government debt and worse long term growth. Terrible idea but may fool the low info voters enough to help the GOP in 2018.

  
Tax cuts can lower the burden of the national debt. How do you reduce Debt to GDP? Either reduce the debt or increase GDP. Remember, taxes are a restraint on the economy. The higher taxes are the less productive the economy will be since there is less incentive to work hard (each individual gets less benefit from their labor and investment). After the Reagan tax cuts the debt to GDP ratio fell because the economy improved so much.

  Why do low info people pretend that what makes sense in their mind has any evidence to support it?

https://fas.org/sgp/crs/misc/R42111.pdf

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cestmoi123 said:   
puddonhead said:   It also increases the risk free income that AAPL gets from it's stockpile, or GOOGL, or MSFT, or INTC before the high profile acquisitions.

Current, low interest environment punishes the high quality cash flow businesses. I don't see that as particularly fair. I'm not sure it's economically efficient either - as it is, in effect, corporate welfare favoring high leverage industries.

Fed rate setting is a complex topic that I don't fully understand! However, I don't need to understand that to know mortgage deduction, or the artificially low yield is against net investors like me.

  
In theory, eliminating the mortgage interest deduction would result in lower rates, on balance, since it would reduce the demand for mortgage borrowing.  So, wouldn't help you there.

Regarding the deductibility of interest, there's an argument to treat interest and dividends similarly from a corporate income tax perspective and a personal tax perspective, so as not to have the tax code effectively encourage one source of capital (debt) over another (equity). 
PS AAPL is a net payor of interest, not a recipient - they have about $30B in net debt ($105B in debt less $75B in cash).  Also, they only have that massive cash hoard because they have huge overseas earnings that they don't want to bring back to the US because they'd have to pay tax on it.  It's wildly inefficient for them to be sitting on $75 billion in cash.  


>> In theory, eliminating the mortgage interest deduction would result in lower rates, on balance, since it would reduce the demand for mortgage borrowing.  So, wouldn't help you there.

Not sure I follow!

Less demand for mortgage -> less housing demand -> lower prices, or more sellers willing to cut a deal to make a quick sale (like it was in my case when I purchased a house this year).

Lower housing cost -> difference I need to pay to move within 1 hour of Manhattan, and my current house is smaller -> I am no longer priced out of that market -> my quality of life is better.

I still come out ahead. No?

 

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Can I change my screen name to "IluvPoorShamingLosers" please?

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Y'all are missing the point. It's not about whether the deductions are good or bad for society or fiscal sanity.

The housing industry and those who underwrite mortgages will fight anyone trying to mess with the mortgage interest deduction.

The entire business lobby will fight any attempt to eliminate the ability to deduct interest.

Those who manage and leech off of retirement accounts will fight any tax changes in regards to 401(k) plans.

It's all about the Benjamins.

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puddonhead said:   
cestmoi123 said:   
puddonhead said:   It also increases the risk free income that AAPL gets from it's stockpile, or GOOGL, or MSFT, or INTC before the high profile acquisitions.

Current, low interest environment punishes the high quality cash flow businesses. I don't see that as particularly fair. I'm not sure it's economically efficient either - as it is, in effect, corporate welfare favoring high leverage industries.

Fed rate setting is a complex topic that I don't fully understand! However, I don't need to understand that to know mortgage deduction, or the artificially low yield is against net investors like me.

  
In theory, eliminating the mortgage interest deduction would result in lower rates, on balance, since it would reduce the demand for mortgage borrowing.  So, wouldn't help you there.

Regarding the deductibility of interest, there's an argument to treat interest and dividends similarly from a corporate income tax perspective and a personal tax perspective, so as not to have the tax code effectively encourage one source of capital (debt) over another (equity). 
PS AAPL is a net payor of interest, not a recipient - they have about $30B in net debt ($105B in debt less $75B in cash).  Also, they only have that massive cash hoard because they have huge overseas earnings that they don't want to bring back to the US because they'd have to pay tax on it.  It's wildly inefficient for them to be sitting on $75 billion in cash.  


>> In theory, eliminating the mortgage interest deduction would result in lower rates, on balance, since it would reduce the demand for mortgage borrowing.  So, wouldn't help you there.

Not sure I follow!

Less demand for mortgage -> less housing demand -> lower prices, or more sellers willing to cut a deal to make a quick sale (like it was in my case when I purchased a house this year).

Lower housing cost -> difference I need to pay to move within 1 hour of Manhattan, and my current house is smaller -> I am no longer priced out of that market -> my quality of life is better.

I still come out ahead. No?

 

I was referring to the comment about eliminating the mortgage deduction resulting in higher rates for depositors.  

Regarding your "move closer to Manhattan" question, then it really depends on your particular situation.  Presumably, eliminating the mortgage deduction would result in lower home prices in areas where the deduction is, for a typical buyer a meaningful portion of the payment and their income.  If houses in an area are $85k, and the typical buyer is taking the standard deduction anyway, then eliminating the mortgage deduction wouldn't have much effect.  Same if you're talking at the very high end of the market (saving $20k/year in taxes when you're buying a $10M home doesn't really move the needle).  If you're in an area with high incomes and high house prices, though, then the mortgage deduction becomes significant.  If we think about a $1M home, with 20% down, at 4%, that's a $3800/month mortgage payment.  If the buyer is in the 33% bracket, the mortgage interest deduction is worth about $900/month (before taking state tax into account), so the effective payment is about $2940/month.  Eliminate the deduction, and you'd expect that $1M home to, all things being equal, move down to around $770-800k, the level at which the effective payment stays the same.  Lot of moving parts, but that's broadly what one would expect to happen over time.  

Whether this benefits you depends on your particular situation vs. other buyers in areas you'd like to live.  If, relative to other buyers, you have a lot of available cash or less income, then you're better off if the deduction goes away, since you benefit from the lower price, but don't lose much in terms of the lost deduction, either because you were going to pay cash anyway, or because your income isn't high enough to get much value from the deduction.  If your profile looks like other buyers, though, then you're in the same boat - the price is lower, but the effective monthly cost to you isn't.  

rated:
HBaxx said:   Y'all are missing the point. It's not about whether the deductions are good or bad for society or fiscal sanity.

The housing industry and those who underwrite mortgages will fight anyone trying to mess with the mortgage interest deduction.

The entire business lobby will fight any attempt to eliminate the ability to deduct interest.

Those who manage and leech off of retirement accounts will fight any tax changes in regards to 401(k) plans.

It's all about the Benjamins.

Agree with you on the mortgage deduction - the housing industry has a huge amount of clout (homebuilders, construction unions, construction equipment manufacturers, mortgage lenders, etc. etc.) and they'll fight this tooth and nail.

Lots of widespread opposition to eliminating upfront deductions for 401(k)s.  

Not so sure on the corporate interest deduction - depends on what the tradeoff is.  If it's "interest on new debt isn't deductible, but the corporate rate is lower," then the response will be mixed - more levered companies opposed, less levered companies in favor.  

rated:
HBaxx said:   
The entire business lobby will fight any attempt to eliminate the ability to deduct interest.

 

  That doesn't seem that easy to do. for example, CC promo balance transfers are nominally 0% interest but have a 2-3% "fee"

rated:
rufflesinc said:   
HBaxx said:   
The entire business lobby will fight any attempt to eliminate the ability to deduct interest.

 

  That doesn't seem that easy to do. for example, CC promo balance transfers are nominally 0% interest but have a 2-3% "fee"

  He's talking about deducting interest on corporate income tax returns. 

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rated:
jerosen said:   http://idioms.thefreedictionary.com/in+debtf
if the value of property is more than the under lying loan, then you have positive 

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