I didn't list any schedule C items, or any other schedule A (like charitable contributions). They obviously affect the tax scenario. The column on the right gets the C income/loss but doesn't get the A ones (other than charity and mortgage interest). They haven't made the tax bracket cutoffs known. In order for the $150K married couple to pay less in tax, the effective tax rate has to be less. Your calculations ($75K x ...) are the effective tax calculation for the left column. We don't know the brackets for the right column, but we do know the intent is to lower tax rates and effective tax. That's what we need to watch for when congress debates the bill and works out the details.
Since they havent made the tax brackets known, that means you are admitting your charts are useless. Stop adjusting the effective tax rate willy nilly. Your spreadsheet was off. It didnt have to list schedule c items. It would have already been included in coming to your AGI bro. And more schedule a deductions is better for the middle class person today than it would be for whatever is on the right side of your spreadsheet.
How are they useless? They show that the effective tax rate needs to be something like 15% for the $150K married couple to pay lower taxes. Schedule C matters because the pass through rules will change, too. But they're likely to stay the same, so fine. If they're taxed at 25%, it's a hike. I already stipulated that the schedule a deductions favor the left column. Bigly.
Schedule c income is not taxed at a different rate. Neither are s corps or partnerships. They are taxed at the individuals rates. Again. They both would be included in the AGI number so are irrelevant to whatever you're arguing. You straight up listed the effective tax rate at 15% in your spreadsheet when they would not have been 15% based on the same tax brackets.
Trump's tax plan proposes to change the pass through (schedule C income) from LLC and the like to a max of 25% tax rate. It remains to be seen what the final rule is. I don't see the issue about "same tax brackets" when the proposal is all about new and different ones.
The guy in your 2nd link made up his own effective tax rate. I wanted to see what it would take for the new proposed rules to save a similar couple money. https://www.bloomberg.com/view/articles/2017-09-28/the-trump-tax-reform-s-pass-through-boondoggle The framework limits the maximum tax rate applied to the business income of small and family-owned businesses conducted as sole proprietorships, partnerships and S corporations to 25%. The framework contemplates that the committees will adopt measures to prevent the recharacterization of personal income into business income to prevent wealthy individuals from avoiding the top personal tax rate. I assume the LLCs are treated the same as S corps. Again, it remains to be seen what the final rule is. Trump's May proposal was a cap at 15%, which would mean someone paying your calculated 17.5% effective tax rate would be paying 15% on some of it that otherwise would be taxed at 25%.
It wasn't meant to rile anyone up. We're talking about Trump's plan. He says "we're going to win bigly" and stuff like that.
By "my" chart, the taxes do go up about $2K for the $150K family, though the effective tax rate goes down by < 1%. Again, the ultimate brackets aren't known. These are what Trump wants: https://assets.donaldjtrump.com/trump-tax-reform.pdf The brackets may end up closer to those.
My use of LLC fits this definition: http://www.investopedia.com/terms/l/llc.asp What is a 'Limited Liability Company - LLC' A limited liability company (LLC) is a corporate structure whereby the members of the company cannot be held personally liable for the company's debts or liabilities. Limited liability companies are essentially hybrid entities that combine the characteristics of a corporation and a partnership or sole proprietorship. While the limited liability feature is similar to that of a corporation, the availability of flow-through taxation to the members of an LLC is a feature of partnerships. BREAKING DOWN 'Limited Liability Company - LLC' Although LLCs have some attractive features, they also have a number of disadvantages, especially in relation to the structure of a corporation. A LLC has to be dissolved upon the death or bankruptcy of a member, unlike a corporation, which can exist in perpetuity. Also, a LLC may not be a suitable option when the objective of the founder is to eventually become a publicly listed company. Protections of a Corporation The primary reason an LLC is selected as an ownership structure is to limit the principals' personal liability. An LLC is often thought of as a blend of a partnership, which is a simple business formation of two or more owners under an agreement, and a corporation which is afforded certain liability protections. An LLC is a more formal partnership arrangement requiring articles of organization to be filed with the state. An LLC is much easier to set up than a corporation, and it provides more flexibility along with the protection. However, creditors may be able to pierce the corporate veil of an LLC in cases of fraud or when legal and reporting requirements haven’t been met. Flexibility of a Partnership The primary difference between a partnership and an LLC is that an LLC is designed to separate the business assets of the company from the personal assets of the owner, which has the effect of insulating the owners from the LLC's debts and liabilities. An LLC functions similar to a partnership in that the profits of the company pass through to owners’ tax return. Losses can be used to offset other income, but only up to the amount invested. The LLC only files an informational tax return. In terms of the sale or transfer of the business, a business continuation agreement is the only way to ensure the smooth transfer of interests when one of the owners leaves or dies. Absent a business continuation agreement, an LLC must be dissolved in the event of a bankruptcy or the death of a partner.
http://www.businessinsider.com/trump-tax-plan-take-home-pay-2017-9 Trump's tax plan proposes three federal income tax brackets: 12%, 25%, and 35%, but it does not yet specify income ranges for the proposed tax brackets.
More from the above link: The majority of Americans do not itemize tax deductions. According to the most recent IRS analysis of individual tax returns, 70.4% of taxpayers claimed the standard deduction on their tax return. Americans who do claim the standard deduction will be able to reduce their taxable income further under Trump's tax plan, in turn reducing their tax bill. Single filers would deduct $12,000, slightly higher than the current combined $10,400 deduction, which includes the standard deduction and one personal exemption. Joint filers would deduct $24,000, up from the current $20,800, which includes the standard deduction and two personal exemptions. But, Trump's tax plan would do away with many deductions, which could increase federal taxes for Americans who itemize their deductions. Among those who do, the average claimed for 2014 was $27,447.
12% up to $100,000,000? Yeah, I'm being extreme to make the point. That's what's not specified in Trump's current proposal. It does not specify the income ranges for the proposed tax brackets. I've written that several times now, and all the reports you're reading or citing can't possibly know yet.
Hence my spreadsheet trying to figure out the EFFECTIVE tax rate required to not raise taxes on the middle class. It suggests some range of values for the income ranges for the brackets that work.
And i used your cute little graph to proof based on those numbers, middle class people who itemize end up paying more.
Based upon income ranges that nobody knows. Hardly a "proof." More like a contrived case, as I admit my own is as well.
You were the one pushing it. I showed it was false. What more do you want? When the actual tax brackets come out, if they are the same as your graph, it's been proven. If it's different, i would glady have this discussion with you again. And gladly would admit it wouldn't hurt middle class if it doesn't.
