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Ask HN: How will the 2018 Tax Cut plan impact Engineers?

• tabeth 9y ago
  Tax is complicated, however: 1. Fewer tax brackets. Many software engineers are in the 28% and 33% brackets. A lot of these people will now be in the 35% bracket, depending on their exact income. 2. Standard deduction has been increased. More money in their pocket (though this is true with many) 3. Mortgage interest deduction -- this might be removed to only 500k. This means people in california won't be able to deduct as much for their expensive houses. There are many more things, obviously.
  • votepaunchy 9y ago
    The standard deduction is being increased but personal exemptions eliminated so that’s basically a wash. Child tax credit increase is also offset by eliminating exemptions.
  • el_benhameen 9y ago
    These are a good summary, but for #1, I was under the impression that the Senate bill keeps 7 brackets. Whether that will survive conference is another matter, but from what I know, the conference version will more likely resemble the senate’s version of the bill.
  • jwatte 9y ago
    Anyone with substantial state taxes and mortgage interest is unlikely to take the standard deduction currently, and the increase in the standard deduction seems unlikely to compensate nearly enough. Couple with the significant impact on education cost (especially graduate education) and this tax plan looks tailor made too punish the coasts and benefit the aristocracy.
    • bogomipz 9y ago
      Indeed people living in NY and CA are going to feel pain without the ability to deduct states taxes. People are in for a shock.
  • bogomipz 9y ago
    Its worth noting that 2 and 3 are mutually exclusive. You can claim one or the other.
• mancerayder 9y ago
  It depends if you're in a state with high state taxes, for one. You can't deduct those. In those same states many mortgages are over 500k, as that's the price of a studio apartment in cities, where many engineers live, and most of us don't live in studios. A good question is, will independent contractors flourish?
  • bogomipz 9y ago
    >"A good question is, will independent contractors flourish?" Can you elaborate on this? How would the proposed tax regime be more attractive to contracting?
    • awinder 9y ago
      Pass through and corporate rates are going to drop dramatically. Independent contractors can set up their income as business profit and pay much smaller amount of taxes at higher levels of income.
      • mancerayder 9y ago
        Will this be retroactive through 2017? For me it might be a wash. My state and local taxes (state and city tax) are almost 10% combined, and that's no longer deductible. My > 500k mortgage had a big interest deduction yearly, which won't exist. But I'm paid through a pass-through LLC, which will have a big savings. And it's no longer incentivizing to be an owner-occupier due to the mortgage interest deduction disappearance plus the cap gains exclusion (first 250,000 / 500,000 if married exclusion on sales profit of a property if you've lived in it 2 years, moving up to I believe 5). It's crazy. It's like the financial incentives are geared towards rentier classes (since I might as well rent my place out and perhaps even put it in its own LLC), self-employed temps, and away from people with student debt, medical expenses, mortgage debt, etc. etc.
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• jawns 9y ago
  > How will the new 2018 tax plan help/hurt you? Just want to point out that this question is not quite the same as, "How will the new 2018 tax plan affect the amount of tax you are required to pay?" Even if the tax plan positively or negatively affects the tax you are required to pay, you will probably be helped or hurt significantly more by its affect on your community than you will by its affect on your own taxes.
  • sarcher 9y ago
    Agreed. Largely I am protected from the worst impacts of the 2018 tax plan, but I'm not an island - the tax plan does my community no favors. It not only favors the wealthy over those who really could benefit from tax relief, but it steals from the future by increasing the national debt to pay for it (I have no problem increasing the national debt for services and infrastructure, but giving the wealthy tax relief is neither). What a catastrophe.
• kellysutton 9y ago
  My tech-friendly CPA has a nice newsletter that outlines some of the effects of the proposed tax bill: http://mailchi.mp/2b465b061dd6/december-2017-clients?e=c3de06547c http://mailchi.mp/2b465b061dd6/december-2017-clients?e=c3de0... In short, engineers in CA/NY will see their taxes increase substantially because you can no longer deduct state income taxes. The $500k mortgage interest deduction will also affect folks in states with expensive property, but current versions of the bill only apply this new limit to mortgages created after Nov 2, 2017. If you are an engineer making a salary in the band you mentioned, this is most likely going to be a significant raise in your tax bill.
  • planteen 9y ago
    Thanks for sharing that, it's a great write-up.
  • b4lancesh33t 9y ago
    One important consolation, for those of us who are savers. Corporate profits are likely to increase significantly (at least on a first-order basis). So if you own a lot of stock, I somewhat expect to see the return on that rise. This doesn't help folks who are just starting out, or else don't save much, but it is an offsetting change that may help some people reading this.
  • tarr11 9y ago
    The senate version keeps the mortgage deduction at 1MM Remains to be seen which one will win.
  • ScottBurson 9y ago
    This writeup makes the excellent point that the weight of the new tax structure falls heavily not only on the high-population coastal states but also on the younger demographic within those states.
    • api 9y ago
      It falls heavily on the demographic that supported Trump the least.
• ScottBurson 9y ago
  I found this online calculator: https://www.marketwatch.com/story/the-new-trump-tax-calculator-what-do-you-owe-2017-10-26 https://www.marketwatch.com/story/the-new-trump-tax-calculat... My income is in the range you're asking about, and it says my taxes will fall slightly in the short run, on the assumption that I stop itemizing deductions. I live in Silicon Valley. Despite that, I am opposed to the bill. I think it's astounding that after all the discussions the world has been having about inequality over the last few years, the Republicans enact a tax plan that is designed to enrich the .1% even more, and balloon the deficit in the process. They are trying to take this country back to 1890.
  • chmaynard 9y ago
    It's pretty clear that the long-range goal of Republicans in Congress is to reduce or eliminate the New Deal entitlement programs. Greatly increasing the federal deficit is simply a means to this end. This was exactly Ronald Reagan's strategy. Nothing has changed in 35 years.
  • mancerayder 9y ago
    Yes, I agree. But these people are smart; they must know that the U.S. will look more like Brazil than Norway in the next decades. How can they sleep at night? Part of my thinks there's a cynical dystopic nervousness in the back of their minds: get in, get profit fast, and get out. This very sentiment I see in startup world in tech, personally observing the effect of VC money and board pressure on startups in my last two gigs. There's just something short-term-minded about investors and politicians these days. The days of FDR-minded folks seems long-gone.
• roofer 9y ago
  The main question - What all these cash rich companies and individuals will spent they new money on? World is already awash of capital, and we have everything bubble now. I bet next move by this administration will be drastic rate increases! This will mean they can starve everybody else from cash, and then swoop in and buy on the cheap.
  • ddw 9y ago
    Maybe it's time for us to all start companies that cater to the rich. Get the crumbs wherever we can. /s
  • nojvek 9y ago
    Microsoft Google and Apple have so much cash, they don't know what to do. Simplest is to put it offshore where gains incur the lowest taxes.
• vintageseltzer 9y ago
  Perhaps it's not the biggest factor, but it is likely to reduce employee benefits like education stipends, relocation stipends and dependent care FSAs. Previously, employers were able to deduct the costs of these benefits from their tax bill, saving them money. The new tax plan eliminates these benefits (https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/house-gop-tax-reform-bill-keeps-401(k)-tax-rule-as-is.aspx https://www.shrm.org/resourcesandtools/hr-topics/benefits/pa...). Now that these benefits are much more expensive, you can except these benefits to reduced or eliminated, and the remaining costs to be take from your future salary.
  • jdavis703 9y ago
    Yes, but those benefits should be paid for in a lower overall corporate tax rate. There's many flaws in the tax bill, but eliminating special interest tax deductions in favor of lower taxes for everyone who isn't a special interest isn't one of them. Unfortunately the tax bill includes many new special deductions for special interests like craft breweries, and people passing on multi-million dollar estates to their children.
    • vintageseltzer 9y ago
      Corporations are enjoying record profits for years but wages have been stagnant since the 90s. The idea that when corporations receive more money they pass on a proportional value of benefits to their employees or customers is a laughable fiction. In fact, they will proudly say that this is a good thing, as their only responsibility is to the shareholder.
      • ddw 9y ago
        https://youtu.be/_6Dvv1uSmss https://youtu.be/_6Dvv1uSmss It's a sick joke
  • koolba 9y ago
    An alternative view is that those people will no longer receive tax free benefits that the rest of us aren't getting. I'm hoping they take things a step further and one day eliminate the health insurance deduction for corporations and count the cost as income for the employee. It's nonsense that a corporation can deduct it as an expense but an individual getting their own insurance can't. Sure you can set up a pass through entity but why should you have to?
• gok 9y ago
  Assuming your paycheck is unaffected by the changes? If you live in a low/no state income tax area, your after tax income will go up. If you live in a higher state income tax area, your after tax income will go down. Your paycheck may get a little bigger because positive macroeconomic effects are expected. The Joint Committee on Taxation expects GDP to go up 0.8%, capital available for production to raise about 1.1% and employment to go up 0.6%. It's unclear how that will affect a single worker. If you have money in the stock market, you'll probably get more money. The lower corporate income tax probably means that dividends and stock buy-backs will grow, which is also good for many tech workers. So that may help you. If your employer makes a profit, their profit after taxes will go up. That would help you if you have a profit sharing or stock compensation deal. The end of the individual mandate means you'll live in a country where many fewer people will have health insurance, which will mean you're living around sicker people. That will almost certainly hurt you, even if those people aren't your friends and family.
  • thesmallestcat 9y ago
    > The end of the individual mandate That's not true, ACA is still in force and everybody will continue to have access to insurance, no rejection for preexisting conditions, people can still be under their parents' health insurance well into their 20s, etc. The only change is now you won't get shaken down when you file your taxes for not having health insurance, which to me is a great thing, especially for members of a site like Startup^H^H^H^H^H^H^H Hacker News.
    • gok 9y ago
      The congressional budget office predicts the end of the individual mandate will lead to 13 million fewer people insured by 2025.
      • thesmallestcat 9y ago
        That's still better than punishing people for not shelling out to private health insurance companies. If the goal is to give everybody access, we need single payer, the current state of affairs is corrupt to the core.
• tarr11 9y ago
  I wonder about the loopholes this creates. Will this transfer residential real estate ownership from individuals to corporations? Eg, since buying a home becomes even more expensive in the bay area because of property tax and mortgage deduction limitations. But now, corporations (who have more cash from corp tax reduction, and more leeway with deductions) start purchasing real estate and then offering to rent it to employees as a perk. Has the additional benefit for corporations, of keeping employees from leaving (since leaving the job means losing your housing)
  • ddw 9y ago
    Aligns well with the GOP goal of taking us back to fuedalism
• deleted 9y ago
  [deleted]
• thesmallestcat 9y ago
  Two things that stand out to me: Now you can quit your job and do whatever without getting robbed by absurdly expensive plans through ACA or shaken down when you file taxes. That's a big deal for people who want to take a chance on some startup idea. And filing taxes is simpler since you don't have to prove that you had health insurance. I hated that shit.
  • nojvek 9y ago
    What if you get sick on your startup venture and don't have a lot of income? Yeah it's gonna be amazing.
    • thesmallestcat 9y ago
      You could still choose to be insured, wouldn't have to pay if your income is low, and couldn't be denied for a preexisting condition. My point is that you're not being _coerced_.
  • mancerayder 9y ago
    Right, because if you get sick without insurance and the hospital has to repair you, that comes out of the public tax system anyway. The Republican agenda has often been around socializing risk (as in the example above) under the guise of individual freedom.
  • seattle_spring 9y ago
    > And filing taxes is simpler since you don't have to prove that you had health insurance. All you had to do was tick the "Yes" box. You only had to prove it if you were audited.
• JohnTHaller 9y ago
  For starters, stop calling it a "tax cut" plan.