5 ms·

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=c

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.
- rayiner 9y ago
  Most young people don't make enough to pay a lot in state income taxes, don't own a house so they don't pay mortgage interest, don't have a professional job that has all sorts of tax-free benefits, don't have kids and aren't married so they can't use many personal exemptions, etc. The tax bill cuts corporate taxes while raising taxes on middle/upper middle class people. That's consistent with taxes in Germany, Canada, the U.K., etc.
  - jdavis703 9y ago
    The mortgage interest thing does impact young people though. While they can't buy houses now, once they do have the financial ability to do so it'll cost them more than it cost their parents to buy a house.
    - rayiner 9y ago
      No, it will cost them less, because the value of the mortgage interest deduction is baked into the price of the house. It'll also be more fair. The perverse thing about the mortgage interest deduction is that it benefits you more the more money you make.
      - ejstronge 9y ago
        I'm a little confused about this. I can understand this in terms of college (i.e., no one pays the sticker price so the prices are elevated, etc.). But for housing, especially in very competitive markets, I feel that things will prove different. Already, successful house purchases come in above the offering price (from what I've seen) in the Bay Area. Do you think the loss of mortgage interest deduction will lead sellers to decrease their asking prices?
        barrkel 9y ago
        Reduction in demand should lower prices, yes. Either that, or fewer sales. The reverse - making mortgages cheaper - would also just raise prices.
        9y ago
- to_bpr 9y ago
  >falls heavily not only on the high-population coastal states but also on the younger demographic within those states Coincidentally the very people who voted for Hillary.
surfmike 9y ago
One other effect to consider is the housing prices after the bill. Expensive areas might see an up to 10% drop in property values, which would be bad for those who recently bought but should be easily weathered by others who have seen an 80%+ appreciation in the last 6 years.
- AznHisoka 9y ago
  why would they drop?
  - jdavis703 9y ago
    Because buying property becomes less lucrative and requires more money with no mortgage interest tax deduction. I'm not sure anyone has modeled an accurate demand curve, but in theory this will impact housing prices.
    - deleted 9y ago
      [deleted]
    - usaar333 9y ago
      But if you sell, you lose your grandfathered in deduction.. a supply cut that might cancel it demand cut
      - lavamantis 9y ago
        And in California we still have Prop 13, which effectively locks long-term owners into their existing houses.
      - surfmike 9y ago
        It's hard to imagine supply getting any lower than it already is, but yes that is potential offset.
throwahey 9y ago
Understandably most people in high-tax states would be upset by this, but I see it a as a positive overall. This will put more pressure on those states to reduce their tax rates, lest they lose the workers. Ultimately, I don't think that states like California use tax money responsibly, so the lower the tax rate the better. Democrats will have two options, to lower taxes or lose seats.
- akhilcacharya 9y ago
  >Democrats will have two options, to lower taxes or lose seats. The Republicans in Southern California, New Jersey, and Upstate have two options, to not vote for the reconciled bill in the house or lose their seats and the house majority.
  - throwahey 9y ago
    There are Republicans all over California, in fact the only blue districts are the major population centers. I anticipate they will vote with the party, as in either case once the Tax Bill passes their blue constituents won't be happy.
    - akhilcacharya 9y ago
      Inaccurate. Orange county voted for Hillary by nearly 9 points while people like Darrel Issa barely hung on. Same for people that hung on in the Bluer parts of Colorado and NoVa like Mike Coffman and Barbara Comstock. The reckoning is coming in 2018.
- dashundchen 9y ago
  Why? California, New York etc are net donor states that contribute tens of billions more to the federal government than they get back, while other states like Alabama get $2 for every dollar contributed. SALT was part of tax code since the introduction of federal income tax in 1913. For all the right wing complaining about welfare and redistribution of wealth, and states rights, they're more than happy to accept it when they take blue state dollars. I'm pretty upset at this because despite the relatively high rates of state and local taxes in New York, i have no qualms paying them. Services such as the Department of Environmental Conservation, social services, state parks, education, arts and culturals are effective and well funded compared to most states. I don't think we should be punished for this.
pgwhalen 9y ago
I get the frustration of the author on grandfathering in mortgages for interest deduction, and you could certainly argue it’s for the benefit of boomers at the expense of millennials, but isn’t it the only sane option? Otherwise the tax bill could effectively be putting people with existing mortgages (not an easy thing to get out of) in a serious bind. It kind of seems a bit unfair. Though I will admit after writing that out, that it’s probably not really that different than other taxes - if you plan your financial life around a certain tax situation you have to understand it could always change.
- koolba 9y ago
  The overall lower tax rates are the biggest hand out to the boomers. They’re the ones with retirement accounts that only now begin to draw down at the lower overall rates.
  - ddw 9y ago
    Boomers may feel some pain though when Medicare and social security are cut next. All signs point to the GOP suddenly crying about the deficit now.
    - nojvek 9y ago
      Were very much due for a bubble burst anyway. I think tax cuts for the rich will only drive into the frenzy.
      - ddw 9y ago
        Right, so then the austerity kicks in. On some level the GOP knows this.
- awinder 9y ago
  It’s fine to say that people shouldn’t plan around tax situations, but that tax break has been thought to be untouchable for a long time now. I’m a millennial who bought last year so for me, this doesn’t sound very fair. Boomers got to take advantage of favorable tax write offs on their homes for decades; I’ll be able to get in on that for 2 years. 2.
Pilfer 9y ago
>this is most likely going to be a significant raise in your tax bill. SALT changes will cause a 1-1.5% percent decrease in after tax income for those making 150k-250k per year, the magnitude increase on taxes is not especially significant. https://www.vox.com/policy-and-politics/2017/10/30/16557554/the-state-and-local-tax-deduction-explained https://www.vox.com/policy-and-politics/2017/10/30/16557554/...
nunez 9y ago
That really really sucks because state taxes in coastal cities are already extremely high relative to the rest of the nation and $100-200k earners in these cities aren’t rich

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.
rayiner 9y ago
Most young people don't make enough to pay a lot in state income taxes, don't own a house so they don't pay mortgage interest, don't have a professional job that has all sorts of tax-free benefits, don't have kids and aren't married so they can't use many personal exemptions, etc. The tax bill cuts corporate taxes while raising taxes on middle/upper middle class people. That's consistent with taxes in Germany, Canada, the U.K., etc.
- jdavis703 9y ago
  The mortgage interest thing does impact young people though. While they can't buy houses now, once they do have the financial ability to do so it'll cost them more than it cost their parents to buy a house.
  - rayiner 9y ago
    No, it will cost them less, because the value of the mortgage interest deduction is baked into the price of the house. It'll also be more fair. The perverse thing about the mortgage interest deduction is that it benefits you more the more money you make.
    - ejstronge 9y ago
      I'm a little confused about this. I can understand this in terms of college (i.e., no one pays the sticker price so the prices are elevated, etc.). But for housing, especially in very competitive markets, I feel that things will prove different. Already, successful house purchases come in above the offering price (from what I've seen) in the Bay Area. Do you think the loss of mortgage interest deduction will lead sellers to decrease their asking prices?
      - barrkel 9y ago
        Reduction in demand should lower prices, yes. Either that, or fewer sales. The reverse - making mortgages cheaper - would also just raise prices.
      - 9y ago
to_bpr 9y ago
>falls heavily not only on the high-population coastal states but also on the younger demographic within those states Coincidentally the very people who voted for Hillary.

surfmike 9y ago

One other effect to consider is the housing prices after the bill. Expensive areas might see an up to 10% drop in property values, which would be bad for those who recently bought but should be easily weathered by others who have seen an 80%+ appreciation in the last 6 years.

AznHisoka 9y ago
why would they drop?
- jdavis703 9y ago
  Because buying property becomes less lucrative and requires more money with no mortgage interest tax deduction. I'm not sure anyone has modeled an accurate demand curve, but in theory this will impact housing prices.
  - deleted 9y ago
    [deleted]
  - usaar333 9y ago
    But if you sell, you lose your grandfathered in deduction.. a supply cut that might cancel it demand cut
    - lavamantis 9y ago
      And in California we still have Prop 13, which effectively locks long-term owners into their existing houses.
    - surfmike 9y ago
      It's hard to imagine supply getting any lower than it already is, but yes that is potential offset.

throwahey 9y ago

Understandably most people in high-tax states would be upset by this, but I see it a as a positive overall. This will put more pressure on those states to reduce their tax rates, lest they lose the workers. Ultimately, I don't think that states like California use tax money responsibly, so the lower the tax rate the better. Democrats will have two options, to lower taxes or lose seats.

akhilcacharya 9y ago
>Democrats will have two options, to lower taxes or lose seats. The Republicans in Southern California, New Jersey, and Upstate have two options, to not vote for the reconciled bill in the house or lose their seats and the house majority.
- throwahey 9y ago
  There are Republicans all over California, in fact the only blue districts are the major population centers. I anticipate they will vote with the party, as in either case once the Tax Bill passes their blue constituents won't be happy.
  - akhilcacharya 9y ago
    Inaccurate. Orange county voted for Hillary by nearly 9 points while people like Darrel Issa barely hung on. Same for people that hung on in the Bluer parts of Colorado and NoVa like Mike Coffman and Barbara Comstock. The reckoning is coming in 2018.
dashundchen 9y ago
Why? California, New York etc are net donor states that contribute tens of billions more to the federal government than they get back, while other states like Alabama get $2 for every dollar contributed. SALT was part of tax code since the introduction of federal income tax in 1913. For all the right wing complaining about welfare and redistribution of wealth, and states rights, they're more than happy to accept it when they take blue state dollars. I'm pretty upset at this because despite the relatively high rates of state and local taxes in New York, i have no qualms paying them. Services such as the Department of Environmental Conservation, social services, state parks, education, arts and culturals are effective and well funded compared to most states. I don't think we should be punished for this.

pgwhalen 9y ago

I get the frustration of the author on grandfathering in mortgages for interest deduction, and you could certainly argue it’s for the benefit of boomers at the expense of millennials, but isn’t it the only sane option? Otherwise the tax bill could effectively be putting people with existing mortgages (not an easy thing to get out of) in a serious bind. It kind of seems a bit unfair. Though I will admit after writing that out, that it’s probably not really that different than other taxes - if you plan your financial life around a certain tax situation you have to understand it could always change.

koolba 9y ago
The overall lower tax rates are the biggest hand out to the boomers. They’re the ones with retirement accounts that only now begin to draw down at the lower overall rates.
- ddw 9y ago
  Boomers may feel some pain though when Medicare and social security are cut next. All signs point to the GOP suddenly crying about the deficit now.
  - nojvek 9y ago
    Were very much due for a bubble burst anyway. I think tax cuts for the rich will only drive into the frenzy.
    - ddw 9y ago
      Right, so then the austerity kicks in. On some level the GOP knows this.
awinder 9y ago
It’s fine to say that people shouldn’t plan around tax situations, but that tax break has been thought to be untouchable for a long time now. I’m a millennial who bought last year so for me, this doesn’t sound very fair. Boomers got to take advantage of favorable tax write offs on their homes for decades; I’ll be able to get in on that for 2 years. 2.

Pilfer 9y ago

>this is most likely going to be a significant raise in your tax bill. SALT changes will cause a 1-1.5% percent decrease in after tax income for those making 150k-250k per year, the magnitude increase on taxes is not especially significant. https://www.vox.com/policy-and-politics/2017/10/30/16557554/the-state-and-local-tax-deduction-explained https://www.vox.com/policy-and-politics/2017/10/30/16557554/...

nunez 9y ago

That really really sucks because state taxes in coastal cities are already extremely high relative to the rest of the nation and $100-200k earners in these cities aren’t rich