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Thread: House GOP Tax Reform Plan

  1. #361
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    Re: House GOP Tax Reform Plan

    Quote Originally Posted by JasperL View Post
    OK, so maybe that cabinet maker signs a piece of paper making his business a corporation, and then making cabinets is now income tax free!!

    stem.
    No, because he had net earnings from the cabinet business and thus pays taxes on it!! And thats it for me. Im tired of whatever this is.

  2. #362
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    Re: House GOP Tax Reform Plan

    Quote Originally Posted by jonny5 View Post
    If hes operating a property rental business then hes paying himself a wage. And paying taxes on it.
    There's nothing in any post I've made about Thurston that would imply he was running any sort of rental business.

    He inherited his seed money and bought real estate, some of which he rents out, occasionally selling a property when it's profitable. He doesn't "operate a property rental business", he rents out properties that he owns. He doesn't pay himself a wage, he collects rent. And since it's not a wage, he pays no income tax.
    I'm not going to chase you while you run around with the goalpost in your arms.

  3. #363
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    Re: House GOP Tax Reform Plan

    Quote Originally Posted by jonny5 View Post
    No, because he had net earnings from the cabinet business and thus pays taxes on it!! And thats it for me. Im tired of whatever this is.
    That's the issue when you say you want to tax "only wages and nothing else" : determining what constitutes "wages".

    Is rental income "wages"? Is selling a property at a gain "wages"? Or are the only people that are going to be paying taxes the people that are employed and being paid a "wage" from someone else?
    I'm not going to chase you while you run around with the goalpost in your arms.

  4. #364
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    Re: House GOP Tax Reform Plan

    Quote Originally Posted by jonny5 View Post
    No, because he had net earnings from the cabinet business and thus pays taxes on it!! And thats it for me. Im tired of whatever this is.
    OK, but you're confirming the point - a "simple" and fair income tax system is one that taxes income from whatever source derived at the same rates.

  5. #365
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    Re: House GOP Tax Reform Plan

    Quote Originally Posted by JasperL View Post
    OK, but you're confirming the point - a "simple" and fair income tax system is one that taxes income from whatever source derived at the same rates.
    No, but like I said. Ive had enough. No need to reply anymore

  6. #366
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    Re: House GOP Tax Reform Plan

    Quote Originally Posted by jonny5 View Post
    No, but like I said. Ive had enough. No need to reply anymore
    I don't care if you reply or not, but what I've been pointing out is that it's really impossible to carve out a narrow definition of income, and only tax that, without introducing both enormous complexity and a dysfunctional tax system that will tax two identical transactions in substance entirely differently based only on the form.

    If you only tax wages or labor, as I've pointed out, then tax planners will find all kinds of creative ways to convert "wages" or income from "labor" to anything else that is tax free.

    We have taxed "capital gains" at lower rates for most of recent history, and by some accounts about half the functional complexity in the tax system is related to defining "capital gains" because smart tax planners spend enormous effort (and charge huge fees - 7 figures or more in many cases) converting what is in reality ordinary income taxed at roughly 40% to capital gains taxed at roughly half that amount. So there are lots of rules in the code, regulations, Rev. Procs, Rev. Rulings, PLRs, and dozens or hundreds of court cases, many of them at the Supreme Court, that set the boundaries for what is and isn't "capital gains." And still the IRS is always behind creative lawyers and tax planners who find new loopholes, like Whack a Mole.

    When the tax rate on dividends when down, of course every owner of a closely held corporation had a powerful incentive to not pay ANY salary to themselves, and get all their pay through "dividends." So the code and regs have a lot of rules to prevent "abuse" and require that if the owner provided services, was actively managing the corporation, it must pay out a reasonable salary. If the code exempts 'interest income' (as a lot of 'flat tax' proposals do) obviously insiders have a powerful incentive to move "loans" into their entities at very high interest rates - e.g. 40% annual interest rates. 80% annual rates. Why not? and extract earnings from their closely held businesses that way. And of course the code and regs will have to be amended to prevent abuse of that and only allow "reasonable" or "market" rates of interest, which are nothing but guesses.

    It matters now because Trump's proposal is to tax "businesses" at 15%, but leave wages and labor income taxed at rates up to 30% or whatever the final rates end up. Well, my wife and I get consulting income paid to us personally. If the law passes, we'll, obviously, form an LLC probably and have the people paying us write a check to "JasperL, LLC" or "JasperL, Inc." and convert that income to "business income" that Trump wants to tax at 15%. Obviously, the law will have rules to prevent "abuse" of this GIGANTIC loophole, and little guys like us will mostly be out of luck after a while, but the big boys will likely successfully argue, e.g., that what was previously $5 million in "salary" is now $1 million in "salary" and $4 million in "business" income. It's moronic tax policy, unless the idea is to hand huge tax cuts to the wealthy who can arrange their affairs so that nearly all of their income is now preferentially taxed at rates that now apply to the working poor.

  7. #367
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    Re: House GOP Tax Reform Plan

    Quote Originally Posted by JasperL View Post
    I don't care if you reply or not,
    Ok, well Im not reading anymore beyond the first few words. Was trying to save you some typing.

  8. #368
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    Re: House GOP Tax Reform Plan

    Quote Originally Posted by jonny5 View Post
    Ok, well Im not reading anymore beyond the first few words. Was trying to save you some typing.
    You're not the only participant on DP and I didn't expect you to read it or reply to it since your mind is made up.

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