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House GOP Tax Reform Plan

jonny5 said:
Why should a gift or inheritance be taxed again when its given to another person? Like if your grandma gives you $500 for your birthday it should be taxed?
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For gifts, it's no different than anything in the economy. When I take my after-tax earnings to the store and buy something, the shopkeeper has to pay tax -- even though I paid tax on the earnings.
Inheritance tax is a completely different story. Most of that is unrealized gains: the asset, such as stock, was purchased years ago, at a much lower price. It has appreciated over time but the gain has never been taxed. As an example, Bill Gates owns a huge stockholding in Microsoft that he started in a garage. The stock price has appreciated astronomically since then. Gates pays taxes on the dividends but never on the appreciated value of unsold stock.
 
sear said:
Trump making stink large about 100 days is silly, egotistical.

I'm all for tax reform.
But I'd rather see the studious, responsible, conservative approach; guiding the process intelligently toward a superior replacement; not just change for the sake of change.

Problem is, the Republicans are gunna own this.

Let's hope Speaker Ryan has the brains to resist Trump foolishness.
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Tax reform is more complicated than health care reform (who would have thought?) That's why it is likely to go down the same way.
 
M #327

Regarding comparative complexity:

a revenue neutral revamp is fairly simple:

- list every exemption

- calculate how much lower the set tax rate would be to eliminate that exemption

Tax at that rate.

It's not rocket surgery.
 
Moderate Right said:
I figured that but I was making the argument that you COULD have had more profit because you were bigger and therefore got a cheaper wholesale price for your cost of goods.
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so? My original point regarding income taxes still stands regardless..
 
MTAtech said:
For gifts, it's no different than anything in the economy. When I take my after-tax earnings to the store and buy something, the shopkeeper has to pay tax -- even though I paid tax on the earnings.
Inheritance tax is a completely different story. Most of that is unrealized gains: the asset, such as stock, was purchased years ago, at a much lower price. It has appreciated over time but the gain has never been taxed. As an example, Bill Gates owns a huge stockholding in Microsoft that he started in a garage. The stock price has appreciated astronomically since then. Gates pays taxes on the dividends but never on the appreciated value of unsold stock.
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You arent buying something though. Youre giving something. Nothing is exchanged.
 
jonny5 said:
Why should a gift or inheritance be taxed again when its given to another person?
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Because it's income. If our main method of taxation is going to be on income, we should tax income from all sources.

jonny5 said:
Like if your grandma gives you $500 for your birthday it should be taxed?
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Yes.
 
molten_dragon said:
Because it's income. If our main method of taxation is going to be on income, we should tax income from all sources.



Yes.
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Income is defined as money received in exchange for a good or service. A gift is, therefore, not income. What we actually tax is gains. Since a gift was already taxed when it was earned, it should not be taxed again.
 
jonny5 said:
Like if your grandma gives you $500 for your birthday it should be taxed?
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For 2016, the gift tax is for gifts above $14,000.
 
jonny5 said:
Oh, so its only income when its a rich person.
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If you don't like the gift tax rules, don't complain to me. I didn't write the rules. Go talk to Congress.
 
This tax plan is basically just another gift to the wealthy at the expense of the lower classes. The rich get a windfall and the working class gets screwed. Trump is just another establishment whore.
 
jdog said:
This tax plan is basically just another gift to the wealthy at the expense of the lower classes. The rich get a windfall and the working class gets screwed. Trump is just another establishment whore.
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Cant very well be a gift if they arent giving anything. They would be taking less. Not sure how middle class gets screwed either when their taxes also go down.
 
"They would have us borrow $700 $Billion $Dollars over the next ten years, to give a tax cut of about a $hundred $thousand $dollars each to folks who are already $millionaires." U.S. President Obama 2010
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403 Forbidden
 
jonny5 said:
Income is defined as money received in exchange for a good or service. A gift is, therefore, not income. What we actually tax is gains. Since a gift was already taxed when it was earned, it should not be taxed again.
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There is no accepted definition of 'income' for tax purposes. Effectively, income is what the IRC says it is, and the general rule is any increase in your wealth from any source is considered "income" for purposes of the Code unless specifically exempt. That's why we don't tax returns to principle - if you buy something for $10 and sell it for $10, your wealth hasn't changed. If you sell it for $20, you realize a gain of $10 and we tax it. Same thing with debt forgiveness. If you owe $100 on Monday, and on Tuesday the lender forgives your debt, your net worth increases by $100 and that debt forgiveness is a taxable event, subject to income taxes.

With a gift, your net worth increases by the amount of the gift, and would be taxable as income, but the IRC specifically excludes it Sec. 102(a)

Second, a lot of assets in an estate have never been taxed. Ex. is Bill Gates - he's holding $billions of MSFT stock with a basis of roughly $0 to him and the gain hasn't ever been taxed.
 
jonny5 said:
Why should a gift or inheritance be taxed again when its given to another person? Like if your grandma gives you $500 for your birthday it should be taxed?
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For practical reasons, that gift shouldn't be taxed. But if the system is an 'income' tax, then a gift is income and should be subject to the same rules as other increases in your wealth, regardless of the source.

Otherwise the system doesn't make a lot of sense.

1) Poor person A mows the yard and paints the house for Grandma and gets $500. That's income and is taxed.
2) Junior just gets a check for $500 from Grandma cause he's been a good boy.

On what principle should the former be taxed, the EARNED income, but not the gift? Do we want to encourage or subsidize the grandchildren of wealthy people? What's the public policy purpose of exempting income from gifts?

The reason we don't tax gifts is 1) because obviously rich people don't want their kids to pay tax on that income, and if nothing else this country serves the rich, and 2) administering a tax on gifts would be an administrative nightmare and if the gifts are small, there is a good reason to just exempt them all for purposes of simplicity. So we have a threshold of $14,000 and anything below that which captures about 99.9% of all "gifts" are tax free, but larger gifts ARE subject to a transfer tax.
 
JasperL said:
There is no accepted definition of 'income' for tax purposes. Effectively, income is what the IRC says it is, and the general rule is any increase in your wealth from any source is considered "income" for purposes of the Code unless specifically exempt. That's why we don't tax returns to principle - if you buy something for $10 and sell it for $10, your wealth hasn't changed. If you sell it for $20, you realize a gain of $10 and we tax it. Same thing with debt forgiveness. If you owe $100 on Monday, and on Tuesday the lender forgives your debt, your net worth increases by $100 and that debt forgiveness is a taxable event, subject to income taxes.

With a gift, your net worth increases by the amount of the gift, and would be taxable as income, but the IRC specifically excludes it Sec. 102(a)

Second, a lot of assets in an estate have never been taxed. Ex. is Bill Gates - he's holding $billions of MSFT stock with a basis of roughly $0 to him and the gain hasn't ever been taxed.
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We arent debating what the law IS, but what it should be. And a gift should not be taxed since it was already taxed once.
 
JasperL said:
For practical reasons, that gift shouldn't be taxed. But if the system is an 'income' tax, then a gift is income and should be subject to the same rules as other increases in your wealth, regardless of the source.

Otherwise the system doesn't make a lot of sense.

1) Poor person A mows the yard and paints the house for Grandma and gets $500. That's income and is taxed.
2) Junior just gets a check for $500 from Grandma cause he's been a good boy.

On what principle should the former be taxed, the EARNED income, but not the gift? Do we want to encourage or subsidize the grandchildren of wealthy people? What's the public policy purpose of exempting income from gifts?

The reason we don't tax gifts is 1) because obviously rich people don't want their kids to pay tax on that income, and if nothing else this country serves the rich, and 2) administering a tax on gifts would be an administrative nightmare and if the gifts are small, there is a good reason to just exempt them all for purposes of simplicity. So we have a threshold of $14,000 and anything below that which captures about 99.9% of all "gifts" are tax free, but larger gifts ARE subject to a transfer tax.
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I think you explained it well. Income tax is wrong. Neither wages, nor gifts, nor capital gains should be taxed.
 
jonny5 said:
We arent debating what the law IS, but what it should be. And a gift should not be taxed since it was already taxed once.
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Whether or not a gift was already taxed (it often has NOT been taxed) is beside the point, irrelevant to the question whether a gift or any other way we spend our money should be taxable income to the recipient. When I buy a shirt, that money I spend has been taxed but the store has to include that amount in its taxable income. Same for my doctors, landscape people, contractors who work on the house, etc.
 
jonny5 said:
We arent debating what the law IS, but what it should be. And a gift should not be taxed since it was already taxed once.
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If we use that metric, then nothing should be taxed. So since I paid income tax on my money, the plumber shouldn't have to pay tax on the money I give him, because that money has already been taxed once.

Which is why it's more appropriate to look at it as 'transactions' being what is taxed. Generally, when money changes hands, the gov't wants a piece of it.
 
Critter7r said:
If we use that metric, then nothing should be taxed. So since I paid income tax on my money, the plumber shouldn't have to pay tax on the money I give him, because that money has already been taxed once.

Which is why it's more appropriate to look at it as 'transactions' being what is taxed. Generally, when money changes hands, the gov't wants a piece of it.
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I agree, it shouldnt be taxed multiple times.
 
JasperL said:
Whether or not a gift was already taxed (it often has NOT been taxed) is beside the point, irrelevant to the question whether a gift or any other way we spend our money should be taxable income to the recipient. When I buy a shirt, that money I spend has been taxed but the store has to include that amount in its taxable income. Same for my doctors, landscape people, contractors who work on the house, etc.
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Its not besides the point. Its the entire point. If we're going to tax wages, then tax only wages.
 
jonny5 said:
Its not besides the point. Its the entire point. If we're going to tax wages, then tax only wages.
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I use income that has already been taxed to pay wages to all kinds of people - electricians, plumbers, doctors, stores where I guy fishing gear, the cable company, my guitar teacher, etc...... That income is taxable to them even though I'm paying them with money already taxed.

It makes no sense to exempt gifts because the money I use to make a gift MIGHT have been previously taxed. Doesn't matter for all those people who do work for me or who sell me goods, so why should it matter to the recipient of my gifts.

And why if we tax wages tax ONLY wages. There are many other types of "income" that aren't wages. So if I rent a house to someone that should NOT be taxed, but if I provide them roofing services, that should be taxed? If I buy an old house and put in 1000 hours of my time and $40,000 in materials and sell that renovated house for a profit, why should THAT gain be tax free, but if I worked for someone else doing the same work, my labor charges would be taxable? Why?
 
JasperL said:
I use income that has already been taxed to pay wages to all kinds of people - electricians, plumbers, doctors, stores where I guy fishing gear, the cable company, my guitar teacher, etc...... That income is taxable to them even though I'm paying them with money already taxed.

It makes no sense to exempt gifts because the money I use to make a gift MIGHT have been previously taxed. Doesn't matter for all those people who do work for me or who sell me goods, so why should it matter to the recipient of my gifts.

And why if we tax wages tax ONLY wages. There are many other types of "income" that aren't wages. So if I rent a house to someone that should NOT be taxed, but if I provide them roofing services, that should be taxed? If I buy an old house and put in 1000 hours of my time and $40,000 in materials and sell that renovated house for a profit, why should THAT gain be tax free, but if I worked for someone else doing the same work, my labor charges would be taxable? Why?
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Simplicity. Pick one source, tax that. Leave everything else alone. X% of a citizens paycheck and done. Dont tax private renting out a room, dont tax sale of property, dont tax gains or gifts or corporate profits. We already have the system in place, Im just removing the complexity.
 
jonny5 said:
Simplicity. Pick one source, tax that. Leave everything else alone. X% of a citizens paycheck and done. Dont tax private renting out a room, dont tax sale of property, dont tax gains or gifts or corporate profits. We already have the system in place, Im just removing the complexity.
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That will just make it easier for some to find ways around paying tax. (In your best Thurston Howell voice ... ) "Well, Lovey, all my money comes from capital gains on my investment properties, so I don't pay "income" tax". While some poor schlep working for $7.50/hour at Mickey D's pays a quarter of every check to various tax agencies.
 
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