The Trump Tax Cut: Even Worse Than You’ve Heard

[Jim in CT]

Originally Posted by Pete F.

Corporate income taxes paid went down by HALF, how much any individual corporation paid is immaterial in funding the government.

Well the corporate tax rate didn't get cut in half, so something else is at play there which may or may not have anything to do with the tax cut.

I have news for you...when corporations have more after tax income, that doesn't only benefit the wealthy. I have spent my career so far in a cubicle, I am a worker bee not an executive. And I have worked for some huge companies (Aetna, Travelers, The Hartford). And I know for sure, that the more money the company has at the end of the year, the better my raise and bonus will be. They share profits with the workers, they have to, or the good workers will all leave.

Corporate America isn't the plantation you seem to think it is.

[Pete F.]

Originally Posted by Jim in CT

Well the corporate tax rate didn't get cut in half, so something else is at play there which may or may not have anything to do with the tax cut.

I have news for you...when corporations have more after tax income, that doesn't only benefit the wealthy. I have spent my career so far in a cubicle, I am a worker bee not an executive. And I have worked for some huge companies (Aetna, Travelers, The Hartford). And I know for sure, that the more money the company has at the end of the year, the better my raise and bonus will be. They share profits with the workers, they have to, or the good workers will all leave.

Corporate America isn't the plantation you seem to think it is.

There is a difference between tax rate and effective tax rate.
Wharton did a study and the effective rate was 20% and now is expected to be 9%
That's more than half.
"You never can answer the question" Is how I believe you typically put it with some identity politics thrown in.
Your taxes withheld or owed went down?
Have you done your taxes yet or are you surmising?

[Jim in CT]

Originally Posted by Pete F.

There is a difference between tax rate and effective tax rate.
Wharton did a study and the effective rate was 20% and now is expected to be 9%
That's more than half.
"You never can answer the question" Is how I believe you typically put it with some identity politics thrown in.
Your taxes withheld or owed went down?
Have you done your taxes yet or are you surmising?

"There is a difference between tax rate and effective tax rate."

agreed.

"Wharton did a study and the effective rate was 20% and now is expected to be 9%
That's more than half."

Yes it is. That Wharton said it, doesn't mean that's what's going to happen. I'm not an accountant, but I'm not sure how the effective tax rate would go down by larger percentage than the flat rate, not across the board.

If a company's net rate was 20% (when the gross rate was 35%), that means they have quite a bit of income not subject to the federal income tax (for example, maybe they have money invested in T-bills, on which interest earned is tax free). If that stays the same going forward, that income is still tax free, so would not decrease the effective tax rate. Not sure why, on average, companies would see a 55% decrease in effective tax rate, when the gross rate decreased by 40%, but I'm no CPA.

"Your taxes withheld or owed went down?
Have you done your taxes yet or are you surmising"

I thought I answered that is detail.

My taxes withheld went down, and my CPA says that my end-of-year taxes owed, will go down by the same amount. So the $200 a month bump I saw, will be ours to keep.

We qualify for that tax decrease, because of a decrease in tax rates as well as an increase in child tax credits.

Does that not answer your question? I think it answers it precisely as you asked.

I have not done my taxes yet (who has their W-2 already?). I asked a CPA what the end-of-year impact would be, of my decreased withholdings. I'll tell you for certain in March.

I am not assuming anything about taxes withheld, those went down by $200 a month. The payroll department wouldn't do that, if it meant I'd owe that much more at the end of the year. I didn't change my W-4.

[Pete F.]

Originally Posted by Jim in CT

"There is a difference between tax rate and effective tax rate."

agreed.

"Wharton did a study and the effective rate was 20% and now is expected to be 9%
That's more than half."

Yes it is. That Wharton said it, doesn't mean that's what's going to happen. I'm not an accountant, but I'm not sure how the effective tax rate would go down by larger percentage than the flat rate, not across the board.

If a company's net rate was 20% (when the gross rate was 35%), that means they have quite a bit of income not subject to the federal income tax (for example, maybe they have money invested in T-bills, on which interest earned is tax free). If that stays the same going forward, that income is still tax free, so would not decrease the effective tax rate. Not sure why, on average, companies would see a 55% decrease in effective tax rate, when the gross rate decreased by 40%, but I'm no CPA.

"Your taxes withheld or owed went down?
Have you done your taxes yet or are you surmising"

I thought I answered that is detail.

My taxes withheld went down, and my CPA says that my end-of-year taxes owed, will go down by the same amount. So the $200 a month bump I saw, will be ours to keep.

We qualify for that tax decrease, because of a decrease in tax rates as well as an increase in child tax credits.

Does that not answer your question? I think it answers it precisely as you asked.

I have not done my taxes yet (who has their W-2 already?). I asked a CPA what the end-of-year impact would be, of my decreased withholdings. I'll tell you for certain in March.

I am not assuming anything about taxes withheld, those went down by $200 a month. The payroll department wouldn't do that, if it meant I'd owe that much more at the end of the year. I didn't change my W-4.

I doubt that Wharton figured out what all corporate taxes were, they did a model based on typical numbers and came up with a projection.
Not perfect but they came up with more than 50% reduction which matches the decrease in taxes paid to date.

I was probably asking when you were answering
So you're surmising that your withholding is correct based on some free advice from a CPA and you'll find out in March.

[Jim in CT]

Originally Posted by Pete F.

I doubt that Wharton figured out what all corporate taxes were, they did a model based on typical numbers and came up with a projection.
Not perfect but they came up with more than 50% reduction which matches the decrease in taxes paid to date.

I was probably asking when you were answering
So you're surmising that your withholding is correct based on some free advice from a CPA and you'll find out in March.

I'm surmising based on (1) my payroll department told me this would be the case, and because that's how payroll departments handle changes in tax rates, and (2) MY CPA, not some random CPA, did an estimate of my 2018 taxes, using the new rates and what I could tell him about my income for this year, and my refund was actually $200 larger than the refund I got last year, on top of my withholding being $200 a month less. He actually put the numbers into a tax spreadsheet, he didn't just guess out of thin air.

I won't know for sure, I can't know for sure, until I do my taxes. I am certain that my refund won't be $2400 less than last year, due to my withholding $2400 less. That's not how it works.