Thursday, December 21, 2017

This Tax Accountant's Thoughts on New Tax Law


This is a draconian tax bill for employees. it creates incentives for self-employment, which means that we will see more and more people look to work for themselves, and companies and corporations already have incentive to hire sub-contractors instead of employees to avoid paying benefits. Without the mandate to have insurance, health care premiums will go up, and self-employed people will have to bear the cost without employer subsidies. 

It will particularly hurt wage-earners, you who are employees. It will specifically hurt police, fire fighters, nurses and teachers. Why? Because it eliminates employee business expenses. Teachers can take $250 of deductions, but "Masters plus 30" education — teachers can get raises up to 30 hours past their Masters Degree —  will no longer be deductible if you earn more than $65,000 as a single person or $130,000 as a married couple. In other words, education you pay for on your own dime to become better at your job — any job — will no longer be deductible starting January 1st. You can take the Lifetime Learning Credit, but it phases out completely at these income levels. Starting in 2018, classroom supplies, photocopies, incentives, classroom decorations, class parties, union dues are all gone. Police, nurses and firefighters, who previously deducted uniforms and equipment, you can kiss that goodbye, along with union dues. Carpenters and electricians can no longer deduct equipment, tools and supplies. 

Yes, there will be a higher standard deduction. And those who pay for supplies and union dues out of pocket will be hurt disproportionately compared to those who don't. And, as has been discussed elsewhere, the $10,000 SALT cap hurts my clients who live in Connecticut, New Jersey and New York, where I prepare taxes as an Enrolled Agent, licensed to practice before the Internal Revenue Service.

 This is the wave of the future, which technically expires for individuals in 2026, at which point we don't know what will happen,but the corporate tax cuts will be permanent. This will create massive budget deficits.  Speaker Paul Ryan is already saying that the increase in the deficit means that Congress will likely attempt to cut Social Security and Medicare benefits. We're going to have to get back next year at entitlement reform, which is how you tackle the debt and the deficit,” Ryan said during an appearance on Ross Kaminsky's talk radio show.   "...Frankly, it's the health care entitlements that are the big drivers of our debt, so we spend more time on the health care entitlements — because that's really where the problem lies, fiscally speaking. In other words, Congress will be paying for tax breaks to corporations by cutting Social Security and Medicare to pay for it. 

Make no mistake. This law Is designed to benefit the Republican donor class, who have threatened to cut off funding unless and until this has passed. It also is insidiously designed to social engineer our society, away from wage earners and the benefits that employers are obligated to provide, to become an increasingly non-union and non-employee based economy of contractors and sub-contractors, with no benefits, sick pay, family leave, unemployment insurance, workers compensation, or vacation pay.

And, of course, no health insurance. 

And still, the debt will grow by trillions....

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