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Tax Cuts and Jobs Act of 2017
In the wee hours , the U.S. Senate passed a tax bill.
It still needs to be reconciled with the significant differences in the House’s version before it goes back for a full vote of Congress, but this bill in some form seems likely to become law.
It seems the sort of dog’s breakfast you would expect to come out of this Congress.
And there’s plenty to roll your eyes about.
But partisan critics, in their hyper-eagerness to find fault, have inadvertently highlighted one of the plan’s best features: that it unsustainably increases federal government debt by cutting tax revenue without corresponding spending cuts.
Depending on whose numbers you trust, the bill may eventually add $1 trillion or more to the national debt.
If you want to see the federal government’s power and ambition curbed, you should be pleased to see it further hobbled in this way.
Does the bill offer anything to those of us who are trying to resist federal income taxes by keeping our incomes low?
It’s still too early to say for sure, as nobody seems to know all of the ramifications of the bill, and it isn’t finalized yet (even the basic income tax rates — how many there are and at what taxable income levels they apply — are very different between the House and Senate versions).
The bill would substantially increase the standard deduction, but would also eliminate the personal exemption, so this is almost a wash (this also has the effect of making itemized deductions less attractive).
It eliminates (or may eliminate) some credits and deductions (e.g. for education, medical expenses), but increases the child tax credit.
There are some attractive provisions for business owners, including “pass-through” businesses, which may make self-employment yet more useful for tax resisters.
But as I said, it’s too early to say much definitive yet.
I’ll keep my eye on the news and on useful commentary (there’s a whole lot of unuseful commentary to sift through at the moment) and I’ll summarize anything interesting I learn here.
Congress is wrapping up its tax legislation.
Here is some of what I’ve learned about it — particularly those parts that might be important to people trying to eliminate their income tax as I do, by keeping our incomes low:
This is expected to be costly to the U.S. Government.
It is projected to lead to the government collecting $1 trillion dollars fewer in taxes over the next decade.
This will likely show up as increased government debt, as the Republicans had a hard enough time doing the easy part (lowering taxes) and are unlikely to be able to muster enough courage to do the hard part (reducing spending).
Republican optimists hope that by keeping this $1 trillion out of government hands and in the private sector, the economy will boom, leading to higher tax receipts after all, and so things will all balance out in the end.
People who know how to run the numbers, though, don’t seem to be taking that scenario seriously.
The bill reduces both corporate and individual tax rates.
But for a lot of people, what really controls how much they’ll pay is not their rate, but how much of their income is subject to the income tax and how much is safely deducted out of harm’s reach.
In any case, the lowest of the rates (10%) remains the same as before and covers just about the same amount of taxable income, so from the point of view of a low-income tax resister like myself, nothing much has changed here.
Next year, the standard deduction had been scheduled to go up to $6,500, and the personal exemption to $4,150 — shielding $10,650 of a single person’s income from income tax.
The new legislation eliminates the personal exemption, but boosts the standard deduction to $12,000 — thereby adding $1,350 to the amount that’s shielded in this way (people filing as married-joint, married-separate, or head-of-household also see rises to their standard deductions).
Modifications to the child tax credit and credits for non-child dependents are meant to make up for the absent personal exemption for people with dependents.
The bill eliminates some itemized deductions, but also eliminates the limitation on how much of such deductions you can take if you’re well-off.
You will also be able to take a slightly higher proportion of your Adjusted Gross Income (60%, up from 50%) as a deduction for charitable contributions, and the law will become somewhat more generous about allowing you to take a deduction for medical expenses.
I haven’t looked into this very closely, but it’s possible that this holds out some hope to high-rollers that they might eliminate their federal income tax through zealously pursuing itemized deductions.
The bill would allow you to use tax-advantaged education savings accounts to pay for a child’s tuition at a private elementary/secondary school (in the past, these accounts could only be used for post-secondary education).
This could be a useful tax shelter for people who would prefer not to inflict government-run schooling on their children.
It’s surprising to me just how little actual change there is from the status quo.
Everybody complains about the complexity of filing their income taxes, and politicians get lots of mileage about promising to let people file on the back of a postcard and the like.
But after all of the wrangling, this new bill keeps the individual Alternative Minimum Tax and doesn’t even reduce the number of tax brackets — the cheapest trick in the “simplification” bag.
It even introduces a lot of new complexity by means of its new method of taxing “pass-through” income — something that may cause some new headaches (or, may we hope, offer new tax-saving opportunities) to those of us with Schedule C income from sole proprietorships, gig economy work, or small businesses.
I was also a little surprised to see neither the House nor Senate try to boost Health Savings Accounts.
These are a more Republican-identified health care policy reform measure, and I would have thought that as they try to sabotage Obamacare that they would have put some effort into bolstering some of their own alternative ideas.
No such luck.
It makes me wonder if maybe Health Savings Accounts are a craze that has come and gone and that we might expect the program to atrophy at some point.
One side effect of the recently-enacted tax legislation is that many, maybe even all American employees will need to fill out new W-4 forms with their employers.
These forms govern how much federal income tax is withheld from employees’ paychecks.
New rules regarding exemptions and credits mean that people need to recalculate how much should be withheld.
This is an opportunity for those of us trying to encourage tax resistance.
The first place to resist the federal income tax, for most Americans, is in this W-4 form.
By having less tax withheld, you give yourself the opportunity to refuse to pay whatever is left over when you file your annual tax return.
If too much is withheld from your paycheck over the course of the year, you have nothing to resist but a refund, which isn’t very effective.
I got excited about the possibility that American employees would need to file new W-4 forms with their employers because of the changes in the new tax law that is coming into effect at .
This would give them an opportunity to reduce or eliminate their federal income tax withholding and thereby to potentially join the ranks of the resisters.
But the IRS has since said that it will try to adjust its withholding tables so that for many employees, their previously-filed W-4 forms will do a good-enough job for now.
Some tabs that have slid through my browser in recent days:
Miscellany:
The U.S. Department of Defense budget is notoriously sloppy.
This is by design, as it allows for a lot of kickbacks and graft and such, and is the most popular place for politicians to put their pork projects.
An independent audit recently conducted by “a Michigan State University economist [Mark Skidmore], working with graduate students and a former government official,” concentrating on the budgets for , found trillions of dollars of Pentagon spending that was never authorized by law.
The Defense Department has announced that for the first time ever (!) the agency will conduct an audit of its finances.
According to a new study by Marius Frunza, the underground economy in the European Union succeeds in resisting €132 billion in Value-Added Tax each year, about 14% of the total amount of that tax the Union collects.
Compare this to the “tax gap” in the U.S., which is estimated to be about 16%.
This suggests to me that if the U.S. were ever to drop its income and payroll tax in favor of a VAT (as so-called “Fair Tax” promoters advocate), this might not have much effect on the over-all tax gap.
Quaker Peace & Social Witness is a project of Britan Yearly Meeting.
They have a new project called “Take Action on Militarism.” War tax resistance is nowhere mentioned as one of the actions you might consider taking, however, so chalk this up as another example of the decay of the practice of war tax resistance among Quakers since the end of the Cold War.
Kimberly Amadeo, at the balance, has written up a good summary of the various aspects of the new U.S. federal tax law.
Some of it is still sketchy (she documents parts of the bill that were dropped before the bill was passed, for instance), so read it with caution, but it’s more thorough than most summaries I’ve seen.
Parts of the new law reduce the ability of people to deduct state taxes on their federal tax returns.
This has the effect of raising federal taxes on people in higher-tax states — these are typically states like California and New York with high property values and affluent cities… also, not coincidentally, states that tend to vote Democrat.
Those states are now considering ways to fight back by rejiggering their own tax systems in such a way that they can bring in as much revenue while preserving their citizens’ federal deductions.
This may end up making the new tax law even more damaging to the fiscal health of the federal government than had been originally anticipated.
Some links that have skipped past my browser in recent days:
KQED commentator Luke Pease has lost interest in being a responsible taxpayer and now is on the lookout for businesses that offer a “discount for cash” and other opportunities to evade taxes levied by a government that has lost his moral support.
The vast majority of people whose bank accounts were abruptly seized by the IRS for “structuring currency transactions” (defined as deliberately depositing amounts under $10,000 in order not to have the transactions reported to the government) had earned that money legitimately, contrary to the government’s representations that such transactions were evidence of criminal activity, according to a new report from the Treasury Inspector General for Tax Administration.
The law permits the IRS to seize money in such cases without having to go to the trouble of proving a crime, forcing the suddenly-impoverished owners to go to court to prove their innocence if they want to see their money again.
The widespread abuse of this practice has led the agency to back off somewhat from the use of this tool.
A new issue of NWTRCC’s newsletter is out, with content including:
Notes on issues for war tax resisters crossing the border, glitches with the latest tax bill, the difficulty in understanding IRS interest rates, new estate tax exemption limits.
Advice on starting a local war tax resistance support group, writing letters of protest to the IRS, and a review of “Walden: The Video Game.”
Michael McCarthy reflects on the collective war tax redirection practiced by a group he is part of in Michigan.
Some bits and pieces from here and there:
At Riversong HouseWright, war tax resister Robert Riversong recalls
the Randy Kehler / Betsy Corner house seizure of
in the context of Gandhi’s “constructive programme” theory. He also shares
many photos from the protests that accompanied the seizure, and from the
cooperative home-building project that grew out of it.
The surge in the number of Americans renouncing their citizenship
seems to have slowed
after having accelerated for several years.
The recent Republican tax rate cuts were offset by a growing economy such
that while corporate taxes have fallen so far , individual income taxes have risen enough to
more than make up for it.
Rebel neighbors in McKillop, Sasketchewan, have organized to refuse to pay property taxes after they were nearly doubled by their Rural Municipality council.
“None of us really cared before,” one of the resisters said.
“We just shut up and paid our taxes. But something like this is bringing us together.”
In other news:
the phrase “29/3 No Brexit? No Council Tax!” painted onto a wall near Wearhead Drive in Sunderland
The House Joint Committee on Taxation prepared a report on the “Tax Cuts and Jobs Act” that went into effect .
The report was designed to to address how the act affects taxpayers at different income levels, but I was mostly interested in the bottom-line, which showed that the law is expected to result in the government bringing in $259,454,000,000 less in federal taxes than it otherwise would have .
War tax resisters in the United States celebrated “Tax Day” with the usual protests, penny polls, leafletting, and other methods of outreach.
The Berkeley Daily Planet covered the People’s Life Fund annual granting ceremony in which they redirected $15,000 in taxes from the federal government to local charitable groups.
The refusal to collaborate economically with the state, in the financing
of military spending and other things that we consider socially unjust
or harmful, empowers us and allows us, collectively and cooperatively,
to show our opposition to certain state policies, to generate a social
debate about the model of society that we want, while at the same time to
promote the construction of “another possible world” by giving economic
support in solidarity with other transformative struggles that exist in
our society and elsewhere.
Mike Causey, at Federal News Network, adds another article to the growing consensus that the IRS is in a world of pain. Causey includes a long quote from an anonymous “long-time career IRS manager” who says:
…There are barely enough people left keeping the lights on to barely
allow enough people to barely meet far reduced goals.… Millions of
dollars of production are lost due to not having hundreds of dollars of
resources on a regular basis.
Most of the personnel with most of the talent and experience have retired
or fled to the private sector…
The Republican tax reform legislation does seem to have cut taxes for just
about everyone. But only a minority of people think they personally got a tax cut.
This may be in part because of Democratic talking points about the cuts
having only gone to the wealthy — they seem to have hit their target and
sown doubt about what the legislation accomplished. It may also be because
tax refunds haven’t gotten any bigger for the typical taxpayer,
and changes in tax withholding aren’t salient enough to make an impression.
This may also erode tax morale by contributing to the impression that
lawmakers are jiggering the tax code to favor the other guy.
A majority of Americans
believe the federal tax system is not fair, and among Democrats in
particular, perceptions of the fairness of the federal tax system are lower
than they have been in recent memory.
Automated traffic-ticket-dispensing radar cameras in France have undergone
an extraordinary wave of attacks by frustrated motorists. Statistics on the
extent of the attacks and their effect on government revenue continue to
come in. The latest show that revenue from radar vans in particular dropped 42% last year.
The IRS is hoping to get a bunch of new funding for a desperately-needed computer modernization effort. Problem is, this isn’t the first time, and the last couple of times they’ve gotten a bunch of new funding for desperately-needed computer modernization efforts, they’ve bungled it badly. Will Congress let them take another swing? Do they have a choice?
Some links from here and there…
An editorial cartoon shows Nicaraguan president Daniel Ortega trying to take down tax resistance leader Irlanda Jerez, while his wife, vice president Rosario Murillo yells “Bite her, pinch her, pound her, but do something!”
Nicaraguan tax resistance leader Irlanda Jerez was released from prison as part of a government amnesty of political prisoners in the run up to negotiations with the opposition.
Jerez says she was drugged, tortured, and sexually assaulted while in prison, and that her home was sacked and her family attacked by government-aligned paramilitary forces soon after her release.
Her children are now refugees.
Torture, arbitrary arrests, and repressive brutality are frequently relied upon by the Ortega regime, amounting to “crimes against humanity,” according to Amnesty International.
She has renewed her call for mass civil disobedience. “We’re ready to pay any price necessary to free Nicaragua.”
Residents of Faradje, in the Democratic Republic of the Congo, are threatening a tax strike to pressure the government to take action against the incursions of Wodaabe nomadic cattle-herders from neighboring South Sudan into the land they use for agriculture.
