I want to know exactly what’s happening before I form my opinion on this
That’s a very good principle to follow in any situation, Nerevar, and you’re wise to do it. That being said, the US Federal tax code has purposely been written over the years to be as byzantine and incomprehensible as possible.
By making the code as complex as possible, Congress can more easily hide the various loopholes and other breaks they’ve been bribed to provide. All the loopholes, exceptions, and other bit means it’s next to impossible to predict how a series of changes will effect the whole. The system is simply far too complex.
While no one can really predict how the “cut” will effect most taxpayers, there are some changes which can be explained.
State Taxes – Government in the US exists on three levels; local, state, and federal. Each of those levels have the power to levy various taxes in various ways. Just what taxes exist or not and just how high those taxes are depends entirely on your location. Some states have no income tax, for example, while others have no sales and so forth. For many years now, the federal government has allowed you to claim your state income tax as a deduction. Let me use this simple example.
You made $10,000 last year so your federal income tax would be based on that amount. The feds in their mercy allow you to deduct certain expenses from that amount which lowers your yearly income for tax purposes. So, if you paid the state $1,000 in income taxes, the fed will figure their income tax as if you had made $9,000 instead of $10,000. However, if you live in a state without a state income tax, you would have no deduction and would pay the fed taxes on the original $10,000 thus paying more.
Part of this tax cut removes that deduction because, as others have pointed out, being able to deduct state taxes meant the feds were subsidizing those states with high taxation levels. People in places like California and New York with high state taxes are going to feel the full weight of those taxes because people from Florida or New Hampshire with low state taxes aren’t going to be paying more to the feds and essentially subsidizing the others.
When the bill is signed – This is simply a question of when the new laws take effect. Because many taxes are collected automatically through payroll deductions, tax bills don’t come into effect immediately after being signed. Instead, they start at the beginning of the next year.
If Trump signs the bill in December 2017, the new laws take effect in 2018. If he signs it in January 2018, the new laws take effect in 2019. This is important because, while the feds have cut future taxes, they haven’t cut future spending yet. Putting off the tax cuts until 2019 gives them time to cut the budget first.
Sequestering – Over the last quarter century or so, Congress has cynically avoided it’s duty to manage the federal budget. Loathe to cut the budget because that would mean they couldn’t bribe voters and payoff the lobbyists who bought them, Congress also wanted to seen cutting taxes. Because any attempts to balance the budget would require spending cuts and tax increase – neither or which the corrupt cowards in Congress want to do – Congress came up with a system they could blame instead; Sequestering.
When the budget imbalance reaches a certain point, and automatic government shutdown occurs and a whole range of services stop. Congress loves this because they can pretend it all isn’t their fault while also whipping up anger among the huge numbers of “gimmedats” who rely partially or fully on government handouts. The desire not to “hurt unfortunates” means Congress can then borrow more money to meet the shortfall thus increasing the national debt and still be thought of as “good guys”.
Hope all this helps you understand just how broken the US federal tax code, and indeed the federal government, actually is.
Do not date. Do not impregnate. Do not co-habitate. Above all, do not marry. Reclaim and never again surrender your personal sovereignty.
