The tax writing’s on the bill, some of it possibly from more than 6,200 lobbyists

Handwriting penmanship_Rochelle Truong via Reddit

(Image by Rochelle Truong | Reddit)

As we continue to plow though the Senate’s version of the House tax reform bill, many folks, both on Capitol Hill and across the country, are still upset with the process used by GOP leaders to get the measure through the upper chamber.

Changes traded for votes: One of the biggest complaints is about the legislative changes made on the fly to woo enough Senators to the “yea” side.

That’s not necessarily unusual. Quid pro quo is common in crafting legislation.

But the problem for opponents of the bill was that some of these alterations were scribbled by hand on some of the bill’s 479 pages.

Take the page pictured below that sent Sen. Bob Casey (D-Pennsylvania) to Twitter in search of “Any handwriting experts out there? I’d like to know what this says before they call for a vote. This is absurd.

Senate handwritten changes to tax bill_Sen Bob Casey via Twitter

That same page caught the angry attention of Sen. Jon Tester (D-Montana), who went a step further and captured his frustration via video.

Other samples, like those below, show other handwritten deletions and annotations to the bill that could, depending on what happens in the conference committee, possibly end up in the Internal Revenue Code.

Senate handwritten changes to tax bill_Tom Herron and southpaw via Twitter

The writing’s on the bill: So who came up with the changes that were made in pen and ink Friday and Saturday, Dec. 1 and 2, throughout the bill?

In some cases, they no doubt were proposed by the lawmakers that Senate Majority Leader Mitch McConnell (R-Kentucky) was seeking to win over to his side.

Others, however, possibly were proposed by lobbyists.

That argument largely came from those opposed to the bill, but they could have a point.

Some K Street lobbying shops got a look at the Republican-proposed changes to the tax code before lawmakers.

If they’re getting a sneak peak, the argument goes, it’s because they had a hand in putting the bill together in the first place.

Lobbyists abound: And then there’s the sheer number of tax lobbyists in Washington, D.C.

In its pointedly titled study “Swamped,” the government watchdog nonprofit Public Citizen says that “more than half the members of Washington’s lobbying corps have plunged into the tax debate.”

So precisely how many potential tax influencers are we talking about? The report, released on Dec. 1, says:

“In all, 6,243 lobbyists have been listed on lobbying disclosure forms as working on issues involving the word ‘tax’ through the first three quarters of 2017, according to Public Citizen’s analysis of a massive data download provided by the Center for Responsive Politics ( That is equal to 57 percent of the nearly 11,000 people who have reported engaging in any domestic lobbying activities at all in 2017.

Put another way, this equals more than 11 lobbyists for every member of Congress.”

That last point bears repeating. More than 11 lobbyists with an interest in taxes for every member of Congress.

That numerical revelation about the ratio of tax lobbyists to Congressional members also earns 11 this week’s By the Numbers recognition.

Who’s writing what: That these thousands of special-interest folks are involved in writing tax legislation, even as it’s being debated, is not that far-fetched of an idea.

I can tell you from my experience back in the day as a staffer in Capitol Hill tax-writing offices and later in the government relations office of a major multinational corporation, that the adding of actual legislative language to bills by lobbyists happened.

And although it’s been a while since I worked in the nation’s capital, I’d bet my house and its less-valuable-under-tax-reform deductions that it’s still happening.

You also might find these items of interest:





8 differences to be reconciled in House & Senate tax bills

Senators cast final votes on their tax reform bill 120217_C-SPAN2 screenshot

After 14½ hours of debate, the U.S. Senate early on Saturday, Dec. 2, approved 51-49 its version of tax reform. Now the hard work starts. (C-SPAN2 screenshot; click image to watch video of the full debate and votes)

It’s alive! Tax reform, or at least tax cuts (for a while, for some people) survived a marathon session in the Senate, with that chamber approving its Internal Revenue Code revisions early Saturday, Dec. 2, morning.

Now the real fun begins.

Since the House version (H.R. 1, the Tax Cuts and Jobs Act) passed on Nov. 16 is different from the Senate’s bill, the two legislative bodies must send members to a conference committee to mash up the two measures.

It won’t be easy. While both the House and Senate bills cut corporate taxes and taxes on individuals, the bills diverge in some major areas.

Here are some of the biggest differences that have to be ironed out.

1. Tax rates and income brackets
Currently, we have seven progressive individual income tax rates and associated income brackets. They are 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent and 39.6 percent.

The House wants to reduce those to just four individual rates — 12 percent, 25 percent, 35 percent and 39.6 percent — and income tax brackets, with the top tax kicking in on single filers who make more than $500,000 and more than $1 million for jointly filing married couples. That’s much higher than the $418,401 for single filers and $470,701 for married joint filers at which the current 39.6 percent rate is imposed.

The Senate proposes keeping seven individual tax rates, but the highest tax it imposes on individuals is 38.5 percent, which applies to individuals earning more than $500,000 and married couples with combined income of $1 million.

The other six tax rates the Senate says would apply to us much less-wealthy filers are 10 percent, 12 percent, 22 percent, 24 percent, 32 percent and 35 percent.

On the corporate side, the House cuts the business tax rate from a nominal 35 percent to 20 percent starting in 2018. H.R. 1 also makes its individual and corporate tax rates permanent.

Under the Senate bill, the corporate tax rate also is cut to 20 percent and is permanent. It won’t, however, drop until the 2019 tax year.

Meanwhile, individual tax cuts per the Senate would become law in 2018, but they would expire in 2025. The limited life span is so that the Senate can comply with its rule that tax changes don’t create deficits beyond what is allowed under the approved budget amount.

2. Pass-through entities
Under this tax structure, income from certain businesses — such as sole proprietorships, partnerships, limited liability companies (LLC) and S-corporations — is passed through to the business owners, who then report it on their personal tax returns to be taxed at their individual ordinary tax rates.

Both the House and Senate bills lower taxes on the business portion of a filer’s pass-through income. But they do so differently.

The House bill cuts the top income tax rate for pass-through money to 25 percent from 39.6 percent. It also prohibits individuals who provide professional services, such as lawyers and accountants, from taking advantage of the lower rate. And it phases in a lower rate of 9 percent for businesses that earn less than $75,000.

Rather than setting a specific tax rate for pass-through income, the Senate bill lets such business owners deduct 23 percent of their income. Similar to the House bill, some service businesses would be prevented from taking the tax break; those making $250,000 if a single filer or twice that for married filing jointly couples could not claim the deduction.

3. Estate tax
The House bill would eliminate the so-called death tax beginning in 2024. Before the estate tax ends, the amount that could be left tax-free to heirs would double. Under current law for tax year 2017, that’s $5.49 million per person or $10.98 per married couple.

And heirs who sold shares of stocks they were left would not have to pay any capital gains tax on the proceeds.

Rather than repeal the estate tax, the Senate increases the amount that can passed tax-free to loved ones and friends from the current nearly $5.5 million to $11 million.

4. Alternative Minimum Tax
The House bill repeals the Alternative Minimum Tax, or AMT. This parallel tax system was created to guarantee that the richest tax filers pay at least some tax. Despite changes to ease its effect on more middle-income taxpayers, many still are hit by this bipartisanly hated tax.

The Senate also wanted to kill the AMT, but budget considerations forced the Upper Chamber to retain the tax. The Senate bill does, however, increase the amount of income exempt from the AMT.

5. Mortgage interest and other home-related deductions
The House bill keeps, but reduces for new buyers, the amount of mortgage interest that can be claimed as an itemized deduction. H.R. 1 would let borrowers deduct interest on up to $500,000, half the loan amount allowed under current law.

The Senate basically leaves the maximum mortgage interest deduction alone. Keeps the mortgage interest deduction for a filer’s main home as is, letting homeowners claim a deduction for the interest paid on home loans up the $1 million for their primary residences.

As for property taxes, another now fully deductible home-related expense, both the House and Senate tax bills would limit the amount of real estate taxes that could claimed by itemizers to $10,000.

The bills also change how homeowners can profit tax-free from the sale of their residences.

Current law allows sellers to generally exclude $250,000, or $500,000 for those filing jointly, from capital gains when selling their primary residence as long as they’ve lived in it for two out of the past five years. Both the House and Senate want to increase the live-in time period to five out of the last eight years.

The Senate bill also ends the deduction for home equity loans.

6. Child tax credit
Parents and guardians currently can claim a tax credit of $1,000 for each dependent child younger than 17.

The House bill would increase the credit to $1,600 per child.

The Senate’s child tax credit would increase to $2,000 per child. It also would be available for any children younger than 18, but would revert to the 17-year-old limit in 2025.

Both versions would be subject to income phaseouts.

Rubio Lee amendment defeated_Bloomberg Twitter

Opponents of both bills say that since the child tax credit is only available to parents who pay income taxes, more than 10 million children in low-income families would be excluded from the increased tax break.

7. Other deductions and credits
The House and Senate bills agree on eliminating the itemized deductions for state and local income and state and local sales taxes.

While these components of the of the various deductible state and local taxes, known in the tax world by the acronym SALT, were approved by their respective chambers, expect opponents of the change — including some Republican House members — to fight the SALT elimination provisions again in any conference version.

The House bill originally got rid of the adoption tax credit, but added it back in after objections from some GOP lawmakers. The Senate bill would leave the adoption credit in the tax code.

Both bills also eliminate the above-the-line deductions for student loan interest and moving expenses, as well as the itemized one allowed under miscellaneous expenses for tax preparation fees.

And then there’s the medical tax deduction.

Current tax law allows Americans to deduct as itemized expenses qualified medical costs that come to more than 10 percent of a taxpayer’s adjusted gross income (AGI). This can include a variety of medical expenses above and beyond just the standard doctor, dental and vision expenses. It is a tax breaks especially used by people with chronic illnesses.

The House bill repeals the medical deduction option. The Senate bill, however, keeps it and goes back to the prior 7.5 percent of AGI threshold that was increased as part of the Affordable Care Act.

8. Affordable Care Act individual mandate
And about the ACA, or Obamacare as it’s still popularly known, has come back into play in the tax reform debate.

Originally, the House and Senate wanted to repeal it and its many taxes to free up money to make tax cuts easier from a budgetary standpoint. That didn’t happen.

But a part of the health care law has been worked into the Senate tax reform bill. Or rather, worked out of the tax code.

The Senate’s bill would repeal the ACA’s individual mandate. This is the health care law’s requirement that individuals buy at least a minimally acceptable medical insurance policy or pay a tax penalty for going without coverage.

The House keeps the Obamacare insurance coverage requirement on the books.

However, House Speaker Paul Ryan (R-Wisconsin) last month said that if the Senate took the lead on scrapping the health care coverage requirement, he’s open to adding similar language to any final tax reform measure.

If Ryan sticks with that stance, the ACA issue could be one of the easier provisions that conference committee members will tackle. However, they could get push pack similar to that they faced during their chambers’ specific Obamacare repeal efforts, especially since the CBO says that striking the ACA mandate will mean 13 million more Americans would be uninsured by 2027.

Much tax reform work left to do: The bottom line is that there is still a lot of work to be done before we get any tax bill. And it won’t be easy.

The Senate bill is 479 pages long, with many changes made — some of them by nearly illegible scribbling in the bill’s margins — at the last minute as the final vote neared.

That process infuriated a lot of Senators, and by a lot I mean all 46 Democrats and two Independents. 

Their frustration was summed up by Democratic Sen. Jon Tester of Montana who took to Twitter last night to exasperatedly complain, “I was just handed a 479-page tax bill a few hours before the vote. One page literally has hand scribbled policy changes on it that can’t be read. This is Washington, D.C. at its worst. Montanans deserve so much better.”

Yep, the Treasure State’s senior senator lived up to his surname in his testy nailing of the problem with the way Congress, and the Senate in particular last night/early this morning, has operated when it comes to controversial legislation.

Math, not massive size of bill, at issue: Maybe members of Congress will get/take time to read the massive Senate tax bill and carefully compare it to the House version before any final decisions are made in the upcoming conference committee deliberations.

But the biggest obstacle is not legislative language. It’s budget math.

The CBO estimates that the House bill will increase the deficit past the initial 10-year window. That’s a no-go as far as Senate rules are concerned.

The Senate cannot approve tax measures that that increase the deficit over the coming decade. Per the recently passed budget resolutions, that’s $1.5 trillion over that period. Late Friday as Senators were debating their tax bill, the CBO released its analysis finding that the Senate proposal would increase the deficit by $1.4 trillion over the next decade.

Whew! Just sneaked in under the budget line.

The Senate got to the acceptable deficit amount by using the sunset gimmick that ends almost all individual tax breaks at the end of 2025 so that the corporate tax break can become permanent parts of the Internal Revenue Code.

Any changes that are made in the tax reform bill conference committee will have to take the Senate deficit requirements into account to assure that a final bill can make it through that chamber. Again.

Tax reform is ____: Hunker down, folks. This ride is far from over.

To borrow Donald J. Trump’s observation during the failed Obamacare repeal and replace effort, who knew tax reform could be so hard?

Or, per my witty Twitter tax pal Joe Kristan in deciphering the #TRIH hashtag, it also is many other things:

Joe Kristan Twitter TRIH hashtag

Let me add one more: Hypocritical.


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10 tax moves to make by Dec. 31 (and before Congress changes the tax laws)

Merry Texmas Yall_Marble Falls Walkway of Lights 2011

Ho, Ho, Ho, hoss. It’s the most wonderful time of the year. The holidays and year-end tax moves are here! (Photo by Kay Bell of a scene at Marble Falls, Texas’ annual Walkway of Lights along the lake)

Hello, holidays! We’re so happy you and your good cheer have finally arrived.

But the arrival of December also means 2017 is almost over, giving us only 31 days to take care of tax tasks that could save us money when we file our returns next year.

This year, it also looks like Congress might actually make some tax changes, if not accomplish real tax reform. If that does happen, the good news is that we don’t have to worry about deciphering them before we do our 2017 taxes.

The tax law changes being debated this month won’t take effect until the 2018 tax year. And those 1040s aren’t due until 2019.

But we still need to pay attention to what could happen to the Internal Revenue Code because it could affect some of our 2017 year-end tax moves.

Demise of deductions: Right now, the most concerned taxpayers are those who itemize.

Both the House bill (H.R. 1, the Tax Cuts and Jobs Act, which was approved last month) and the Senate measure (which that chamber will try to pass today if it can allay some Senators’ deficit concerns) call for elimination of many most deductions.

With that in mind, here are seven itemized deduction-related moves to make now, along with three other more conventional pieces of tax advice we’re all heard (or given) about this time for the last few years to bring the list to the invitingly clickable list of 10.

  1. Pay your state taxes ASAP. If you live in one of the 41 states and Washington, D.C., that tax wage and salary income, pay as much of those taxes as you can this year while they’re still deductible. A good way to do this is to make any final state estimated tax payments this month.
  2. Buy a car. Or a truck, SUV, van, motorcycle, off-road vehicle, motor home, recreational vehicle, boat or airplane. Even look into purchasing a mobile or prefabricated home. Currently, the sales tax on all these major purchases is deductible. That’s true even if you use the standard sales tax deduction tables the Internal Revenue Service creates for each state; the major purchase sales tax is added to that prefigured amount. But if the sales tax deduction goes away, so does this bonus tax write-off.
  3. Pay your real estate taxes early. There appears to be some legislative leeway here, with the House bill allowing deduction of real estate estate taxes of up to $10,000. If your property tax bill is higher than that, and yes in areas where home values have appreciated nicely that’s possible, pay it in December instead of its early 2018 due date when you might lose some of its deductibility.
  4. Prepay your January mortgage. Both the House and Senate tax bills would keep the mortgage interest deduction in some form as an itemized expense, but the larger standard deduction amounts could make this write-off moot. Prepaying your January mortgage payment in December will push that deductible interest amount into this year. It might not be that much, but at least you get one more month’s use of it on your 2017 tax return.
  5. Go to the doctor. Medical expenses are deductible only if they exceed 10 percent of your adjusted gross income (AGI). That’s a lot for a lot of taxpayers, but if you’ve had a particularly challenging year as far as your or family members’ health, this is the year to make sure you don’t waste any expenses. In addition to year-end doctor and dental visits, make sure you don’t overlook other possible medical deductions.
  6. Bunch miscellaneous expenses. Among the Schedule A deductions that face potential tax reform extinction are miscellaneous expenses. These include such things as job search costs; investment related costs, such as the fee for the safe deposit box where you keep your stock certificates; and even the cost of doing your taxes, such as accountant fees or the cost of your computer tax preparation software. But like the medical deduction, you must have more than a certain percentage — this time it’s 2 percent of your AGI — for all your miscellaneous expenses to count on Schedule A. You can get there by bunching expenses into the 2017 tax year.
  7. Give, give, give to your favorite charities. Again, this deduction looks safe, but if your other itemized deductions are gone and the standard amount is increased, you’re probably not going to have enough in donations alone to warrant filling out Schedule A. So consider at least doubling up donations to your favorite nonprofits this year when you can still claim the gifts, as long as you follow the current IRS donation deduction rules.
  8. Take your RMD. Taxpayers age 70½ must take their annual required minimum distribution by Dec. 31 or face seriously costly penalties. If you’re older but don’t need the required retirement account withdrawal to cover daily expenses, consider donating the RMD amount to your favorite charity. You won’t get a deduction, but you’ll do (and feel!) good and avoid any IRS penalties for not taking your RMD.
  9. Defer income. If deductions aren’t a big issue for you, you’re in better shape as far as tax reform planning. But what you do want to focus on is income. If it looks like the proposed changes will put you in a lower tax bracket in 2018, defer as much end-of-year income as you can. By pushing it into 2018, your tax bill should be smaller when you file your first return under tax reform.
  10. Cash in investment winners and losers. Capital gains rates appear to be safe from any tax changes, but you shouldn’t let, as the old saying (or cliché, as my editors would say) the tax tail wag the dog. If you want or need the investment earnings now, sell while the market price is high. Or sell and rebuy an asset to reset its basis. And then offset those gains by also dumping any assets that have tanked.

More year-end tax moves: The 10 tax moves suggested above are just some tax things to think about as 2017 winds down.

December_tax_moves_160You’ll find some more tax December Tax Moves to make before or by Dec. 31 in the ol’ blog’s right column. They’re in the calendar listing right under the bright red heading of the same name, just below the countdown clock ticking off the time left here in tax year 2017.

Check them out and take advantage of those that fit your financial and tax situations. They could provide you some nice holiday tax presents, as well as give you much to celebrate on New Year’s Tax Eve.




IRS Tips for Holiday Security

The IRS wants to remind holiday shoppers to remain vigilant with their personal information this National-Tax-Security-Weekholiday season. That means you should be communicating with clients to ensure they stay vigilant this December. In the hustle and bustle of finding the best deals and shopping for everyone on your list, cybercriminals are waiting. While you’re shopping for presents, they’re shopping for credit card numbers, financial account information, Social Security numbers and other sensitive data that could help them file fraudulent tax returns.

The IRS has declared this week “National Tax Security Awareness Week”.

“Cybercriminals seek to turn stolen data into quick cash, either by draining financial accounts, charging credit cards, creating new credit accounts or even using stolen identities to file a fraudulent tax return for a refund.” – IRS Press Release

Here are seven steps to share with clients courtesy of the IRS that will help with online safety and protect tax returns and refunds in 2018.

  1. Shop at familiar online retailers. Generally, sites using the “s” designation in “https” at the start of the URL are secure. Look for the “lock” icon in the browser’s URL bar. But remember, even bad actors may obtain a security certificate so the “s” may not vouch for the site’s legitimacy.
  2. Avoid unprotected Wi-Fi. Beware purchases at unfamiliar sites or clicks on links from pop-up ads. Unprotected public Wi-Fi hotspots also may allow thieves to view transactions. Do not engage in online financial transactions if using unprotected public Wi-Fi.
  3. Learn to recognize and avoid phishing emails that pose as a trusted source such as those from financial institutions or the IRS. These emails may suggest a password is expiring or an account update is needed. The criminal’s goal is to entice users to open a link or attachment. The link may take users to a fake website that will steal usernames and passwords. An attachment may download malware that tracks keystrokes.
  4. Keep a clean machine. This applies to all devices — computers, phones and tablets. Use security software to protect against malware that may steal data and viruses that may damage files. Set it to update automatically so that it always has the latest security defenses. Make sure firewalls and browser defenses are always active. Avoid “free” security scans or pop-up advertisements for security software.
  5. Use passwords that are strong, long and unique. Experts suggest a minimum of 10 characters but longer is better. Avoid using a specific word; longer phrases are better. Use a combination of letters, numbers and special characters. Use a different password for each account. Use a password manager, if necessary.
  6. Use multi-factor authentication. Some financial institutions, email providers and social media sites allow users to set accounts for multi-factor authentication, meaning users may need a security code, usually sent as a text to a mobile phone, in addition to usernames and passwords. For added protection, some financial institutions also will send email or text alerts when there is a withdrawal or change to the account. Generally, users can check account profiles at these locations to see what added protections may be available.
  7. Encrypt and password-protect sensitive data. If keeping financial records, tax returns or any personally identifiable information on computers, this data should be encrypted and protected by a strong password. Also, back-up important data to an external source such as an external hard drive. And, when disposing of computers, mobile phones or tablets, make sure to wipe the hard drive of all information before trashing.

In addition to these tips, encourage your clients to check their credit reports from each of the three major credit bureaus to ensure there aren’t any unfamiliar credit changes. Consumers can also create a “My Social Security” account online with the Social Security Administration to see how much income is attributed to their SSN. This can help determine if someone else is using your SSN for employment purposes.

As tax preparers, it’s our duty to keep clients informed to help prevent tax fraud and identity theft. Be a source of comfort and information by keeping your clients informed all year long. Reminding them of cybersecurity best practices is just one way to prevent a disaster come tax time.



Social Security Admin lowers 2018 taxable wage base


Back in mid-October, the Social Security Administration (SSA) announced that the wage base, that’s the amount of each worker’s earnings that are subject to the Social Security portion of payroll withholding, would increase to $128,700.

This week, the SSA revised that number downward.

The new amount of income from which Social Security taxes will be withheld is $128,400.

The SSA says it made the adjustment after getting corrected W-2s later in October that weren’t figured into the original 2018 wage base announcement.

“Approximately 500,000 corrections for W-2s from 2016 resulted in changes for three items based on the national average wage: the 2018 taxable maximum, primary insurance amount bend points — figures used in the computation of Social Security benefits — and family maximum bend points,” according to the SSA press release announcing the revision.

Less income subject to tax: The new $128,400 amount that will be used to determine payroll withholding will take effect on Jan. 1, 2018.

The lowered income level is good news for next year’s higher earners. It means that instead of the original $128,700 that was announced in October as subject to the Social Security segment of FICA, or the Federal Insurance Contributions Act, $300 less will be used to compute withholding.

Here’s the math on what this change means.

Under FICA, payments totally 15.3 percent of a worker’s earnings are paid toward Social Security and Medicare.

Employers and employees each pay half of the 12.4 percent Social Security tax portion. For workers in 2018 under the original wage base, that would have been 6.2 percent of $128,700 or $7,979.40. That same amount would have been matched by the worker’s boss.

With the change, the maximum withholding from an employee’s income for Social Security is $7,960.80 ($128,400 x 6.2 percent). That also will be matched by employers.

OK, the wage base change difference is only $18.60 less in tax, but that’s $18.60 you will have if you’re a worker making up to or more than the applicable six figure income subject to the Social Security payroll tax.

I’d happily take that almost $20 to pay for three of my favorite venti Frappuccinos or a Tex-Mex food truck lunch for the hubby and me.

No income cap on Medicare: The other portion of the overall 15.3 percent payroll tax is the withholding amount that covers your future Medicare costs.

In this case, this is another 1.45 percent of your wages withheld from your checks and also paid by their employers for the federal health care coverage.

However, there is no limit on wages that are subject to this combined 2.9 percent payroll tax.

So no matter how much more than $128,400 you make next year, the Medicare payroll tax will keep coming out of your pay.

No worries for current recipients: And just in case you collect Social Security or, like me, have a relative who does and freaks any time the agency is in the news, don’t worry.

The wage base change for next year has absolutely no effect on current beneficiaries, says the SSA. Any changes in benefit computations based on the new data will only apply to people who initially become eligible for Social Security benefits in calendar year 2018.

And in case you’ve bookmarked this year’s inflation adjustments series — a table of contents is in the first post on income tax brackets — I’ve also updated the 2018 inflation adjustments item on the Social Security wage base with this new data.

You also might find these items of interest:




Tax Reform Links and Examples

Tax reform is moving along.  The House Ways and Means Committee introduced its bill – H.R. 1, on November 2 and the House passed it on November 16. The Senate Finance Committee released its proposal on November 9 and passed it on November 16. At 11/29/17, we are waiting for a vote by the entire Senate. If that happens, then we’ll see if the House will also pass that same Senate passed bill or instead go to conference for members of the tax committees to work out the differences between the bills.

Following are links to the key documents on the bills and Joint Committee on Taxation analysis. I also show examples of how two different families fare under the House and Senate Finance Committee bills.  Please note that there are many variations possible depending on how many children a family has and their ages, the types of itemized deductions they have, and their income level and its nature. I have kept the examples simple with the individuals only have wage and interest income.


H.R. 1 – Two examples of individuals:
Family of 4, wages $100K, state taxes $8K, mtg int $10.5K, charitable $500
Family of 4, wages $250K, mtg int $40K, State tax $35K, charitable $5K, misc $3K
2018 current law
H.R. 1
2018 current law
H.R. 1
Taxable income
Child credit
Non-child dependent credit
Net tax

Note: The family above with $40,000 of mortgage interest has a debt greater than the new $500,000 limit allowed by H.R. 1, but falls under the transition rule. If this taxpayer instead had a new mortgage, the tax would be higher because H.R. 1 limits mortgage interest to a debt of $500,000..

SFC – Same examples as above:

Family of 4, wages $100K, state taxes $8K, mtg int (AI) $10.5K, charitable $500
Family of 4, wages $250K, mtg int (AI) , $40K, State tax $35K, charitable $5K, misc $3K
2018 current law
2018 current law
Taxable income
Child credit
Non-child dependent credit
Net tax
Tax HR 1

There are numerous changes for individuals, businesses, estates, and exempt entities in the proposals. The above examples aim to illustrate that not everyone gets a tax cut; it depends on the mix of their income and current deductions.
What do you think?


Pong’s success 45 years ago has led to today’s digital taxes

Pong via GiphyPong via Giphy

Who knew 45 years ago today when Atari released Pong that the two-dimensional video version of table tennis would herald in a fascination and fixation with video games?

Who also knew that those games would become a major battle front in the taxing of digital entertainment?

We’ve come a long way, baby, to borrow a phrase from Pong’s era.

Old and new gaming options: Since Pong’s Nov. 29, 1972, debut and consumer acceptance that made it the first commercially successful video game, the world has become populated with video game addicts of all ages.

The variety of video games, ranging from sports-focused to combat (real and fantasy) themes to other nostalgic throwbacks like Super Mario, were no doubt crammed into Black Friday and Cyber Monday shoppers‘ physical and digital carts.

Super Mario Odyssey banner

Nintendo’s Super Mario debuted in 1985 with his brother Luigi. In 2017, Mario’s on, per the video game’s pitch, “a massive, globe-trotting 3D adventure” during which he uses “his incredible new abilities to collect Moons” so that players “can power up [the] airship, the Odyssey, and rescue Princess Peach from Bowser’s wedding plans!”

Those purchases, which likely will increase during the holiday season as more games are released in December, translate into major dollars. Through October, consumer video game spending in the United States was up 3 percent from last year, accounting for $4.2 billion in sales.

Sales taxes on boxed, digital games: That’s also good news for state and local tax offices.

The price of the actual games that plug into players are, in most states, subject to sales taxes.

And in the never-ending quest for more revenue — hmmm, that sounds like it could make a good video game … — states also are looking at taxing digital goods and services.

That’s already happened in North Carolina and Pennsylvania, just to name a couple of taxing jurisdictions.

Even cities are trying to get into the act. 

Chicago’s expanded amusement tax: The most aggressive so far has been Chicago. It’s also the major metropolitan area that’s facing the most push-back.

In June 2015, the Chicago comptroller expanded the city’s 9 percent amusement tax to streaming entertainment services, including gaming and streaming movies, television and music.

Dubbed the “Netflix tax,” the levy has been under assault since it was enacted. Lawsuits were filed, including one by a group of Chicago residents represented by Liberty Justice Center, soon after the tax’s expansion.

The video gaming industry also has joined the fray.

Gaming creators fighting tax: The Entertainment Software Association (ESA), the trade group representing among others some of the biggest names in the gaming industry (Sony Interactive Entertainment Inc., Microsoft Corp., Nintendo of America and Warner Brothers Interactive Entertainment Inc.) has taken its case to court.

The ESA filed a lawsuit on June 5, 2017, charging that the Windy City’s tax violates the federal Internet Tax Freedom Act, which prohibits states and cities from imposing discriminatory internet-only taxes.

Opponents of the tax say that Chicago is the first major city to so aggressively push for taxation of streaming media services. This effort, they argue, is yet another attempt to essentially expand nexus, the law-for-now that requires a physical presence for the taxing of remotely supplied products and services.

The Chicago cloud tax lawsuits are being watched closely by taxing jurisdictions that are contemplating similar revenue streams.

Meanwhile, the overall nexus issue could be (re)settled by the U.S. Supreme Court

Neither, however, is likely to happen before gamers finish up their holiday shopping online, in stores or via streaming subscriptions for their favorite video adventures.

So if If you’re one of the folks looking for the latest, coolest gamer, you might want to add a few more dollars to cover your December spending spree.

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