Bacon's Rebellion

A Tax Question

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by

Dick Hall-Sizemore
in

The numbers in the following scenario are not necessarily based in reality. They are used to illustrate a point.

Mary Sue works as a housekeeper in a large hotel, cleaning guest rooms and changing bed linens. She makes $30,000 annually. Her employer deducts taxes, including Social Security, from her wages.

Susie Que waits on tables in a busy restaurant next door to the hotel. She makes $30,000 annually. Of that amount, $10,000 is from her base pay and $20,000 is from tips. Her employer deducts taxes, including Social Security, from her wages and tip income. 

Both Presidential candidates have proposed excluding tip income from taxation. Why should Mary Sue have to pay taxes on all her income, while a good part of Susie Que’s income is excluded from taxation?

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129 responses to “A Tax Question”

  1. walter smith Avatar
    walter smith

    And if you want, I can give you many examples of unfairness, all arising out of the income tax and using tax policy to incentivize behavior. Now do the Green Nude Eel. Solyndra. Terry McAwful’s car company in Mississippi. All those electric chargers. EV tax rebates. Who did those go to?
    How come “free” Medicare costs me more than my employer plan?
    Our country lived from 1789 to 1913 (?) without an income tax. Has our govt gotten better or just bigger? Are we more free or less free?

    1. Stephen Haner Avatar
      Stephen Haner

      Pay for it all with tariffs? Is that the pipe dream now? And there was an income tax to fund the Union war effort during the Civil War (another strike against it for you, I'm sure.)

      1. walter smith Avatar
        walter smith

        Wow. How do I deserve the Civil War comment? When do "conservatives" call someone who agrees with them on many many issues "racist"?
        Somehow the United States of America existed from 1789 until 1913 without an income tax. How? Has the income tax made the country "better"? I think a strong argument can be made for "no."
        For that matter, I think the 17th Amendment was a mistake.

        1. WayneS Avatar
          WayneS

          I'm not a big fan of the 17th either.

          I don't lose sleep over it, but I would like to see our method of electing federal senators go back to that stated in the original constitution.

          1. Lefty665 Avatar
            Lefty665

            May be the cynic in me, but how would having Senators elected by state legislators be an improvement on the direct statewide elections we have now? Not arguing that the results would be worse, just not seeing that they would be obviously better.

          2. Marty Chapman Avatar
            Marty Chapman

            It serves to empower the states against the Federal Gov and is an important check and balance.

          3. Lefty665 Avatar
            Lefty665

            Perhaps direct elections of senators empowering the people over both the state and feds is the most important check and balance. That is the more conservative view.

          4. Marty Chapman Avatar
            Marty Chapman

            I would even settle for 1 from each state!

        2. Stephen Haner Avatar
          Stephen Haner

          How is it a race thing to point out the US did use the income tax during the period you cited? It wasn't 1789 to 1913….not sure when the 1861 version expired.

          1. walter smith Avatar
            walter smith

            Oh…there was no implication of wishing for slavery to continue because an income tax was used to fund the Northern side in the Civil War?
            And if it was totally legit, then why was an amendment needed to allow it in 1913?

            " (another strike against it for you, I'm sure.)"

            I'm a big boy. Sticks and stones and all that. I just expected better from you.

          2. Dick Hall-Sizemore Avatar
            Dick Hall-Sizemore

            The Civil War income tax was continued until it was repealed in 1872. The income tax was reinstituted in 1894, but was declared unconstitutonal by the Supreme Court the next year. With the ratification of the 16th Amendment in 1913, Congress gained the authority to levy the income tax.

    2. Hunter Avatar
      Hunter

      Excellent point. The tax code is used in countless ways to advantage one taxpayer or one industry or one lobbying group over another. The result: A tax code so complex that no politician is willing to revise it meaningfully.

      1. DJRippert Avatar
        DJRippert

        Absolutely right.

      2. LarrytheG Avatar
        LarrytheG

        Massive changes WERE made to the TCJA, and some of the biggest recipients are those who have employer-provided health insurance – which is not taxed and if it were , would amount to a thousand or two thousand dollars. People who work that don't get employer-provided have to find their own insurance AND pay for it with post-tax dollars. If it were not for the ACA, many millions would not have even that option.

    3. Thomas Dixon Avatar
      Thomas Dixon

      Depends on if you want to walk on the beach without having your COVID jab.

  2. Paul Sweet Avatar
    Paul Sweet

    Good question.
    Hotel housekeepers also make some tip money, although I don't think people tip them as generously as they do waiters & waitresses.
    The problem with taxing tips is determining how much people earn in tips. Most are honest and will report their tip income, but some are dishonest and a lot more don't keep good records.

    1. WayneS Avatar
      WayneS

      If the customer pays with a credit card then the employer and the government already know how much the tip was.

      I often tip in cash even when paying by card. Sure, it makes me look like a cheapskate on the credit card receipt, but it leaves it up to the worker whether they declare the income it or not.

      1. Paul Sweet Avatar
        Paul Sweet

        I usually tip in cash. I'm not sure whether the worker always gets the full amount of the tip.

        1. WayneS Avatar
          WayneS

          They do if you hand it to them.

          1. Paul Sweet Avatar
            Paul Sweet

            I should have added "when the tip is put on the card."

          2. Matt Adams Avatar
            Matt Adams

            That's my preferred method, as well.

          3. LarrytheG Avatar
            LarrytheG

            I do that also most of the time.

            You can bet that most cash tips are not reported anyhow.

  3. Ronnie Chappell Avatar
    Ronnie Chappell

    Wonderful example of bipartisan idiocy.

    My guess is that most wait staff pay no federal income tax. Only half of Americans do. Requiring them to contribute to Social Security and Medicare/Medicaid seems fair since they will benefit from these soon to be grossly underfunded programs.

    That said, why wait staff? Why not teachers and nursing home workers — workers that at badly needed and in short supply? Okay, maybe not teachers.

  4. James Kiser Avatar
    James Kiser

    Flat tax would solve the issue for everyone. No deductions for anyone but then pols would have to end so called foriegn aid which is basically bribes to fellow pols overseas

    1. Teddy007 Avatar
      Teddy007

      And what would the flat tax rate have to be set at to coverage all of the federal expenditures. And is one willing to have a gross receipts tax instead of an income tax for businesses so that corporate plants and limo services cannot be deducted before the flat tax.

      1. WayneS Avatar
        WayneS

        I would favor replacing the current income tax structure with a modest flat tax on all income and a federal sales tax.

        It looks like gross national income (GNI) is now around $23 trillion. The feds spent about $6.13 trillion in FY 2022, which is about 26.7% of GNI. So, perhaps a 10% flat tax on GNI, with the rest made up by a federal sales tax. The sales tax could vary in % based on whether an item is considered a necessity, a luxury, or a combination thereof .

        For example, if you assess a 2% federal sales tax on the first $40,000 cost of a new vehicle, and 4% on any amount over $40,000), then more expansive cars will pay a much higher tax. A $300,000 Ferrari would be assessed an $11,200 federal sales tax, while a $25,000 Toyota Corolla would only cost the new owner an additional $500 in federal tax.

        1. Teddy007 Avatar
          Teddy007

          A federal sales tax at on consumer facing items or a value added tax for every transaction along the way. A flat tax to gain over $2 trillion a year would not be modest and would benefit the most affluent. And one did not mention corporate income taxes or capital gains versus income.

          1. WayneS Avatar
            WayneS

            Please see the example I added to my comment. A federal sales tax could be structured so that it did not overly benefit the affluent.

            And a flat income tax is by definition 'fair' because it costs everyone the same percentage of their income. Although, since there are nuances to everything, the first, say, $30,000 income could be exempt from the flat tax.

            PS – I'd tax corporate income and earned capital gains the same as private income.

          2. WayneS Avatar
            WayneS

            Please see the example I added to my comment. A federal sales tax could be structured so that it did not overly benefit the affluent.

            And a flat income tax is by definition 'fair' because it costs everyone the same percentage of their income. Although, since there are nuances to everything, the first, say, $30,000 income could be exempt from the flat tax.

            PS – I'd tax corporate income and earned capital gains the same as private income.

          3. WayneS Avatar
            WayneS

            Please see the example I added to my comment. A federal sales tax could be structured so that it did not overly benefit the affluent.

            And a flat income tax is by definition 'fair' because it costs everyone the same percentage of their income. Although, since there are nuances to everything, the first, say, $30,000 income could be exempt from the flat tax.

            PS – I'd tax corporate income and earned capital gains the same as private income.

          4. WayneS Avatar
            WayneS

            Please see the example I added to my comment. A federal sales tax could be structured so that it did not overly benefit the affluent.

            And a flat income tax is by definition 'fair' because it costs everyone the same percentage of their income. Although, since there are nuances to everything, the first, say, $30,000 income could be exempt from the flat tax.

            PS – I'd tax corporate income and earned capital gains the same as private income.

          5. Teddy007 Avatar
            Teddy007

            So the way to make a flat tax better is to not make it flat. And what rate would need to be set to balance the federal budget. I believe the number is higher than what most Americans pay now in income taxes. It would be a huge windfall for the rich. And a flat tax should not be used as a backdoor way to “starve the beast” since all that does it leads to massive budget deficits. And what does the sales tax apply to . And what about all of the income that flows into tax-exempt endowments. Will those also pay the flat tax?

          6. WayneS Avatar
            WayneS

            Hey, you're the one who said a flat tax would be overly beneficial to the rich. One solution to that issue is to simply remove the poor from the equation altogether, and let them pay no income tax.

          7. WayneS Avatar
            WayneS

            Hey, you're the one who said a flat tax would be overly beneficial to the rich. One solution to that issue is to simply remove the poor from the equation altogether, and let them pay no income tax.

          8. WayneS Avatar
            WayneS

            Hey, you're the one who said a flat tax would be overly beneficial to the rich. One solution to that issue is to simply remove the poor from the equation altogether, and let them pay no income tax.

          9. Teddy007 Avatar
            Teddy007

            Having a lot flat tax rate but a high national sales tax would help the rich compared to today since they would pay less taxes, the middle class and poor would pay more taxes, and since the rich do not spend every dollar they earn, the rich would pay a smaller percentage of their gross income as sales tax. And if business expenses are except from sale taxes, the rich even get a second benefit by moving many of their living expenses into businesses expenses.

          10. DJRippert Avatar
            DJRippert

            It's less that the tax has to be flat than it is that:

            a) It has a very limited number of tiers (say 3) and …
            b) There be no deductions for anybody or anything.

          11. Teddy007 Avatar
            Teddy007

            But then one would need to eliminate business deductions and have all corporations pay a gross receipts tax.

          12. f/k/a_tmtfairfax Avatar
            f/k/a_tmtfairfax

            Wouldn't that reward more efficient companies and those that don't pay their executives ridiculously high bonuses even when they don't achieve outstanding results? Ditto for sports teams and entertainers. Maybe, there can be some time limited, special treatment for startups. Say, to make up a number, three years. It would need to be coupled with some strong penalties for playing games with corporate entities.

          13. DJRippert Avatar
            DJRippert

            Yes.

          14. LarrytheG Avatar
            LarrytheG

            tax all including investments, stepped up basis, inheritance at the same rate?

          15. WayneS Avatar
            WayneS

            Okay. I can get behind that.

  5. James Kiser Avatar
    James Kiser

    My brother and I were discussing this issue and he said a tip is a gift and there fore not taxable. This is a point that I believe has not been raised before at any time and people can give gifts up to 10K I believe and not be taxed. Thoughts?

    1. Super Brain Avatar
      Super Brain

      Nope. Plenty of tax court and Circuit Ct cases that stop that cold. The exemption is $18,000 in 2024.

      1. James Kiser Avatar
        James Kiser

        if the exemption according to what you say is 18,000 then that would cover a lot of tips. So why wouldn’t that work.

        1. Super Brain Avatar
          Super Brain

          A service was provided for the tip. A gift is not earned.

          1. LarrytheG Avatar
            LarrytheG

            do you report a "gift" on your return?

          2. James Kiser Avatar
            James Kiser

            How do you know that? If I say it is gift who is to say otherwise?

          3. LarrytheG Avatar
            LarrytheG

            Well, if the IRS knows you got it, they might.

            But how would they know you got it unless you reported it?

            WHY would you report it?

            😉

          4. James Kiser Avatar
            James Kiser

            So multi millionaires and billionaires give their kids tax free foundations but if I give a waitress or waiter or a “gift” it is illegal. Some wrong headed thinking on taxes here.

          5. LarrytheG Avatar
            LarrytheG

            I agree.

  6. energyNOW_Fan Avatar
    energyNOW_Fan

    Democrats have become masters at using money handouts to gain support from voters (better known as bribery and bribery, well, just works). One could argue Trump lost in 202o due to Republican refusal to give COVID handouts, which upon Repubs losing the election, the Democrats heaped $$$$ to the public. Ironically, Trump sees that reality and he also wanted to spread out some bribery COVID dollars, but the Senate/House conservatives insisted it was better to lose the election, which they did. I also perceive Trump was not supportive of overturn Roe v. Wade for pragmatic reasons. Again Repubs insist, so now Dems have great advantage due to their bribery tactics and women's rights.

  7. energyNOW_Fan Avatar
    energyNOW_Fan

    Democrats have become masters at using money handouts to gain support from voters (better known as bribery and bribery, well, just works). One could argue Trump lost in 202o due to Republican refusal to give COVID handouts, which upon Repubs losing the election, the Democrats heaped $$$$ to the public. Ironically, Trump sees that reality and he also wanted to spread out some bribery COVID dollars, but the Senate/House conservatives insisted it was better to lose the election, which they did. I also perceive Trump was not supportive of overturn Roe v. Wade for pragmatic reasons. Again Repubs insist, so now Dems have great advantage due to their bribery tactics and women's rights.

  8. Nancy Naive Avatar
    Nancy Naive

    wow, just noticed the standard deduction is 29.2 for married filing jointly. Add in the age deduction for over 65, and it’s well over $30K, maybe $34K. So, two folks on SocSec alone surely go through an awful lot of work calculating the taxable part of their SocSec only to not have any tax.

    1. Lefty665 Avatar
      Lefty665

      The 1040 makes that a pretty simple calculation. The calc of the taxable portion of SS is straightforward as are the subtractions for standard deductions and exemptions. If taxable net income is $0 (or less) you're home free.

      1. Nancy Naive Avatar
        Nancy Naive

        I wouldn’t actually know. I wrote my own tax program in eXcel years ago. I was in a flaming rage when Trump did his “Tax Reform” aka Re-Form and I had to write the whole damned thing again.

        1. Lefty665 Avatar
          Lefty665

          I started using Turbo Tax around 25 years ago. Made it simple once I collected the data. A quick look at a 1040 will show that the taxable SS calc is pretty simple.

          1. Nancy Naive Avatar
            Nancy Naive

            Yeah, for me it’s just $SS*0.85. It’s half dozen calculations for everyone else. The Va working spouse calculations for that $259 is waaaay worse.

        2. f/k/a_tmtfairfax Avatar
          f/k/a_tmtfairfax

          Put it on the market. I'm tired of how slow TurboTax runs.

          1. Lefty665 Avatar
            Lefty665

            Hit it with more processing horsepower. My complaint with speed is the mandatory updates when loading, not when running.

          2. LarrytheG Avatar
            LarrytheG

            Conservatives are opposed the IRS Direct File which has good reviews and some say better than some of the commercial programs who are lobbying against it – with Republicans of course.

            Youngkin just shot it own and Miyares just joined some other AG spouting really silly stuff:

            " Thirteen Republican state attorneys general have sent a letter demanding that Treasury Secretary Janet Yellen halt the IRS’s free Direct File pilot program, calling it “unnecessary and unconstitutional,” Accounting Today reported.

            “Congress has never granted the Department of the Treasury authority to create a Direct File program. And for good reason: the American taxpayers do not want to invite the proverbial fox into the hen house,” the letter, written by Montana Attorney General Austin Knudsen, read. “The United States Constitution vests the power to make laws and appropriate funds with Congress. Allowing the Treasury Department to set up an IRS-run Direct File Pilot Program is a clear attempt by the Biden administration to circumvent these constitutional limitations.”

            The letter was co-signed by Knudsen’s counterparts in Georgia, Idaho, Iowa, Louisiana, Missouri, Nebraska, South Carolina, Tennessee, Texas, Utah, Virginia, and West Virginia."

            https://www.nysscpa.org/news/publications/the-trusted-professional/article/13-republican-ags-seek-to-stop-irs-s-fre-direct-file-pilot-program-020224

            Yet another reason why the GOP is unfit to govern, in my view.

          3. WayneS Avatar
            WayneS

            You trust the same people whose job it is to maximize the amount of money they can take from you to compute how much money they can take from you?

            You are correct about the GOP, though, they are unfit to govern… …sheep.

          4. LarrytheG Avatar
            LarrytheG

            Read the reviews. It's good software. We use IRS software to do volunteer taxes and yes, it does get checked against other commercial software. So, yes I do trust them. No conspiracies.

            It implements Pub 17 – the basic tax code.

            What the IRS DOES do – is NOT always give you credit that you are due unless you claim it.

          5. Nancy Naive Avatar
            Nancy Naive

            Give me your email, and I’ll clean up a copy for you. It only does the 1040 married filing joint, Sched 1 through 5, A, B, and D without 1250 gains. It does Va760 too. It also has the AMT form.

            I can get it to you in January after I encode tax functions, and limits for 2024 tax year. If you’re able to code, it’s easily changed year to year.

            Put TAX PROGRAM in the subject line.

            [email protected]

          6. LarrytheG Avatar
            LarrytheG

            sounds pretty clever!

            excel? probably won't work on google sheets, right?

          7. Nancy Naive Avatar
            Nancy Naive

            Haven’t a clue. I’m using Office 2010 eXcel.

          8. LarrytheG Avatar
            LarrytheG

            2010?

          9. Lefty665 Avatar
            Lefty665

            If you did the Virginia machine readable forms in Xcel my hat's off to you.

          10. Nancy Naive Avatar
            Nancy Naive

            No, no. Just the calculations. Transcription required.

          11. Lefty665 Avatar
            Lefty665

            Transcription was my problem, and why I started using Turbo Tax long ago. I could screw up copying numbers to and from subsidiary forms and worksheets, and the tax program did that pretty well. Good on 'ya for writing the sheet to do the calcs. That's not a trivial task.

          12. Nancy Naive Avatar
            Nancy Naive

            Retirement boredom.

          13. Matt Adams Avatar
            Matt Adams

            taxslayer

  9. Stephen Haner Avatar
    Stephen Haner

    Now that both candidates have endorsed it, happy to label this a stupid idea. Earned income is earned income.

    1. Nancy Naive Avatar
      Nancy Naive

      Now that both have endorsed it, know that it is also a dead issue.

  10. walter smith Avatar
    walter smith

    I agree. Abolish the income tax.

    1. WayneS Avatar
      WayneS

      Well played, sir.

    2. WayneS Avatar
      WayneS

      Well played, sir.

    3. Nancy Naive Avatar
      Nancy Naive

      Eliminate wages. Provide work credits.

      1. WayneS Avatar
        WayneS

        That might be one step too far…

  11. Eric the half a troll Avatar
    Eric the half a troll

    To answer your question, they shouldn’t. Income should be income. Period.

    Related question – what is a “tip”? I have been to restaurants where a 20% gratuity has been added to my tab. That is not a gratuity but is instead a part of the server’s salary that has simply been line itemed out (which I am fine with, btw). Apparently, the tax exemption would apply to these fees. Now what happens when people like fund managers change the line item from “fee” to “tip”? Noticed that Harris focused her support only to hospitality industry.

  12. Ronnie Chappell Avatar
    Ronnie Chappell

    Wonderful example of bipartisan idiocy.

    My guess is that most wait staff pay no federal income tax. Only half of Americans do. Requiring them to contribute to Social Security and Medicare/Medicaid seems fair since they will benefit from these soon to be grossly underfunded programs.

    That said, why wait staff? Why not teachers and nursing home workers — workers that are badly needed and in short supply? Okay, maybe not teachers.

    1. Dick Hall-Sizemore Avatar
      Dick Hall-Sizemore

      If a tip is provided by adding it to a credit card bill for the meal, as I assume most tips are, then employers have a record of it and are requried to deduct taxes before distributing it to the server. Of course, the server may get all or most of this back through refunds, but that is a different story.

      1. Nancy Naive Avatar
        Nancy Naive

        I always tip cash. In the cc voucher, just write “cash” on the tip line. It keeps the wait staff somewhat honest in reporting the tip.

      2. Nancy Naive Avatar
        Nancy Naive

        I always tip cash. In the cc voucher, just write “cash” on the tip line. It keeps the wait staff somewhat honest in reporting the tip.

        1. WayneS Avatar
          WayneS

          That's not a bad idea. I think I'll start doing that. Since I come from a family of above-average tippers, the wait staff have the option to "split the difference", declaring the typical 15% while keeping the rest of the tip out of the tax equation.

    2. Randy Huffman Avatar
      Randy Huffman

      I don't like it either, but as you say, its a good bet that most people who work for tips are not paying much if any income tax now anyway. The likelihood of those who get cash tips are declaring it as income is also probably low already, as anyone who works for cash.

      Unless anyone knows different, I had not heard if the proposed tips are subject to payroll taxes (employee AND employer), and if not, then the worker will not get credit for their social security payments when they retire, will they…..?

      At the end of the day, its not the President who can unilaterally make this decision, the House and Senate will need to pass a bill.

  13. Fred Costello Avatar
    Fred Costello

    There is much discussion on the Internet and in books about the Fair Tax, a national sales tax. One objection is that it hurts the poor; however, the originators of the Fair Tax proposed that everyone be given a grant (the same for all) to offset the national sales tax. Another objection is that the government should not be trusted to eliminate the other taxes and close the IRS.

    1. Nancy Naive Avatar
      Nancy Naive

      progressive sales tax.

      1. Fred Costello Avatar
        Fred Costello

        Yes, more or less, but there is no income test. Everyone gets the same “allowance” — enough to (barely) live on. At least that is my understanding. Notice that the Fair Tax discourages consumerism and waste.

        1. Nancy Naive Avatar
          Nancy Naive

          The foundational blocks of the American economy.

  14. WizeMaxcy Avatar
    WizeMaxcy

    They both should pay the lower amount (what Susie Que pays), not the higher amount of Mary Sue.Lower taxes for everyone. shrink the size of misgovernment.

  15. WayneS Avatar
    WayneS

    If either Mary or Susie is supporting a child, they most likely won't owe any federal income tax anyway…

    1. Super Brain Avatar
      Super Brain

      Reagan started the march towards loweringg the tax on lower income folks.

  16. energyNOW_Fan Avatar
    energyNOW_Fan

    Democrats have become masters at using money handouts to gain support from voters (better known as bribery and bribery, well, just works). One could argue Trump lost in 202o due to Republican refusal to give COVID handouts, which upon Repubs losing the election, the Democrats heaped $$$$ to the public. Ironically, Trump sees that reality and he also wanted to spread out some bribery COVID dollars, but the Senate/House conservatives insisted it was better to lose the election, which they did. I also perceive Trump was not supportive of overturn Roe v. Wade for pragmatic reasons. Again Repubs insist, so now Dems have great advantage due to their bribery tactics and women's rights.

    1. DJRippert Avatar
      DJRippert

      You mean that forgiving (i.e., transferring) student debt from adults who willingly took on the debt to others who did not was nothing more than a handout to those who at least attended some college in order to buy votes?

      1. energyNOW_Fan Avatar
        energyNOW_Fan

        All kinds of Dem handouts yes. I know some who had their student loans forgiven and that was important to their whole family.

        1. DJRippert Avatar
          DJRippert

          I would like to have my mortgage loan forgiven. It woud be important to my whole family.

  17. f/k/a_tmtfairfax Avatar
    f/k/a_tmtfairfax

    Income is income. Both candidates are wrong.

    But neither addresses the issue of untaxed private foundation and other untaxed nonprofits engaging in advocacy and attempts to influence public opinion. Or government contractors having PACs or 501(c)(4) affiliates. How much more money would be in the federal coffers if these giveaways were taxed? It's my recollection that the Ford Foundation takes in about $100 M per year. And yet, people and the media rage about someone making $ 5 million.

    1. Super Brain Avatar
      Super Brain

      Private foundations do pay a tax on investment income.

      1. f/k/a_tmtfairfax Avatar
        f/k/a_tmtfairfax

        They pay an excise tax, not the corporate income tax.

    2. Randy Huffman Avatar
      Randy Huffman

      If you want more guardrails on this, fine, but I don't understand the fundamental issue you are raising:

      1) if a donor contributes to a private foundation, that money needs to be used for charitable gifting. So why wouldn't the contributions to the foundation be tax deducible as a charitable gift?

      You should also note that a donor cannot deduct more than 30% of their AGI for private foundation gifts. So if the donors income is $1 Million, and he/she gifts $1 Million, they can only deduct $300,000, and the rest gets carried over for up to 5 years

      2) gifts to a pac or 501c4 by an individual are not deductible as a charitable gift. If they are paid by a corporation, "it depends" on how the money is used by the pac, and that is where my knowledge of this ends

      1. LarrytheG Avatar
        LarrytheG

        what's the purpose of giving tax deductions for "charity" to begin with? Or for a mortgage but not rent?

        1. Randy Huffman Avatar
          Randy Huffman

          First of all, last time I checked I was not a member of Congress when those laws were passed many decades ago, nor now. But I digress.

          Overall the Trump tax cuts of 2017 put the bar high for deductions over the standard deductions. To take deductions, you need some hefty payments.

          You ask why should a charitable deduction be allowed, my response is why the heck should the Government tax something that the receiver is giving it away to charity? They are not keeping it for vacations or a new car, they are donating it. Why should the Government take part of that away, who do they think they are!

          As for mortgages, I recall sitting in my tax class in college in the 70's, and the instructor telling everyone that this deduction was put in place to encourage home ownership. Back then all interest was deductible, people who complain about lower tax rates don't bother to tell you that the deductions available back in the 60's to 80's were quite substantial, until they started lowering tax rates, which is a good trade off. Now, available deductions are quite a bit lower, only the first $1 Million of a house mortgage is available for deduction, IF it was taken to buy the house (second mortgages have major sub-limits) and there is of course a cap on state and local income taxes.

          I would be in favor of eliminating all deductions, EXCEPT charitable gifts, those should stay. If someone wants to argue that the definition of a charity should be tightened (eg, eliminate ACLU and Judicial Watch) that would be a worthy exercise, but the effort would be mired in controversy.

          1. f/k/a_tmtfairfax Avatar
            f/k/a_tmtfairfax

            If a nonprofit organization gives money to feed poor kids or plant trees or clean beaches, let them alone. But how many of them have Washington Offices and attempt to influence public policy and opinion? How many of them fly executives to world conferences? How many of them engage in litigation? Confer closely with politicians? If you have a Washington Office or hire one, you should pay full corporate income taxes.

            And how long should a private foundation exist? English law frowned on things lasting in perpetuity. The Statute of Mortmain that prohibited giving land to the Church which would hold it forever. The Rule against Perpetuities. Trusts could last for only lives in being plus 21 years.

            Congress should amend the Estate and Gift Tax laws to combine both bequests to heirs and gifts to private foundations for purposes of the exemption from taxes.

            And government contractors are not supposed to give campaign contributions. But they can do it through their 501(c)(4) affiliates. Not to pick on Planned Parenthood because it is far from alone, but it is paid by the government to provide services and, through its affiliate is active in election campaigns.

          2. LarrytheG Avatar
            LarrytheG

            The whole "charity" tax code thing is Swiss cheese. I agree.

            It should apply to ONLY humanitarian organizations who must file complete 990's, no exceptions.

          3. Randy Huffman Avatar
            Randy Huffman

            My bigger issue is why the Federal Government has a right to charge estate taxes to begin with. The fairer thing to do is calculate the unrealized gains and charge income taxes on that.

            the Government collects enough taxes, you want to complain about abuse, don’t look at private foundations, look at the Government and their entitlement mentality.

          4. LarrytheG Avatar
            LarrytheG

            Why should money spent on employer-provided not be taxed when people who work but don’t have employer-provided have to buy insurance with money that has been taxed? That’s a huge tax subsidy for SOME workers who are lucky enough to have employer-provided but there are millions of people who don’t have it including
            those who are self-employed and independent contractors, etc.

            Lots of lower income folks give a ton of money to their churches but don’t qualify because of the way the std deduction is structured – so that money gets taxed. But why should the govt decide in the first place because all kinds of “stuff” goes on with foundations that are really not “charity”, they’re actually political advocacy groups masquerading as “charities”.

            We need to seriously tighten the “definition” of charity in my view. I don’t think ANY group that is not a full-up humanitarian charity should qualify. No advocacy groups. No think tanks. No Donor advised funds, none.

          5. Randy Huffman Avatar
            Randy Huffman

            that money given to charity by people not hitting the standard deduction is not taxed, you get the higher of the std deduction or your itemized deductions, you are not looking at it correctly.

          6. LarrytheG Avatar
            LarrytheG

            It’s often lower-income older people who give to their church. Money they don’t have yet they give it to the church and get o credit for it. Did you have a response for the tax-free money spent on Employer-provided health insurance? Is that a tax subsidy for those lucky enough to get it?

  18. DJRippert Avatar
    DJRippert

    This proposed policy shows the daftness of both candidates.

    Per Glassdoor: The estimated total pay range for a Server at Morton's Restaurant Group is $30–$52 per hour, which includes base salary and additional pay. The average Server base salary at Morton's Restaurant Group is $23 per hour.

    The mid-range total comp is $41 / hour. If the "base salary" averages $23 per hour, then a guesstimate at tips is $18 per hour. The tips alone are well over the minimum wage.

    Assuming 30 hours per week … That's $61,500 per year. That's total comp – including tips.

    The Morton's on Connecticut Ave in DC (as an example) serves patrons 59.5 hour per week. So, 30 hours per week is perhaps on the low side for an ambitious server. At 40 hours per week, the server would make $82,000 per year.

    Having partially put myself through college waiting tables at a couple of restaurants, I can say from experience that:

    a) You make more than minimum wage at almost any restaurant where people get served by a waiter or waitress (especially if the restaurant serves alcohol).

    b) The difference in how much a server makes varies greatly from restaurant to restaurant.

    One can only guess that Trump and Harris came closest to working in a restaurant when they watched Alice on TV hustling at Mel's Diner while telling patrons to , "Kiss my grits".

    1. Nancy Naive Avatar
      Nancy Naive

      Now do tha for Texas Roadhouse.

  19. Nancy Naive Avatar
    Nancy Naive

    At $30,000/yr, both are susceptible to promises that won’t be kept. Just promise that the first $12,500 in earnings won’t be taxed and half of the country will think it’s a good reason to vote for you.

    Correction… make that $14,600

    Of course, at this very minute, lots of C-office occupants are rewriting their contracts to make their annual bonuses and stock options into tips.

  20. Nancy Naive Avatar
    Nancy Naive

    and your song for the subject…

    https://www.youtube.com/watch?v=yFWJmPXY3pw

    1. WayneS Avatar
      WayneS

      Great stuff. Ray Davies wrote such wonderful songs, especially the early Kinks tunes. Waterloo Sunset alone should grant him entry to the songwriter hall of fame. The 1972 double album Kinks Kronikles is on my "desert island" list (even if it counts as two of the 10).

      1. Nancy Naive Avatar
        Nancy Naive

        The two tributes to his sister aren’t bad, “Come Dancing,” and “Days”.

  21. James A. Bacon Avatar
    James A. Bacon

    Q. "Why should Mary Sue have to pay taxes on all her income, while a good part of Susie Que’s income is excluded from taxation?"

    A. Because two president candidates are pandering for votes, and voters are too dull to realize that carving out exemptions in the tax code displaces the tax burden to others (including themselves).

  22. LarrytheG Avatar
    LarrytheG

    Tried to give a tip to my barber and said that did not accept tips but did accept gifts.

    😉

    Many barbers and other service workers work as independent contractors and their employers don't pay FICA tax and the worker owes it at tax time.

  23. LarrytheG Avatar
    LarrytheG

    The Tax Cuts and Jobs Act made massive changes to the tax code that affected just about every taxpayer in a major way. And as I recall, many, if not most of the changes, were really not known prior to the law getting passed.

    A lot of people did not even really know until they did their taxes!

    But the really big thing the changes made – the tax cuts do not pay for
    themselves. It's a permanent built in deficit adding to the debt every year.

  24. Nancy Naive Avatar
    Nancy Naive

    A sign of progress for you Dick — 30 years ago an athlete was banned from the Olympics for smoking pot. The past two weeks saw Snoop Dogg pictured at every venue.

  25. Nancy Naive Avatar
    Nancy Naive

    Forget Suzi and Mary, Dick. They’re poor. In America, they’re screwed. One will pay $1000 in federal taxes, and the other $500. They’ll pay Virginia the same. Their chances of attending night school at $30K to obtain a skill is beyond their reach. Tuition is beyond their reach. (Yea Virginia!!)

    Want inequalities? Look to the not as wealthy as you think. Let’s suppose I’m rich. Let’s suppose my business partner, Lieutenant Dan, invested my share of our shrimp profits in a fruit company, Apple. Now I have $10M in Apple stock that is 99.99% capital gain.

    I could sell my stock and pay the maximum capital gains tax, which would leave me ~$7.5M in cash to live on for the rest of my life.

    OR… Or, I could go to Deutsche Bank, borrow $7.5M at a rich man’s favorable interest rate using my stock as collateral. The interest rate would, for Apple at any rate, be less than the ARoR of the stock. My investment is making more than the interest.

    I still have $7.5 million, albeit with monthly loan payments, to live on. I have paid no taxes to the feds or the state. When I die, my remaining cash, and some stock will pay the loan balance. The rest of the Apple stock will pass to my heir WITH ZERO GAIN. The base price for my heir is the price per share on the day of my death. If they sell, they pay taxes only on the gain they accrue.

    My heirs all went to UVa. Tuition was paid by the shrimp company.

    1. LarrytheG Avatar
      LarrytheG

      that's just a inch deep of it. People wilth money can afford really good tax advisors and do.

      1. Nancy Naive Avatar
        Nancy Naive

        That, Larry, was good tax advice.

        1. LarrytheG Avatar
          LarrytheG

          really good? 😉

          1. Nancy Naive Avatar
            Nancy Naive

            Good.

      2. Nancy Naive Avatar
        Nancy Naive

        Consider too, your house. Works the same as any collateral that appreciates. Suppose you’re 70 years old, own your own home worth say $500K, and it’s mortgage free.

        Consider taking a $400K mortgage. The 6% rate would be around $2500/month. Your loan could service the loan for 13 years, but the house will appreciate at ~4% on average. Technically, the loan costs you 2%.

        There’s two distinct advantages; 1) it puts ready cash in your pocket, and 2) makes your house unattractive to title theft, and again, your heir will pay no gains tax.

        1. LarrytheG Avatar
          LarrytheG

          You think “well”. Seriously, deeper than most. You have perspectives!

  26. VaPragamtist Avatar
    VaPragamtist

    Personally, I think the tipping culture needs to go. Pay workers a fair amount so they don't rely on our tips. Stop asking me for an additional 15% every time I order fast food for take out. Let's move to a European model.

    1. Nancy Naive Avatar
      Nancy Naive

      But how can Domino’s Pizza give you a $3 tip on your next pizza?

  27. Marty Chapman Avatar
    Marty Chapman

    And yet, simple, flat tax on all income with no exemptions is vigorously opposed by those who demand equity in all things.

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