Tax Reform- Ken Lovett, Andrew Cuomo, & CPA Dave Barrett

Sunday, December 3rd

Perspectives on the Senate reform plan


Transcript - Not for consumer use. Robot overlords only. Will not be accurate.

In the meantime though we're going to be talking quite a bit about tax reform and specifically now looking at the governor's reaction to it. Governor Andrew Cuomo having quite a few remarks about that in the past 24 hours after the senate passed the bill late Friday night. Ken Lovett is with us still from the New York Daily News he is there Albany bureau chief Ken thanks for sticking around before we launch into you're analysis of what he said. Let's take just a quick men now here to hear what the governor said. This is. Old style conservative trickle down theory. But that taxes for the rich. Cut the taxes for the rich corporations. They'll spend money and the benefits will trickle down to the rest upon us. That's exactly what they did. They stayed up through the night to pass that helped the rich people tax plan. Great insult to win jury. There than special provisions. That. Already an assault. Aimed at the economic heart of New York. California. And other frankly democratic states. Which is the elimination of state and local. Tax deductibility now it's complicated those words so people haven't focused on. Whatever means is. You pay state tax you pay property tax. Right now you deduct that from your federal income tax. They would eliminate. So they're playing actually. Taxes. That taxes. That New York Graham he's paying. This from the party that says they wanna reduce taxation. And they're actually coming up with the first double taxation. In history. And it's aimed at democratic states. So that takes a tremendous. Hole on the State of New York. New York there are using as a piggy back. The finance the tax cuts. In other states in the midwest. And in this out that's exactly what they're doing there against very distribution they say. Democrats they say like we distribution take from the rich give to the middle class and the working apparently. This is really distribution on steroids they're taking from rich states like new York and California. And this subsidizing tax cuts. In the poorer states. It is the ultimate hypocrisy. The ultimate hypocrisy and the ultimate fraud. Ken Lovett from the New York Daily News read between the lines what is he saying there for you. Obviously he would he's seeing who is what he's been saying it's gonna hurt me or Erica. In particular you on the argument that it'll help. It will only impact the rich yards uses. Not sincere and he argues that people leave me are millionaires can leave New York which would put the burden on the middle class. He's done after politically. The for a house Republicans who voted for the house bill including Chris Collins from near buffalo area Tom lead. Claudia Kenny and on capitol from Syracuse. And it's also good issue for your own business of national aspirations. It doesn't affect his budget though the honor of the inability to deduct these taxes may hit the individual who's got deducting them anymore. But is very a practical consideration for the State of New York. Well as if millionaires to leave the state of new York and that's less money that this state will be taking in the revenues of so yet could impact me are but you know it it whether would be this particular budget that that remains to be seen. Some people on our tax Larry raising the issue here that it it puts him a tough position. Because while he's saying I am I Andrew Cuomo and for the middle class. He's also kind of having to defend those millionaires that would move out of state is eighteen a bind in that regard. I don't think so because he's he's trying to pinch hit. There's no way that says you know then and the Republican the Pentagon that you know I know you figure you're putting the rich and you're rich donors over the over the middle class would do that erratic and his and his arguing back is. This could ultimately impact the middle class because again if people believed. The burden will fall on the middle class and and the lower income earners to them make up for it. Although below into the Marines don't really pay income tax. Look at that it's a political issue the governor's argument has been for years. Republicans have said don't in New York don't raise taxes on the wealthy you'll drive them out and now they're doing just that raising taxes on the wealthy so. It's kind of got everybody. Flipping the script so to speak that we've heard for all these years. To what degree are the Republicans able to use this is a console to say hey there are some states that are really taxing people a lot. And this is called sort of the way to beat them down in and into submission or at least. I'd get a more in line with what they would like to see nationwide which is obviously the conservative argument of lower taxes. Look at your Kurtz column and Utah leave that's exactly the argument you're making six. We are his head out of the other argument here is that out of control spending per. Decades and decades and maybe this will force me ought to look at how it does business why why is New York Medicaid costs so much higher. Then those in California and Texas combined and why he did you know expand on the program that does economic development lives. For Hollywood you know tax credits and other and things like start a New York that people say don't work. So that is their argument and in their district in May very well worked as a lot of the millionaires aren't there. So people you know home might buy that the governor and the Democrats are gonna use that that these guys are traitors that's the word of governors' views. They voted against the interests of their own state. I think you know the governor has made it clear that he is gonna use these. Issues he said he was gonna go after at least half a dozen house Republicans next year to try and let the house. And if I bet will be issue number one for them. I guess he hasn't taken debate anyway really admitted yes that this is a problem for New York because. New York is yes say hi tech stay. At. Sad that we're really okay I miss that tell me what he said. That's of high taxes. His argument is that you know New Yorkers pay lower taxes. Stabilize. Then they did before it took office he argues that. The 2% to I cap on property tax increases has made a difference. So you know his argument is we are doing things to try and control this stuff and included lowering middle class taxes including lowering business taxes. But this will decimate the progress we've made. All right great interesting stuff Ken Lovett thanks for joining us today. That's Ken Lovett then Albany bureau chief for the New York Daily News I'm gonna dig a little bit deeper into all of this a tax reform stuff with the CPA. Dave Barrett Dave Barrett is with us now he's a CPA he's director of free Mac six tax practice. And with us so graciously on the line from parts unknown different part of the state you're not around here be agreed on a Sunday morning. To a comment and then chat with us some awfully glad you're here Dave thanks for joining us. Good beer days yeah you can't be traveling without my computer put wolf. Okay. I've got three different screens open so there's anything we need to look up we can weaken we can work together here. In general though I wanna start the discussion pretty much where we left off the last segment. Governor Cuomo speaking really harshly. About the reduced deduction. Involving state and local taxes my understanding right now according to the senate bill it mirrors what the ousted does. And basically says is that that. You're allowed to write out 101000 dollars in property tax deductions. For state and local taxes original earlier plans would have eliminated all of it but both the house and the senate now aligned with that 101000. Break it down for me what does that mean in New York State because they're doing it at the same time that they're bumping up the standardized. Deduction so overall. Middle class person. Median income in New York State 71000 so let's use that kind of example. Middle class person Stanley income 71000. What does this do to them especially in regard to the state and local tax deduction that changes. Right so without getting political about it I kept secret governor statement is a little bit extreme. 101000 dollars. Although I don't every are statistically Permian I'm guessing 101000 dollars pretty much can recover most people. In Western New York terms of their property taxes and their deductibility. And you're right the the Washington income tax deduction somewhat. Offset by the doubling of the standard deduction. Again most people in the Western New York are not itemize their deductions to begin. Even when people in context of property tax deductions so. I think it's so that a little bit extreme to the other tempering factor is. Could be in for middle and many middle and upper income taxpayers. But they are paying in my experience what's known as the Alternative Minimum Tax. Which which as the name suggests that it is the second. Method of calculating your income taxes you do with the regularly. And he calculated under the under the Alternative Minimum Tax regime whatever produces a higher result than the one you pay. When you calculate the AMT alternative tax you don't get the benefit of the state tax deductions so. So many of the clients I work wherever are benefiting from their state and local tax deduction anyway. All right now you also Lowe worked with a lot of clients that are small businesses and maybe even larger ones. What kind of impact do you see for them. Well this. Although this may not be the most interesting topic for your listeners to big news. How much more I'm I'd rather be deepened boring let's go. Yeah. We don't need the big news really over the X. Legislation. The changes on the corporate side. The reduction over the next on corporate rate from 35 to Swanee. It is it is very substantial. Liberalized. Expensing rules going forward for asset purchases. Changes. To believe that perhaps through entities are going to be taxed. You know what most of the businesses on the S&P 500 are regular corporations will benefit from the twenties for our country. Most businesses period hurt her family owned or closely on this suspect currently operate. In pass through format which means that their profits or losses and up and the individual returns of their owners. And so. The individual rates are going to be significantly higher. In corporate rates corporates could around the taught and so there has been needed to be a mechanism. Two get some benefit overtook those amenities that are operating in estuaries and again that is most business today. I know you said you won't don't wanna be political but does. The fact that you just said the most significant changes are on the corporate side does that help or hurt those who say. It's all for the corporate entity it's not for the middle class. You know you you can no comment get a couple different ways the the US and 500 companies that are gonna benefit from this. Are owned not by. But Campbell is necessarily but their own by my 401K your 401K. To the extent that they're value. Is an enhanced by paying less corporate income tax and that's what's gonna happen. It's already happened in anticipation of the changes. You know. Folks who were saving for retirement in these kind of vehicles are gonna benefit from. So trickle down you're saying is more than just. Companies may be raising employees' wages are investing in the local plant the local factory whatever. Trickle down to your mind includes. A better return on my 41 K. I I don't that's. Really trickling down but I think that's gonna have I think it'll be interesting to watch what happens with market valuations on Monday after all of us. Talk a little bit about timeframe here those who have argued. That this does not help the middle class enough look at a ten year time frame and some of the benefits that are on the table with both the house and the senate. Expire after a couple of years so if you look long term ten years. He had the middle class might be paying more taxes if you look at it in a smaller slice of one year. That's maybe less the case tell me more. So I've been at this now for over forty years. I would tell you that to try to predict what the tax. Law and economy looks like ten years from now this is your your honor very slippery slope. I don't think cute you know they'll be another presidential election there could be in the administration who knows what what. With ten years article click click here to deal with what's in front years now. And position yourself. The best as possible and you don't understand it. This is not over yet okay and that there are significant differences. At least some worry that I've identified. This still need to be reconciled to rejoin. Congressional committee procedure on this conference. Between the house and senate bill and so among these things are not yet sat. And some of them you know they're in need either choose one of the versions Ausmus or there need to reach a compromise. Or they me fool around with effective dates. But this is still cannot a process to go through. I'm. 89. Significant items that are not yet. So so spawned by any means. Do any of those eight or nine. Changed the scorecard. Again I hate to put in the political context we always hear people debating all this is great for corporations could hurt the little guy. Or no or someone like Chris Collins says 90% of Erie county taxpayers will see some sort of benefit from us. Do any of the things they're still pending change which one of those statements becomes the valid hypothesis. Yeah I think like you know everybody has their own individual tax properties so so the impact of this. Will be very fact specific. But it's just you know to give an example of some of Lou what I view as the significant items that are not yet. Resolved. He Affordable Care Act mandate is. Is kept in the house version the repeal by the senate and the side. The mock or or some of the 1% voters out there at least the status of these state tax. Which protects beer you very few. Tax filers less well under 1%. But so that it doesn't affect it's a big deal and the senate version would. Would simply increase the exemption that exists now. Where is the house version would completely repeal estate taxes if you're one of the few folks that are impacted by an and I work with some of those folks. That's huge. And I imagine too as they tinker on things like that OK let's say we decide to eliminate the estate tax. And then if there whining to be revenue neutral the they would have to change a whole bunch of other things to go. Party well or do we just look at death adding on to the deficit. Yeah you know. So we'll the other could be some some horse trading like. You know one that it's much broader impact an amateur I alluded to earlier is the alternative minimum complex. The house version of the bill would repeatedly empty where's the senate keeps it and that affects a lot of folks. Dave Barry is what this is a CPA with freed Max accused of one of the directors of the attacks practice if you like to what chime in and ask a question or two we'd love to have you aboard. We have about a ten or eleven Mormon is to do that 8030930s. The number. Dave before we take a break and then move on to those phone calls. Can you bottom line it for me is the average person again I guess I use average. Based on family a median income in New York State 71000. Is the average guy going to benefit from this. Be hurt by this or do we just not know yet. Yeah I don't think we know yet I've run some scenarios just just a couple on my own and and coming up with a tax reduction. But again as always just earlier everybody's got their own circumstances a player who may get. Who may experience a probable dismissal kind of like. The dirty little secret that hasn't been highly publicized the colossal of the personal exemption. If you've got you know 34 kids you know middle income family. And you're losing personal exemptions for those kids of 4000 dollars a clip. Sickened more than offset the increase in the standard deductions so that could be a negative scenario. Explain that to me and what's going away there. So slow along with standard deduction the standard goes up to. Suit or let that I'm sorry. Point 4000 for married couples got my number okay. Personal exemptions are gonna be repealed so if that married couple. Is. You know 33 kids. In their than most exemptions currently there were a little over 4000 dollars each. They're increasing the standard deduction is this. Let the got twelve verses ten a 2000 dollar loss theoretically. OK when we come back for our break we'll take a couple of phone calls and and try to get more specific examples on the table. What would this mean to you we're gonna try and sorted out with Dave Barrett he's a CPA with freed Macs are more to come it's hard line news radio 930 WB and it's hard line on news radio 930 WB and this Dave Tebow. GPA Dave Barrett is here from freed Maxi he's one of the directors of their tax practice we are talking about tax reform. What do the changes mean to you what will it mean to the middle class what will mean to the high earners. He seems and they've had to I don't want to up towards him out here but to for the sake of recap. You seem to be saying that there are some benefits. For the middle class depending on individual circumstances but you do see some benefits there for the corporate interest or the higher earners by summarized correctly. Exactly yes yes. All right then with that let's launch as a mom calls and get even more specific examples see how it affects you run in Williams though Europe now good morning. Good morning Dave and Dave are you guys today glad you're here. Thank you I just want to say that. I think there's going to be negative impact on a lot more taxpayers and some may realize. I'm 72. I'm retired. My income is just around 100000 dollars a year. But. I itemized deductions are over 30000 dollars because of property taxes and state income tax. And losing knees deductions is gonna cost thousands of dollars. Dave jumpin. Well yeah you know it's possible. Understand that. He rates or applying to your taxable income are scheduled to be lower and that's wanted to. Not totally resolved issues but for the most part it would be lower. And. Yes you do need to run the numbers and all I have run them gave him in losing. The itemized deductions and replacing them was about 121000 dollars or a single Payer. Minus the personal exemption. I mean that takes it down to 8000 dollars moon. It's it's really a killer and I'll likely. Need to sell property and animals out of this state. All right now tell me specifically again. Where your losses are coming from what is it doing Q. Well I'm losing itemized deductions for property taxes. And likely force state income tax. Property tax is over the 101000 threshold for what's it's like 21000. Team. Yeah so also he got a combination. Scenario there that. The other there're. He used the term winners and losers but there there are folks that will be advantaged by this and and Spanish and that is the case with really every. Tech. Is it possible Dave to say. All for all how many out liars there are is is is he and out liar. Or is is he just you said sort of spin of the wheel kind of guys some people will lose some win. You know I. I would be speculating exactly is now wire I think you're. I think could be a combination of both scenarios. All right John in Rochester quickly Europe now hi. They gave they gave Dave you are right pull it affects. The bond. Senator Schumer governor call Warren. Brian Higgins opinion of the tax bill they basically called false. That are your opposition which also anyway my question is subchapter S corporation politics can be affected. This. This subchapter S corporations that he could benefit out of this. All right Dave quickly before we explain what happens to explain what this. We're told subchapter S corporation is one of the enhanced through entities businesses that I mentioned earlier typically used and and family owned circles fields and aerials. Very very common way of operating business straight now. The results of being calmer a lot of about corporations and all right through to the 1040 individual tax return of of its owners. In our text accordingly. Rate for individuals will be higher than ten regular corporations at this point so so there needs to be a mechanism to sort of balance. That Al in again just an agreement that does not complete agreement between the house and senate versions but they will ball. Allow some portion of the flow through income. To be taxed at a reduced rate point 5%. In Turkey Kosovo would believe this house bill. And and they and they keep production. Awful I'll keep production of about 23%. In the case of the example that escaped an excellent player of the effect of bringing you the effective tax rate and flow through income from past corporations. Closer to what. You know General Motors tech tree will be. All right we have about a minute left maybe a little bit longer than that. Tell me as you watch all the analysis and hear all the discussion about this on TV. Is raising them if you yell at the radio burial of the television is there one really big false without the that you need to correct. Well I think I think what I mentioned earlier the in the state local print selection and it is it is over done. I think that the fact that will not be as dramatic as it is some of these reports are saying. And I and I again as I literally her uncle lost in the personal exemption. Has been very under publicized and we'll go to Asia a negative impact on a lot of family and deals. Are all generalization good for the middle class bad for the middle class. I think it will be. You know again that's my speculation people in the numbers come down I think to be slightly better. For the middle class or will will need to let that play out just me or April 15 I have a better feel for ago actually. All right that's a date and everybody's calendar but I'll output that specific note and we'll have the on again Dave thanks so much fair for joining us good stuff this morning. All right good glad glad you could be that's Dave Barrett CPA with pre Max.