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Mrs. Groovy and I have a very simple tax situation. Our income is $30K a year—$20K from my New York State pension and $10K in dividends from our brokerage accounts. We own our house outright, have no kids, and pay very little in state and local taxes ($3,000).

Since our tax deductions are so low relative to the standard deduction for a married couple, it would be foolish for us to itemize on our federal taxes. Here, then, is what our federal income tax liability will be for 2017.

2017 Income Tax Liability

Gross Income: $30,000
Less Standard Deduction for Married Couple: $12,700
Less Personal Exemptions for Married Couple: $8,000
Taxable Income: $9,300
Federal Tax: $930

And here is what our federal income tax liability will be under the new tax law.

2018 Income Tax Liability

Gross Income: $30,000
Less Standard Deduction for Married Couple: $24,000
Less Personal Exemptions for Married Couple: $0
Taxable Income: $6,000
Federal Tax: $600

Is Good for Us Good for the Country?

So the new federal tax law gives us a 35% income tax reduction. Yippie! That’s great for us. But is it great for the country?

I have my doubts.

Part of my concern has to do with capping the state and local tax deduction at $10K. Most of my family members and friends on Long Island pay property taxes in the $12-15K range. I have one friend in Bayville who pays $20K, and I have another friend in Woodbury who pays $36K. These family members and friends also pay state income taxes, sales taxes, and a cornucopia of additional fees, tolls, excises, and surcharges to the state.  Since most of them have state and local taxes that exceed the new standard deduction, most of them are going to see an increase in their federal income taxes going forward. Ouch!

Another concern I have is the national debt. We are currently $20 trillion in the hole. Will the new tax law curb our addiction to debt or exacerbate it? In other words, will the new tax law create enough businesses, jobs, and salary hikes to offset the lower marginal tax rates and the inevitable rise in federal spending?

I’d be floored if it did.

The only time in my life the federal government was able to live within its means was for a few years in the 90s after our primary military foe collapsed. Well, that primary military foe, Russia, has a formidable military again. And so does China. And let’s not forget North Korea, Iran, and Al-Qaeda and its various affiliates. They have enough missiles, guns, and soldiers to create a lot of mayhem.

Bottom line: I don’t see another peace dividend on the horizon, federal spending is going to keep on rising 6-7% a year forever (we’re too culturally weak to handle any spending cuts), and the national debt will be around $30 trillion when the Trump presidency ends.

Final Thoughts

Okay, groovy freedomist, that’s all I got. What say you? How does the new tax law affect you? Are your federal taxes going up or down? And does the new tax law benefit the long-term fiscal health of our country? Do you give it a thumbs up? Or a thumbs down? Let me know what you think when you get a chance. Peace.

63 thoughts on “Second Wednesday of the Month Politics: Trump’s Tax Overhaul

  1. The sunset clauses have me worried, because not all of them go 10 years, some are shorter.
    We the people are expected to ‘fight’ to keep them (aka harass our congress person), only we have seen how effective (or not) that has been. We are also getting exhausted from all the ‘good fights’ we are trying to keep up. Many of the old fogie congress people expect to be retired by 5, 7, 10 years when the clauses run out, leaving it to the new guy/gal who has their seat, in my opinion. Quite a few have stated recently that they aren’t running for another term.
    I think the FI community is reading enough, keeping an eye on things. Average Americans I think are in for confusion. From the headlines I see on articles, and the general ignorance (not bad, just not informed) state of coworkers & those I interact with in passing, I think the 2017 taxes are going to be a hullabaloo. All this hype about the new plan but what we do in April is under the ‘old’ rules. ‘Wait I thought I get 24000?’ ‘Yeah no, in 2019 you get that for 2018.’
    I’m also cautious about ‘entitlements’, some of these we pay into which is why we are entitled to them at / after retirement age (ex: social security). The term gets thrown around to mean any type of government assistance. Sometimes that assistance is needed. Sometimes that assistance is taken advantage of, for sure. Sometimes corporations or wealthy people put money in banks in the Cayman islands to avoid paying taxes on it, some corporations or wealthy people donate to charities. *shrug*.
    What irks me is we the people are expected to budget in such a way as to pay all our taxes and suffer penalties if we don’t. But local, state and federal government just ask us for more money, or reduce services if they don’t budget / spend wisely.

    I’m interested to see how my paycheck looks in February, it ought to have a few more dollars. But that’s envelope math without pre tax HSA, 401k calculated for, or post tax espp which is a %, so that might go up a few dollars too? I’m in a good financial place that if I get more money, I’ll save it, and be that tiny bit closer to FI. 🙂

    1. Excellent points, Jacq. And you’re absolutely right about the incorrect use of the word “entitlements.” I’m guilty of it too. There is a difference between the pension aspect of Social Security and food stamps. Truth be told, like a lot people, I use the word “entitlements” as a shorthand for all non-defensive and non-infrastructure spending. It’s sloppy and I got to improve on that front. Love the way your mind works, Jacq. Thanks for stopping by.

  2. Study after study has shown that, for years, the tax rates didn’t matter. The US government got a certain % of the GDP (around 18.5%). Rates at 70% meant folks didn’t show much income – they got 18.5% of GDP. Rates low at 25% on average, they got 18.5%. The US government is going to get around 18.5% of GDP, no matter where they put the rates.

    The key, like everyone above said, is to control the spending. I fear we are well past the point where we could “fix” this easily. The entitlements (Medicare, Soc. Security, Government pensions, etc.) will have to be fixed, and this will cause a lot of pain. Doesn’t matter who is in power, its going to have to be done.

    That is why I am not counting on Social Security in my calculations (even though Medicare is in even worse shape).

    1. Agreed. We’re way past the point of no return. Apparently very few Americans would be able to feed, clothe, house, educate, and doctor themselves without the government. So we will walk slowly into the abyss. I figure we got a couple of decades. That’s how long it will take to hollow out the military. And then once there are no more defense cuts to prop up our entitlements, we’ll collapse like the Soviet Union did. Should be fun. Thanks for stopping by, Mr. 39 Months. I really appreciate what you had to say. Cheers.

  3. 36k in property taxes!? That makes my stomach hurt just thinking about it…

    On the spending note. That won’t change because money isn’t marketed that way to our culture. Spending is encouraged on every commercial, and any attempt at saving or frugality (is that even a word?) is looked down upon in our culture. I have never understood this, but it’s true. I definitely get more side looks because of my saving habits.

    Thanks for sharing!

    1. Excellent observation, Sean. As long as the typical American believes his happiness is intimately tied to spending, big business and big government got us by the short hairs. We’re doomed.

  4. I have no idea if I’ll get a tax break or not. I don’t really care how much I pay, within reason, AS LONG AS that money is spent well.

    I wish congress would put half the effort they put into this tax plan into spending cuts! That’s the problem. It’s not a revenue problem it’s a spending problem.

    Until we put term limits on politicians in congress nothing will change. We do not need someone in a congressional seat for 15-50 years! When being in congress becomes your career, you spend most of your time spending money to help those who in the future election will donate and help you stay in your new career! Ridiculous. Our system is really screwed up.

    I just heard today that in just a few years our spending on just Medicaid will be larger than our defense budget! The growth of entitlements cannot continue or it will spend us into oblivion.

    I don’t have all the answers but it seems to me that we should be able to fund our government, and what it was originally designed to do for us, without going further and further into debt. I agree with another person who commented above, you can’t solve a person’s spending problem simply by giving them more money – congress is exactly the same.

    My wife is planning to retire at year end. We will then be searching for a health insurance plan to cover us from age 58 to 65. I’d love to see congress put something in place to either allow the private sector to compete better and provide more options to retirees (or the self employed), or provide a government solution (not my preference however).

    I heard this morning that the labor department just announced ( or at least they are looking into) that they will now allow small businesses to be grouped together, just like unions for example, by insurers to provide group plans. I can’t believe that they were not allowed to do that already! Good grief.

    1. You can pay the membership fee to join associations, and then be eligible for their group insurance plans. One that I know of is the Freelancers’ Union — except I don’t know how good any association’s insurance plans are. But it’s worth looking into now that there’s no penalty for going without ACA compliant insurance.

      1. Yep, good suggestion.

        I’m hopeful that by allowing insurance companies to further tailor their plans to what potential customers actually need, we’ll see better options in the marketplace. Versus ‘one size fits’ all under the former ACA requirements. We really don’t need ‘birth control’ covered at this point. 😉 That might also lower the cost.

        Alumni associations (and Chamber’s of Commerce) I’ve heard can offer some options, or so I’ve heard. We’re planning to dig into this issue more extensively later this year. Although a complex topic, I would think it would be pretty popular on FIRE blogs or any ‘retire early’ blogs because so many people need that insurance at least until they can qualify for Medicare. And after that, you’ll still likely need some gap insurance.

    2. “I wish congress would put half the effort they put into this tax plan into spending cuts! That’s the problem. It’s not a revenue problem it’s a spending problem.”

      You’re a wise man, Mike. And I’m so sick of this entitlement nonsense. No one should have an unlimited entitlement to someone else’s money. Rather than an entitlement, someone should only be entitled to a share. For instance, if we devoted $70 billion to food stamps and 40 million people were eligible for food stamps, each food stamp recipient would be entitled to 1/40,000,000 of $70 billion or $1,750 ($145.83 per month). If 60 million people were eligible, each would be entitled to 1/60,000,000 of $70 billion or $1,166 ($97.22 per month).

      Entitlements are nothing but blank-check tyranny. If the political majority has an unlimited right to confiscate your money and wealth, you’re not free. You’re FINO–Free In Name Only.

  5. Yikes, possible 30 trillion at the end of 4 years? Scary scary thought! I’m still totally on board with PFers starting their own country 🙂 is anyone going to start a petition?

    My husband gives it a thumbs down because he’s worried about later down the road. His dad, retired, gives it a thumbs up even though he lives in California, a state with some of the highest local tax in the country. We weren’t allowed to discuss politics at the table so that’s all I could gather.

    1. Lily, please send me my ID card for the new PF country. Perhaps we can call it Finonia?

      Also, if you haven’t already, try reading Atlas Shrugged. It’s not for everyone, and it’s pretty extreme, but you sentiment is pretty well captured in it. And I say “try” because it’s the biggest book I’ve ever read start to finish at over 1000 pages. Something tells me Mr. Groovy has read it, too.

      1. When I met Mrs. Groovy I new I found my Dagny Taggart. So yes, I’ve read Atlas Shrugged. (And she tells me she read it when she was a teenager, and I’m her John Galt.)

    2. Haha! I’m thinking worse case scenario and Trump is elected to a second term. If he’s a one-termer, our national debt will only be around $23 trillion when he’s done. Yeah, we got big problems in this country. And your holiday dinner table is indicative of that. Half the population wants less government and the other half wants more. Wouldn’t it be great if we could unbundle some of the federal government and allow people choose what level of federal control suits them? Hmmm. Very interesting. I may have to explore this idea for a future Wednesday Politics. Thanks for stopping by, Lily. Always a pleasure hearing from you.

  6. While I expect the new tax law won’t actually change my personal tax situation any, I agree that even if it did, that doesn’t mean it’s good for the country, especially the national debt. More to the point, if future actions are going to cut Social Security and Medicare to pay for it, that will definitely hurt me and millions of others. Big thumbs down.
    Gary @ Super Saving Tips recently posted…Damn Those Skeptics: Owning a Home DOES Build WealthMy Profile

    1. Agreed, my friend. The good news is that any major cuts to Social Security and Medicare are at least a decade away. In other words, there’s time to prepare. I sure hope my fellow Americans make the necessary adjustments. It’s not going to be fun for those who don’t.

  7. About the only thing I hate more than taxes is spending. And it’s not that I hate them directly, but how they’re used. If I had an almighty entity that took my money and then used it wisely and responsibly, I might be a -little- more comfortable giving it to them. But when we’re $20 trillion in debt…I mean, come on. $20 Trillion Dollars? You’d think the almighty entity would be embarrassed asking for any more “so they can spend it on us”. Instead, they smile and proclaim “Hey, look at us, we’ve really reduced that overspending!”.

    That’s like a severely obese person saying “Hey, I’m down to only three Big Macs a day…aren’t I doing great?”

    Regarding the idea that more taxes could fix the debt, I’ll say this: I’ve had an intimate look at hundreds of people’s financials and I’ve never seen more income fix a spending or growing debt problem. Ever.

    1. “I’ve had an intimate look at hundreds of people’s financials and I’ve never seen more income fix a spending or growing debt problem. Ever.”

      Nailed it, Ron. It is all about the spending. And here’s another dirty little secret that few dare to voice: If you are an adult with a sound mind and body, and have adopted a sound culture, you need very little government. The problem is that far too many American adults have adopted a subprime culture and are utterly dependent on the government teat for survival. Meh.

  8. Because I live in Oregon, the removal of state tax deductions is really going to hurt.

    I also have my doubts that the “boost to the economy” is going to offset the decrease in tax revenue.

    Disappointing since the plan came from the political party that preaches fiscal responsibility.

    The numerous companies coming out about $1,000 bonuses to employees seems disingenuous as well.

    No one is going to turn down free money, but a $1,000 salary increase is going to do much more in the long run than a one-time bonus.

    Especially since the companies are going to keep benefitting from the lower tax rate year after year.

    All in all, I give it a thumb down.

    1. Agreed, Nick. But a political party can preach about fiscal responsibility all it wants. If its constituents demand profligacy, it will enact profligacy. I’m reminded of H.L. Mencken.

      “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.”

  9. To resonate with you and some other readers, I’m all for lower taxes and it’d be great to see a repeal of the 16th amendment (federal income tax), but spending is the bigger issue.

    If we as individuals have to cut spending to live within our means or end up on the street, I wish the government would too.

    But that’s what separates the parties who can print fiat currency and those who can’t.
    Josh recently posted…What Is the Dime Holding Up a Dollar in Your Life? (Do You Have the Best Financial Priorities?)My Profile

    1. Totally agree, Josh. I think the Founders two biggest mistakes were 1) not limiting the amount of money the federal government may confiscate from the citizenry, and 2) not limiting the amount of debt the federal government may take on. We’ve had over 200 years to correct those mistakes and we blew it.

  10. I’ll pay less like most folks next year but not sure how much. My income will be cut in half since I started part time last Oct, so that factors in as well.

    Either way, you’re correct that neither party has any desire to cut spending or cut the deficit. This is of course very troublesome going forward…

    1. It is troublesome, my friend. The only way to stop the hypocrisy and the insanity is for we the people to demand less from the government. If politicians got voted out of office for increasing government spending, they would stop increasing government spending. But asking the government for less is not in our DNA. We love the idea of getting something for nothing. Sigh.

  11. I don’t think it will surprise you to know that I have very strong feelings about a lot of aspects of this tax law.

    To stay off the soap box today, though, here’s what I’ll say:

    1. I’m with you. This will be good for me in 2018 and I believe it will be bad for the country.

    2. I think that people are severely overestimating the benefits that they may see from this bill.

    (a) The bill changes the measure of inflation, which means that everyone’s taxes will go up faster than they would have under the old law. Depending on where in the tax bracket people fall, the tax cut they see next year may disappear within a few years.

    (b) In order to make the corporate tax cuts permanent, they had to make the individual tax cuts sunset. This means that in 10 years everyone’s taxes shoot back up to the old rates, while the corporations keep their tax cuts. Plus, they keep the new inflation measure, so everyone’s taxes will be significantly higher under this plan in 2028 than they would have been under the old law.

    Thanks, as always, for getting people talking, Mr. G!
    Matt @ Optimize Your Life recently posted…Mapping Your Route to a Better LifeMy Profile

    1. Agreed, Matt. Quick question. I’m a little bit fuzzy on (a). Are you saying the upper threshold of each tax bracket is pegged to an index that under-reports inflation and salary increases will soon overtake those those ill-pegged brackets?

        1. Oh, Matt, I’m sorry. I have another question. How can the current tax law make the corporate tax breaks permanent? In other words, can the current Congress tie the hands of future Congresses? What if a future Congress wants to reverse the 21% corporate tax rate and bring it back to 35%? It seems to me that the only thing that can legally tie the hands of future Congresses is a Constitutional Amendment. I guess someone in the next Congress will have to bring this matter to the Supreme Court. But then again, why isn’t someone in the current Congress initiating a lawsuit? I don’t see what legal authority the current Congress has to make anything permanent. Something’s rotten in Denmark.

          1. It is not “permanent” in that it is unchangeable. It is “permanent” in that it is indefinite. The word “permanent” has been used more as a point of comparison between the corporate changes and the individual changes.

            The individual tax cuts automatically disappear in 10 years and everyone’s taxes go up. The corporate tax cuts stay in effect until some future Congress proactively changes them.
            Matt @ Optimize Your Life recently posted…Making the LeapMy Profile

  12. I’ve got a post on the new tax law coming out next Tuesday, a potential opportunity for retirees to benefit. I say in that article that I view this as “limited time opportunity”. Taxes will most certainly go up, because we all know governments will most certainly not reduce their spending.

    Enjoy it while it lasts. It won’t be here long.

    1. “Taxes will most certainly go up, because we all know governments will most certainly not reduce their spending.”

      Man, those are ominous words. Looking forward to Tuesday’s post, my friend. It should be a real barn-burner.

  13. You have brought up many concerns that 65% of the population have. They are all valid. I am fortunate that my taxes in Pa are not much higher than yours. I have friends in NJ and NY who pay $20K plus per year. On the bright side, my paycheck is going in increase by a few bucks in February.
    Dave recently posted…The Benefits of a Balanced PortfolioMy Profile

    1. Agreed, Dave. It’s going to be interesting to see how this all plays out. Government sucks, so I’m glad when it gets less of our sustenance. But then again, so many Americans are dependent on the government teat. Something’s got to give. Either those who pay become more complacent slaves or those who suckle become more self-reliant.

  14. I used one of those online calculators and it looks like our taxes will drop next year by about $3,000. But, like you say, is what’s good for us good for the country?

    I have mixed feelings about that. One the one hand, I think governments have a tendency to mismanage and overspend. I grew up in Puerto Rico, which is currently in a quasi-bankruptcy, and can tell you that I saw bad government services firsthand for most of my life. And that’s a high-tax jurisdiction.

    Now in Florida (a low-tax state), services seem wonderful to my eyes. Almost no holes in the roads, agencies that answer the phone and have functioning websites! So my impression is that a well-managed $100 is better than a mismanaged $150.

    On the other hand, spiraling public debt is a problem. After all, it has to be paid back. And my understanding is that the biggest national debt culprits (entitlement programs) are political bombs that no one wants to touch.

    So I’m happy for myself, but worried about the debt.

    1. Hey, Miguel. Couldn’t agree more. I’m not a government fan, per se. I worked for a municipality on Long Island for 20 years and in my small corner of government, the government employees that I worked with were anything but “public servants.” The amount of contempt my co-workers showed for the taxpayers was appalling. I would say we gave the tax payers about 50 cents of service for every dollar they surrendered to us in taxes. And I hope I’m wrong, but I don’t think my corner of government was an anomaly. So what are Americans to do? Just keep giving more money to an inept entity? Lament when the inept entity gets less? Very frustrating, my friend.

  15. Hey Mr. G. I think I have mentioned to you before my wife and I live in the Chicago metro area. Not as bad, but similar to your family in terms of property and state tax.

    We will probably take a hit on our taxes, but I have not put pencil to paper yet. My only hope is the corporate tax rate cut will encourage company’s to increase their dividends more rapidly.

    I’m with you on the national debt. And the new tax code only makes it worse over the long term. I just don’t get it.

    Tom
    Tom @ Dividends Diversify recently posted…I’ve Heard Smoking Used To Be CoolMy Profile

    1. Yeah, I look at our national debt and this tax overhaul, and I don’t see how things end well. At some point in the future, the feds won’t be able to borrow, and everyone who is dependent on the federal government for income or business is going to take a hit. My only advice to people is to get out debt and don’t depend on government pensions, Social Security, and Medicare. It should be interesting, my friend.

  16. I’m from California. You are going to crack up on this one, but California legislature is introducing a bill to allow “donating” to California as a charity and getting a tax credit in return, allowing it to be a deduction. These boobs in our legislature never cease to amaze me on ways they can keep the money flowing!

    It won’t impact us either way because we paid off our home and 2 rentals and don’t itemize. I think the new tax law generally encourages people to have less debt. Will they do it? Yeah, right.

    1. Haha! We’ll see if that flies. If it’s not mandatory “donating,” I imagine a lot of Californians will refuse to make a donation to the state. If it is mandatory “donating,” I’m sure the Supreme Court will view that as a tax. And I never considered the cap on state and local taxes as a nudge to pay off debt. But you’re right. If you’re debt free, the bite of the SALT cap is a lot less painful. Love the way your mind works, Susan. Thanks for stopping by.

  17. So I have not made the geo-arbitrage move (yet). I live in NJ and this new bill will hurt a bit. Eventually, I’m going to lose part of my property tax deduction as my combined SALT deductions will be over $10K. The new bill actually got me started on the “we need to leave the northeast” campaign as I’m pretty pissed off at how homeowners in high tax states were targeted here. This won’t hurt in 2018 though as I prepaid my 2018 property taxes.
    Jason@WinningPersonalFinance recently posted…Living One Dream and Focusing on The NextMy Profile

    1. I hear ya, Jason. When I was back on Long Island, the property tax bill for my one-bedroom, 600 sq ft condo was $5,400. And that was back in 2006. The property tax on my three-bedroom, 2,000 sq ft home here in NC will be $2,100 in 2018. So my property tax is easily one-sixth the property tax of a comparable Long Island home. And believe me, the public services are just as good down here in NC as they are in NY. Hang in there, Jason. You have my sincerest sympathies.

  18. I’m torn on this whole tax restructuring. I think we’re going to make out ok, like you our taxes are pretty simple, no property, etc.

    But we now have a S-Corp deduction, and some other stuff, that should dump money into our pockets. Great!!

    And I think it’s actually a good thing to slap the hands of the states who justified their own enormous taxes by saying, “Oh, you can just pay less to the feds”.

    That being said, I feel like there’s other things that could be done with the money, like I don’t know… providing universal health coverage? Just seems a bit stupid, especially since a large majority of the cut is going to folks that don’t really need it.

    More importantly, it just rained buckets here… should we go pick up syringes and condoms off the beach as our surfer friend recommended?

    1. Thank you, Mr. WoW. There’s a lot of level-headed and honest reflection in your comment. I knew there was a reason why I liked you so much. And funny you should mention syringes, condoms, and other assorted beach detritus. I was thinking of another RTT, but with a catch. Any chance I can get you and Mrs. WoW to team up with Tonya from Budgets and the Beach?

  19. The generous tax deduction your Long Island friends have enjoyed heretofore was a subsidy by the feds of profligate NY and LI governments who tax at a high rate. Thus whether a tax change is “good” or “bad” for the country depends upon whether your ox is getting gored or someone else’s is.

    As for the standard deduction, I will have to talk to my accountant about this. I have itemized deductions since the early 1980s, particularly after I had to figure out depreciation on my four-plex rental house. (I didn’t. I hired a CPA in 1984.)

    Now that I am in retirement I’m looking at expanding the real estate holdings as well as buying a small business. These should expand my deductible expenses appreciably. Moreover, I need to earn at least $6500 for a Roth contribution and an similar amount to put into my HSA. So I am looking for some independent consulting gigs. I may run that money through a Chapter S corporation to be taxed at a lower rate. Idunno.

    I really need to talk to my accountant. And if anyone needs a full stack developer give them my contact info. (If the gig is writing Ethereum solidity smart contracts, I’ll pay YOU.)

    1. Ah, Steve, you never fail to bring a smile to my face. You are absolutely right about the high-tax states and regions being profligate at the expense of low-tax states and regions. And I’m totally on board about residents of Blue States finally paying their fair share of federal taxes. I just think our transition to a simple flat tax should be gradual. In my mind, ten years is a fair transition. Year one, you can only claim 90% of state and local taxes, 90% of mortgage interest, 90% of alimony payments, etc. Year two, you can only claim 80% of state and local taxes, 80% of mortgage interest, and so on. You get the idea.

  20. Good for you. We are like your Long Island family in a high tax state. Luckily with the destruction of our home, the property taxes are going down by about $10,000…This will definitely factor into the size home we move into going forward.

    While I like money, I am also a bit skeptical of running and growing a deficit. Seems like a bad idea but for some reason the government just doesn’t care. Time will tell I suppose.

    1. “While I like money, I am also a bit skeptical of running and growing a deficit. Seems like a bad idea but for some reason the government just doesn’t care.”

      So true, and so sad. No, the government doesn’t care. It will only care when we care. Or better yet, it will only care when we resolve to be less dependent on the government teat. And that sadly isn’t happening anytime soon. We’re too culturally weak to survive without cradle-to-grave government. My only advice to people is to be as financially sound as they can. When the government collapses, only those with money and no debt will escape misery. Sorry to be such a downer, DDD, but our national debt is really messing with my sangfroid. Aaarrrggghhh!

  21. Holy buckets those property tax numbers are outrageous!!!! You guys were smart for leaving that area. I’m happy about a lot of the new tax law changes but have similar concerns as you. Our plan is to ride the wave while making the very best financial choices we can (i.e. keep kicking it toward debt freedom and FI) and to at least be prepared ourselves when it comes time to pay the piper. Then at least we’ll have more money to help others and not be at much risk ourselves.

    1. It’s bananas. Just looked up the per pupil spending of the school district my friend supports with his $36K property tax bill. In 2013, the per pupil spending was $27,646. I’m sure it’s over $30K today. And the sad truth is that you could spend a third of what is currently spent on those kids and those kids would do just as well academically. Anything they’re learning in high school can be learned with a library card and an internet connection. And those two things cost a heck of a lot less than $30K per pupil. Meh. But there’s no sense arguing with my fellow Long Islanders. They’ve really drank the government-is-salvation Kool-Aid. The only recourse for Mrs. Groovy and I was to leave. We now have a lovely home and our property taxes are $2,000 for the year. And government services down here in North Carolina are just as good as New York. And that goes for the schools. NC’s per pupil spending is easily half of New York’s and our kids do slightly better on the SAT. Thud! That noise you heard was me dropping the mic.

      1. While I do feel school spending can be cut, it’s not exactly what they are spending on each individual pupil per year. In my 10 years in education, I have seen schools have to add on TONS of new staffing for more social programs like social workers, speech pathologists, and a whole ton of highly paid professional staff to support more students in areas that used to be supported at home.
        This adds to the spending far more than them spending $30k (average across kids) for books or staffing for regular education purposes. In higher tax states, which people with more special needs tend to gravitate to, students get a lot more support throughout their education than in lower tax states (at least from where I have seen it). Districts now have entire programs filled with support personnel that costs $100k per person and are required by law to serve. There are actual counties/towns in our state people will move specifically to for the services offered in a district, which tend to be higher taxed areas as well.
        I’m not versed in the entirety of the situation, but the averages don’t always show the picture in comparison across states and services offered.
        Kate recently posted…The Frugal Momster Looks Back at Our 2017 ExpensesMy Profile

        1. Oh, I’m sorry, Kate. Somehow I missed your comment. And you’re right. The averages don’t always paint an accurate picture of the situation. And that makes me doubly frustrated. How can a layperson like myself get an accurate picture? Every statistic I see on school spending is basically the per pupil statistic. It would be nice if school districts provided more user-friendly transparency. I’m sure if I pored over a particular district’s budget line by line, I could figure out how much of the per pupil spending goes to classroom instruction, support services, sports, lunch, maintenance, etc. Call me a cynic, but I think our education bureaucracy purposefully shies away from true transparency because it has something to hide. I hope I’m wrong. But I really appreciate your comment, Kate. It made me step back and think.

      2. LOL, I hear you, Mr. Groovy. Our state’s per pupil spending was just a hair under $12k in 2015. You can send your kid to a private school for that kind of cash, yet we are seeing serious shortfalls in our public education system. And it’s not necessarily for a lack of good teachers. Although some lack, I know several who are phenomenal and worth their weight in gold. I’d love to see the transformation in the public education system if the Groovys or some other fabulously frugal person could get their hands on the budget. 🙂

        1. Hey, Laurie. I’m definitely a less is more person when it comes to government. And by less, I don’t necessarily mean less spending. I mean less invasiveness. For education, I prefer the food stamp model. Every child would get a school stamp to buy education. The value of the school stamp could be equal to the current per pupil cost. Or it could be less. Or it could be more for students with handicaps. But whatever value of the school stamp, the following rules would apply.

          1. You must have at least a half hour of math instruction daily.

          2. You must have at least a half hour of English instruction daily.

          3. School stamps may be used to buy education from a public or private school or both. A parent, for instance, may send his or her child to a public school for math and English instruction first thing in the morning and then to a private school that specializes robotics for the remainder of the day.

          4. Unused school stamp money would go into a 529 account for the child.

          5. At age 25, any left over 529 school stamp money may be used to buy a home or start a business.

          This is all we need to revitalise American education. Free people with a little money and few constraints will do amazing things.

      3. It can be hard to quantify some of the cost data for schools, but some stats are hard to misinterpret. In VT our governor Phil Scott points out that we have a 4:1 ratio of support people (including bus drivers, cafeteria staff, etc) to students. Three things stand out on this:
        1) That’s the lowest ratio in the nation
        2) If we made it just 5:1, it’d STILL be the lowest ratio in the nation
        3) That means we’re basically at least 20% overstaffed compared to the next “best” state system.
        Scary stuff indeed. Our $250k house has a property tax of around $6k. I think I’m beginning to understand why!

  22. $20 trillion just doesn’t have the impact as

    $20,000,000,000,000

    That’s a lot of 0’s!

    Our tax situation will change since we got married in 2017 but we’ll bump down a bracket. Not sure how much it’ll actually impact us from before we got married but I’ll let my accountant (my dad) figure it out 🙂 We probably won’t itemize either, but we’ll be pretty close to making that call so we’ll see. Since we’re a new construction we’re only taxed on the land value – not the building – so our property taxes are like $1200, as opposed to about $6k I’d expect.

    $36k seems crazy to me!
    Dave @ Married with Money recently posted…Why the Spend Less or Earn More question is BSMy Profile

    1. That is a lot of O’s. Scary. And, yes, $36K in property taxes is hard to fathom. And if you saw his house, you’d be even more shocked. It’s a nice ranch (about 2,500 sq ft) on about an acre of property. Hardly a mansion. But when my friend bought the house it was in a middle-class town. Well, fast-forward 30 years and that town has now become decidedly upper class. And the school district it resides in is Syosset. The per pupil spending in that district was $27,646 in 2013. I’m sure it’s over $30K per pupil today.

  23. Our taxes are going down, but I don’t know how much. I’m pretty sure that it’s not 30%.
    – Blog income reduction. Yes! It is a pass through and we get 20% deduction.
    – SALT. We were under 10k in 2016, but not sure about the future. It will be pretty close.
    – Tax rate. That’s a reduction for most people including us.
    – Long term capital gains. I haven’t seen much discussion here. Should be better because the tax bracket increased. Not sure about this one.

    It looks good for now, but our taxes are complicated. I won’t know until we do it. Yeah, I don’t like the national debt either. We’ll have to pay for it at some point. Reduction of services, taxes, health care, or something… Nothing is free. Trump is already gutting various protection agencies.
    Joe recently posted…What if you always maxed out your 401(k)?My Profile

    1. Wow, Joe. Thanks for the breakdown. I’ve heard a lot about the dreaded “pass through” deduction, but I most confess that I’m totally clueless about its meaning. Definitely have to rectify that. Maybe today. And you are so right about the national debt. The day of reckoning is coming. And it won’t be pretty. Thanks for stopping by, my friend.

  24. From the looks of it we are only going to get an extra $1k or so back but with all the changes in our household lately, there will be too many variables to account for.

    My biggest concern is how much push this had through the system when most of the politicians didn’t know exactly what version they were voting on. For now, I’m happy they left the retirement system more or less intact. I have mixed feelings about the 529 change.

    Our national debt is way out of hand and this new law is going to make it way worse. I don’t understand how a group that was so angry for the last 8 years about the national debt made a bill that is only going to add to it.

    PS can’t wait for our taxes to be that simple 😉
    Budget On a Stick recently posted…2018 Goals, Not ResolutionsMy Profile

    1. Agreed, BOAS. In this age of two-thousand page bills and last-minute horse trading, no legislator knows for sure exactly what he or she voting on. And in a country that was really dedicated to liberty, the tax law would be written on one page. In fact, I would go so far as to say it would be written in two sentences. Here’s an example.

      Every household member is entitled to a $10K standard deduction. All income regardless of source is taxed at 15%.

      But we can’t have a demilitarized tax code. It’s got to be weaponized so our politicians get bribes (i.e., campaign donations) and those with money can screw those without.

      And you are so right about our hypocritical political class. When the Rs are out of power, deficits are a scourge. When Rs are in power, deficits are cool. And the Ds are no better. Do you think they’d be all for illegal aliens and amnesty if those potential voters were likely to vote Republican?

      1. The whole system is a hot mess and the new bill just doubles down on it. I like the concept of flat taxes like that or even just return-free filing.

        Not sure why I have to figure out my tax bill when the government already knows how much I owe them…

        1. Oh, man, I like the cut of your jib. Keep it simple. Corruption battens on complication. I’d even go so far as to get rid of payroll taxes. Flat tax for everybody. Robust standard deduction to ensure a little progressivity. And percentage-based budgeting on whatever revenue the simplified tax code brings in. 25% of federal revenues go to defense, 25% to Social Security, 25% to healthcare, and 25% to all the other stuff the federal government does. If the federal government can’t save the world under that arrangement, the world doesn’t get saved. Oh, well.

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