Up-to-the-minute advice, information, resources, and, on occasion, commentary on federal and New Jersey state income taxes, and the various New Jersey property tax rebate programs, and insights and observations on tax policy and professional tax practice, by 40-year veteran tax professional Robert D Flach.
Friday, June 23, 2017
TAX REFORM UPDATE
Will there be
tax reform legislation passed in 2017 (the actual question is, with the current
nut job loser in the White House, will there be any legislation successfully passed
in 2017)?You betcha, according to Paul
the National Association of Manufacturers the other day Ryan said, “I’m here to tell you – we are going to get
this done in 2017.” According to
Ryan the end of calendar year 2017 would be a realistic timeline, but he hoped
to get it done sooner.
Ryan did not
provide any real details (similar to the scribblings on a cocktail napkin idiot
Trump released as his “tax plan”), but he did call for eliminating the dreaded
Alternative Minimum Tax (AMT), the federal Estate Tax and “special interest
carveouts and deductions”, doubling the Standard Deduction, lower and fewer tax
rates, and making any reforms permanent – all
concern with eliminating the federal Estate Tax has always been how this will
affect the current step-up in basis of inherited assets.Taxpayers have a hard enough time remembering
what they paid for stock purchased three years ago – knowing what their deceased
parents paid for stock purchased in the 1960s will be impossible.
continued to put forth the ridiculous idea that taxpayers could file a tax
return the size of a postcard.This
would only be possible if the taxpayer was single, had only W-2 income, and
could not itemize – similar to the current Form 1040EZ filer.Providing a postcard option would discourage
taxpayers from taking full advantage of available tax deductions and credits.
legislation will probably not be introduced until the fall – so it is possible
that it could be passed by the end of the year (assuming, of course, that idiot
Trump, if he is still in office, does not fuck it up).But even if reform is enacted by year-end, tax law changes would most probably not
take effect until at least calendar year 2018.
I truly hope
that real and substantive tax reform is enacted this year – but, to be honest,
I am not holding my breath.
bill prohibits the wages or other remuneration earned by an employee who
performs employment duties in more than one state from being subject to income
tax in any state other than: (1) the state of the employee's residence, and (2)
the state within which the employee is present and performing employment duties
for more than 30 days during the calendar year in which the wages or other
remuneration is earned.”
So if you lived and worked in New
Jersey, but spent 23 days working at the branch office in Kansas and 15 days
working at the branch office in New York, you would not have to pay state
income tax to Kansas or New York on your wages for those days.But if you spent 35 days in Kansas you would.
This law would not apply to
professional athletes and headline entertainers.They would still have to pay income tax to
each state in which they appear during the year, regardless of the actual
number of days physically in the state.
This involves the issue of “nexus”,
which affects both individuals and businesses.
When it comes to both individual and
business state income tax nexus it is my belief that it should be totally eliminated.An individual should only be taxed by the state in which he or she lives or the
non-resident state where his or her job or business is physically located (i.e.
live in NJ and work in NYC).And a
corporation or other business should only pay state income tax on net income to
the state in which it is organized and physically located.
State income tax nexus rules, and
they differ from state to state, are truly a PITA and waste lots of time and
money for employers and businesses.
Individual states benefit from nexus
laws by receiving income from non-residents, but residents who must pay income
tax to other states receive a credit on the resident state return for taxes
paid to other states.So I expect the
actual net cash benefit to the states is really not substantial (to be fair, I
have not actually investigated nexus tax statistics).