JOHN BRUMMETT: It's complicated ...

Posted: October 26, 2017 at 4:30 a.m.

Who knew cutting income taxes would be so complicated?

Everyone who pays them, most likely. But President Trump may or may not pay any, or much. All we know is that his only return that got leaked in part to the New York Times showed losses of nearly a billion dollars that conceivably could have offset federal taxes for years.

He wants to cut income taxes--period, end of his interest--so that he can declare victory and brag on himself, which appears to be the purpose of his presidency.


Who can forget repealing Obama-care, which he also hadn't realized was complicated?

When the U.S. House of Representatives passed a repeal-and-replace bill, he threw himself a victory party in the Rose Garden, where he announced that he was doing a good job. Weeks later, when the Senate was bogged down on the issue, he said the bill the House had passed--the one he celebrated--was "too mean."

In a matter of minutes, Trump embraced and then denounced the compromise of Democratic U.S. Sen. Patty Murray of Washington and Republican U.S. Lamar Alexander of Tennessee to make an appropriation to continue for two years the Obamacare cost-sharing subsidies he had discontinued two days before.

They always said Bill Clinton tended to agree with the last person who lobbied him on an issue. Trump seems to agree with his latest mood swing, or the last cable television talking head that popped up, or the latest reality a staff member or general superficially educated him about.

So, on Tuesday, Trump went on Twitter to say there would be no changes to anybody's 401(k) savings plan from the tax-cut bill, which, you must understand, does not exist.

Members of Congress and their staffs are working on it while Trump tweets.

The challenge to those doing the work is reaching the 51 votes to pass it in the U.S. Senate, a task seeming to require offsetting the lost revenue to appease the true deficit hawks in the Republican caucus.

One idea had been to cap the tax-deferred contributions a person could put in his 401(k) at $2,400 a year, allowing him to contribute more than that to what's called a "Roth conversion," meaning a device from which currently owed taxes are withheld, and then withdraw those conversion funds--presumably when retired--without owing any taxes at that time, since they'd already have been paid.

Here's the first thing you should know about that idea: It is an accounting maneuver designed to generate more tax revenue now from retirement savings and defer the taxpayer's benefit to later. It's like this: Pay your retirement savings taxes now, not later, because government needs the money now to afford cutting your regular taxes now.

Here's the second thing: The maneuver was being considered because the only other evident means of offsetting tax cuts is from spending cuts. Those would be more politically problematic than changing 401(k) tax rules, considering that not everyone has a 401(k) and many who have them can't afford to put more than $2,400 a year, or even that, into them.

Here's the third thing you need to know: It's possible that some people with 401(k)s would come out ahead with the proposed change. It would depend on how much more than $2,400 they were saving; the extent to which their employer matched their contribution; what tax bracket their job puts them in currently; what tax bracket their retirement income would put them in later; how much of an ongoing wage or salary boost they'd get from the tax-rate cut, and how long they'd have left to pay into a savings plan before retirement.

It's all moot, probably, because the president hath tweeted, although often the president's tweets amount to nothing.

It's just all very complicated.

First, and again, there is, as yet, no tax-cut bill. There is only an outline that establishes three new tax rates. But we don't know yet what portions of income would fall into which brackets.

Second, we know that the standard deduction would be doubled, although it's hard to figure whether that would be offset by the proposed elimination of individual exemptions and the proposed removal of state and local taxes from itemized deductions. A Californian, by living in a state with high state and local taxes, would be hit harder than the rest of us on itemizing deductions, which, I suppose, is what a Californian gets for voting for Hillary Clinton.

There are but three things that seem firmly known about this percolating tax bill. One is that corporate taxes will be cut. The second is that any rearrangement of tax rates that reduces the top rate will send most of the new cash to the richest people.

The third? It's that Trump cares less about all that than that he gets to sign a bill and brag on himself.

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John Brummett, whose column appears regularly in the Arkansas Democrat-Gazette, was inducted into the Arkansas Writers' Hall of Fame in 2014. Email him at jbrummett@arkansasonline.com. Read his @johnbrummett Twitter feed.

Editorial on 10/26/2017