tv Washington Journal Pete Sepp and Josh Bivens CSPAN April 15, 2019 1:48pm-2:44pm EDT
pete sepp, president of the national taxpayers union, and josh bivens of economic policy institute. you may have heard some of the conversation the first hour and how it is affecting some of our viewers and listeners. how do you think, pete sepp, the 2018 returns look for most people? guest: the reductions have been that 80% of filers would experience some kind of tax reduction on their returns by percent and increase. the remainder, roughly even. it seems to be working out that way. we will not know for sure until the filing data is in and more people are actually delaying their filing, applying for an extension. that is going to have some important data we will not know about for a little while. economically, i think the honest answer is it is too early to tell with the overall impact is going to be. you see signs in employment and wage growth and fixed investment, but whether that is short or long-term no one can be
sure. plus, the fact that the intent of the tax reduction law really was not to deliver immediate kinds of boost through the corporate reduction. it was to affect investment over the long-term. that is hard to pin down, especially when you have other things going on like the trade war that the trump administration has launched. that impacts the economy in a negative way. your take on the impact of the 2018. what you think it looks like compared to previous years? guest: in terms of individuals doing their taxes, it depends on their circumstance. one think we should keep in mind is the centerpiece of the law of 2017 was a corporate tax reduction and that is not affecting individual people's returns. the way that is going to filter through the economy is people who own corporate equities are going to get higher dividends, higher capital gains in future years. it has probably not filter
through this year. that is skewed for the top set of people. for the rest, it depends on whether people get business income. one of the other big pieces of the law was deduction. for people who get most of their income from w-2 wages, i think any effect of the law is going to be year-to-year variation in what they make. they are not going to see a big effect. economy wide, there is little evidence that the tax cut has done anything at all to help boost the economy. i do not think it will. it certainly has not so far. host: you mention people have delayed in filing this year. is that because of the newness of the law or do we know? guest: i think it is the newness of the law. we do annually a study of complexity administration the tax system. areof the big questions was the 15 or 20 million folks who longformuse the
with its associated schedules to take itemized deductions will those people shift into the newer form and opted to fill out fewer schedules, take the standard deduction instead? it seems that that trend is being confirmed right now. that is important because one of fromew supplication gains this law was more people would take the standard deduction. that could mean a reduction in paperwork borden's -- burdens. and moret reduction people taking the standard deduction means fewer people are itemizing. ofks like that is where some the bite might be for some taxpayers. they are not able to deduct with the use to. i'mt: cards on the table, not a big fan of the law. one piece that was decent was the increase in center deductions for supplication --
simplification. it is hard to imagine too many people being made worse off. if you do not have 24,000 dollars in deductions before, the standard deduction gives you that much and you are fine. taxes change for people year-to-year. there income changes. their employer withholds more or less in a given year. people are trying to figure out why their taxes are changed. i do not think the ship from the bigger standard deduction and some of the caps on the itemized is the thing driving it. bivens anduests josh pete sepp with us to talk about the effect of the 2018 tax returns of the 2017 law. we welcome your comments and clause -- calls. republicans, it is (202) 748-8000. for democrats, (202) 748-8001 .or all others (202) 748-8002 some of the effect of the tax law the wall street journal.
the wall street journal is reporting the biggest winners were shareholders. tax savings contribute to a banner year for banks, but the passingest banks are $120 billion in combined profits. stock buybacks have surged by $20 billion from 2017, more than the tax savings. they write businesses have been electing to give workers short-term payouts for morale rather than long-term increases hadage the economy experience in previous decades. wall street journal says the trend of bonuses rather than a permanent wage increase continues. a researcher -- report -- a recent report by the federal reserve says -- is not permanent and can be withdrawn. we have seen this in a number of industries across the country. is this a new fixture that is likely to be a permanent fixture instead of a pay raise?
a bonus because part of the equation. guest: i hope not. the intent of the tax-cut law was to increase private investment over the long term as well as productivity, which shows up in wage growth. a former cbo director testified at a hearing about 2.5 weeks ago on the short-term impacts of the law and stressed that is not where we should be observing the beneficial economic impact. he thought that private investment is up a little bit. gdpd investment as part of trending northward. some of the wage growth trending northward. can that be attributed fully to the tax-cut law? no, probably not. you cannot isolate policies that easily. it is an encouraging sign that two or three years from now we might still have a little bit of wind and the sales of this economy. host: josh bivens, not a fan of
that tax law. part of it reduces the corporate tax rate from 35% to 21%. what have we seen at the impact of that? guest: you have seen a big increase in after-tax probability -- profitability of corporations. some of that has been given to shareholders in the form of higher dividends or a capital gain because of a stock buyback. that is a set of benefits that accrue through the top. the top 1% owns four deep -- owns 40%. that is not a broad-based income increase. i think the tax cuts they hope eventually that lower corporate forrate does filter down more tangible investment and increase productivity. the evidence is weak. if you look at when the tax-cut was passed, you see no change at all the trend of private investment.
they always say it might take more time and it has not happened yet. i think even over time i am dubious it will happen because we have had record high after-tax corporate profitability before the tax-cut but investment was sluggish. that says to me that that was not the thing holding back investment in this economy. low profitability was not the thing holding back investment. profitability was high. i do not understand the description that says it was high before and let's nudge it higher and that will turn the tables. research for the economic policy institute. what signs are looking for for the effect of the law a month, two or three or four months out. -- out? guest: is tough in that short term. corporate taxes went from 35% to 21%. you see that in the data. corporations had to pay a lower
rate of taxes on their profits. you see that jump. what you look at over time, i think the linchpin of the law in terms of its effect on helping a broader group in the economy is what happens to private sector investment. the economic case for why this might be good for a broad group of people as it will spur business investment. you look at trends in business investment and that is what i'm focusing on. in terms of the overall effect down the road? guest: most certainly. towards geared primarily a major reduction in corporate income tax. the other key component is the so-called 100% bonus depreciation allowing companies to write off upfront any of the investments they might otherwise make without the complex depreciation schedules. the problem is that is only good until the year 2022. you already have a clock ticking
for many people making investments in corporations and thinking either we need to do it right away or we might as well forget it. that is a key defect of laws like these and that if you do not have a provision that is consistent over time it becomes more difficult to measure in terms of its impact. host: what does the national taxpayers union do? nonprofit,re a nonpartisan citizen group. we think that the administer as important as things like rate and distribution. unfortunately, this law, with the exception of a few of the individual provisions such as shifting people toward the standard reduction, does not do much work supplication -- for simplification. the national taxpayer advocate
there is a fair amount of research that indicates that higher taxes have negative impact on economic growth. tax foundation, 27 pieces of literature done over to decades, three bang decades -- two decades, three decades, actually, found a negative correlation between high tax rates and economic austerity. as for the trickle-down effect, there has been research going back and forth on the effects of these laws. a lot of it depends on how they are designed. the across-the-board reductions in the 1960's after john f. kennedy's death were measured at increasing employment by 0.5% to
0.8%. revenues actually increased to the federal government after the enactment of the law, which was before. you can't isolate those impact, the evidence is mixed. host: do you think that the trump administration learned anything from the reagan experience? guest: not really. i am with michael on this one, cutting taxes to the richest households is not a strategy that paid off. at least under the reagan administration they did some very large increases as well. the 96 tax reform really did try ,o do some simplification cutting down avenues for gaming the system. the 2013 law learned nothing from that. past so hastily, maybe it was one hearing in congress? maybe zero? and the changes they made to the
corporate side just left huge loopholes all over the place. you mentioned it before, twice as many corporations paying zero taxes and that is in your one. we know that corporate accountants learn over time how to get more and more loopholes in the first year. we already see the hemorrhaging of revenue and i would say they didn't learn any of the good lessons of the reagan tax legacy, they only took about ones. -- the bad ones. host: san francisco, hi there. caller: good morning. talking about hyperinflation, we have been so exposed to fraudulent numbers for so many years that we are kind of well,cal about the -- america was founded on taxation with representation. when the people who get taxed get to run the room lives. now, if the super rich don't want to pay taxes and they are not paying taxes, why do we
allow them to run our lives? so ofs, you know, the structure this current tax plan, is it designed to screw us? that's my first question. the second one is -- how do currency speculators pay taxes? there,e will let you go david. keep that thought for a second and we will get one more caller: here from thomas in texas. texas --little elm elm, texas. host: go ahead. caller: for those working right now, i would suggest that they go to the human resources of their employer and have a percentage taken out withholding . say 10% or if you can afford it, 20%. that will allow you, one, to have more pay in your check. after you figure out you can do
that. you can have more pay in your check as it is now with the tax law, the new tax law, and with the withholding at a higher rate , you can also have a nice substantial amount of money coming back to you at the end of the year. for those people like the gentleman who is on retirement with a pension, yeah, that's earned income additional to your social security. however, if he had taken a lump sum, ok? at retirement? he would not have been involved in that because he would have had maybe some sort of medications where they would have sent in a certain amount to his checking account which would not be counted as an income. now, i have a phd in accounting. i know what i'm talking about and i know every last aspect and every little, behind the tax
law. -- little comma behind the tax law. guest: this brings up the interesting issue of withholding and refunds. probably the worst journalism that we saw about the tax cut law in the year has been the hysteria over tracking the weekly average amount of tax refunds and saying -- that has got to be because of the tax cut law. a refund on your taxes is simply an over aim at you made to the irs throughout the year about getting interest for it. turns out that the refunds are pretty much about the same this year as they were last year, on average. different people are going to have different experiences, they always do. the point i think that needs to be made here is that the system remains to confusing to to many to too-- too confusing many people and it's scary where
people might come out even at the end of the year. many people are nervous about running afoul of irs penalties for under withholding and they go the opposite way and that's a mistake. host: so the idea that caller talked about, going to his hr office and changing his there areg their, certainly some folks who are afraid of doing that or, at the very least, not very knowledgeable about what they should be doing, so they come out even or they get that small refund at the end of the year. right.i think all that's i don't think i would give people blanket advice to tell there with -- their employer to withhold less. i owed a little bit this year in my head, i know, because i had a bit of a windfall because i had too little withheld but it still hurts a little because we are human and psychology, so i wouldn't give it as blanket advice, but the part that should have been relatively straightforward for the hr
department to figure out is how much to withhold from wages and my strong guess is that they probably got that mostly right. it's really the people who have more complicated income forms. they own a business, stuff like that, it gets more complicated. it's not only tax day, but the issue of the debt has come up regularly on capitol hill. i want to play you some comments from larry kudlow about the effect of the 2017 law on the debt. here's what he had to say just a week ago or so. >> one economic indicator that has been bad news, recently, critical of the debt levels in the obama administration, we got a new number, $691 billion deficit in the first half of the year. trillion dollar deficits, democrats say a big part of that, or some part of it, are the tax cuts. are they paying for themselves?
>> yes. and they always will. they always will. >> we are talking about nonpartisan experts here. who said they had blown a hole in the deficit. like i have to process that nonpartisan expert part. i have to think about that. but look, interestingly i just saw, february, march, year on year as the federal residents are coming in when you adjust or a day short in march it's ay, it's about 90%, good number, revenues are really coming in nicely. i believe that what will happen here, as a share of gdp, and i think you have to look at these things in relation to the economy, you will see a deficit on a steady glide path lower. same for the overall publicly owed that. based on what you heard from larry kudlow and other
knowledge that you have, will the tax cuts pay for themselves? >> pay for themselves? i don't think so. i do think that the economic growth generated by them can -- what theo-called budget scorekeepers would call static revenue losses. analysis formic building in a response from individuals and businesses to incentives like reduced rates or expensing of your investments. there have been some estimates for example that the long-term fromue loss dynamically the tax cut law is about $500 billion as opposed to even $2 trillion. i think it's somewhere in between there. you cannot discount the economic impact, but paying for themselves is a bit of a stretch. they are thinking that the corporate tax cuts are going to
fire up more hiring with those revenues from those taxpayers? is that what he's talking about, growing it that way? guest: there are pretty much to channels through which they could affect the economy. the first gives the people of the economy more money to spend, dividends go up, stock buybacks, people spend more money, sort of a stimulus effect. i think the tax cut had very limited stimulus effects. it directed a lot of money towards the top, people who don't tend to spend a lot of -- every last penny that they get. number two, it didn't need a short run stimulus by the time the tax cut ran into it. i think that what he is referring to end the traditional defense of a corporate rate cut, we have talked about this before , maybe it induces businesses to take a more tangible investment in plant equipment. that means productivity that hopefully increases the wages of
workers, and then you get revenue over time. i guess there is very little evidence that the long run dynamic has happened yet. you know, i'm skeptical if it ever comes to pass, but that is the hope that over time you get are revenue and they partially self financing. it hasn't happened yet. you mentioned people at the top. we were reading about new york, california, certainly other states. how do you see that playing out? >> a couple of ways. one, this is a cap on what you can write off on your income tax return? host: yes. guest: that was a part of a law that raise revenue because it was a cap that people used to take in an unlimited way. from a state and local government perspective that makes it harder for them to raise taxes because in the past
new york could raise taxes on residents and say it may hurt a little bit, but you can write it off under federal so it doesn't hurt as much as you think. i think that on the long run that could put a strain on fiscal resources that states can raise. on the other hand, it's a pretty inefficient way to help states raise resources. we could just increase the aid rather than allowing the bank shot of state and local tax reduction. i guess a standalone way to finance a generally flawed tax cut, i'm not a big fan of that. i think that in the long run we should probably figure out better ways to get aid from the federal government. hear from a collar and one of those states. david buchanan, new york. hello, mining is david mcavoy. two questions. or comments. is standard tax deduction only 12,000.
an extra 1300 for seniors and so forth. my other thing is -- if you give more than 15,000 to an individual, you have to fill out what is called a form 709, it's a gift tax. in 2017 the maximum gift tax was 5,000,005 hundred thousand dollars that you could give away. in 2018 each individual is allowed to give away over $11 million. $11 million. it went from $5.5 million to $11 million from one year to the next year. you know who's going to benefit from that? that's it, thank you ray much, appreciate your time. well, those were part of the changes of the tax cut law to the estate and gift taxes. the state tax exemption rose rather to medically. the whole point of the inheritance and gift taxes has been to try to redistribute
wealth and reduce inequality areas the evidence mixed on that. that's why folks from -- like bill gale suggested that maybe we need to raise the exemption from the tax index to inflation, make some other adjustments so that it's not quite as distortion it on medium-size family-owned businesses. we have moved towards that direction. there are some economists who would suggest that in the long run, for the revenue it raises, it might be worth getting rid of it entirely. congress did do that, that debate will continue. we have talked about corporate rates being reduced. how will small businesses do? well, the corporate tax rate doesn't really apply to most of your mom and pop businesses. they are sole proprietorships
that file. in fact, upwards of about 50,000 so-called c courts, the ones that pay the corporation income tax rate, have been migrating out of that system year after year on an annual basis. they have been forming their businesses in other types of structures. host: let's go to jackson, tennessee and hear from ed on the independent line. caller: good morning, yell. -- system is not crippling the taxes are not crippling business, its health care. corporate taxes were 40% of gdp in the 1960's and now it's about 2%. health care was about 5% of gdp in the 60's and now it's 17.6% of gdp. as buffett says here, it's not taxes that are an impediment, it's a distraction. it's health care costs. we spent $3.16 trillion per year
, $1 trillion of that is wasted. we should have more money, we should not be cutting taxes for the wealthy. to me it is insanity to cut these taxes. trust but verify these numbers. host: appreciate that, ed. josh, any thoughts? guest: i think there is a lot of truth to that. on the first thing about the u.s. corporate tax rate before the 2017 law, on that not being an impediment, i totally agree with that. there are a lot of claims that the u.s. corporate tax rate was hurting our competitiveness in a global economy. it's not true. not true for a couple of raisins -- reasons. most corporations paid a lot he raises ahink good point. we have got other pressures on american working families in this economy. health care, low wages. how come we spent all of this time fixing the alledge problem
of insufficient corporate profitability through the tax code? it does seem like looking at the wrong place to relieve economic stress felt by most people. the rich not about paying their fair share, here are some of the frustrations found by the pew research center. "some corporations and wealthy people that don't pay their fair share, a not surprising feeling. the feeling that wealthy people don't pay their ship -- their fair share, 62% on that topline number." potomac, maryland, mary, hi there. guest: hello there, yet -- caller: hello there, yes. i belong to a club. mostly it is a women's club. people -- some of us have realized after paying our taxes, the mostly republican women, they feel they have paid a lot
more than last year. we feel like the working class has been hoodwinked. this trickle-down economics is a total con game. making 1%ut is only of the rich even richer. as it is adding $2.5 trillion to the deficit. kudlow isl that larry a liar, just like trump. mcconnell, trump, and the republicans have ripped down working class. it's no good. host: and your own experience with your tax bill question mark more than you expected? less? husband does the
taxes and he definitely mentioned that we are not getting the deduction that we got last year, that the deduction is a lot less. guest: it would be good to put this in perspective. our tax system as it currently stands is progressive. what we see from industrialized nations around the world suggests that our tax system, even in comparison with other countries is highly progressive. we mean very heavily on the top 10% of earners to finance a great deal of our government. the cbo says the top 1% pay an effective federal tax rate all inclusive of about 33%. that's the most recent data, down two points from 1979. the bottom 1/5 of earners, on the other hand, pay less than 10% of the effective tax rate.
in fact, about 5%, and that's way down from 1979. if you want the system to be more progressive, ok, sure. but to say that is not progressive currently? the facts don't support that. the fact that we have individuals getting away with paying low tax bills doesn't really change the overall picture. joanna andis damascus, maryland, democrats line. i wanted to mention -- that lady sort of stole my thunder but i remember that old cartoon were wimpy would say that he would gladly pay you tuesday for a hamburger today. -- this whole idea that the deficit is exploding is goingmp, the debt way up. at some point or other somebody will have to pay for it. that's one thing. the second thing is that it is all about me, now. it's not about us.
so, all of the departments, the federal departments are being drastically slashed. to a dangerous point. including the agriculture department. you had somebody on from the national farmers union the other day. the agriculture department, homeland security, everything is being drastically cut so we have less money to operate, to do the kinds of things that we need to do in a federal government. the people at the lowest end of the economic strata are really getting hit hard. the people that can least afford it have a higher tax burden. not as many services. i would like you to address those two things because they are both very important. host: josh bivins? thet: i totally agree, in long run everyone to have an effective government that provides vital services for a broad range of people, we will need to tax people more and to
me the natural place to look for more money to start is the top 1% to 5% that have just seen the past generation. we have seen a bunch of money redistributed at the top and it is taxed of it more lightly. on the issue of the deficit, economically or not that concerned about the deficit right now. i look at long-term interest awfully low.re i do think that politically the increase in the deficit is often utilized in a really cynical way. a group of people in congress just passed a deficit financed tax cut and literally in the president's budget this year they scream about deficits being too high and call for steep cuts in programs that benefits a large group of people. don't scare meey that much, but politically they are always used as a cudgel to be ask services for a broad range of people yet they never seem to be in play when we are talking about tax cuts for the rich.
we had mentioned the earned income tax credit earlier in the conversation. there is a report out from what -- from pro-public a about american anti-poor tax audits. "you would think that the irs in an effort to bring in more money would focus on auditing wealthy taxpayers, but as pro-public a found in a disturbing piece from late last year, recipients of the earned income tax credit, one of the biggest anti-poverty programs in the u.s. aimed almost exclusively at the working poor, they were twice as likely to be audited as people earning $200,000 to $500,000. i will raise this up to show the map of the audits, which basically shows a large swath of the southeast to the desert west and the west coast. remind us again of the earned income taxed reddit. what's it for? tax credit.
what's it for? guest: the earned income credit was a program created over three decades ago, actually, designed to offset the income and later, the payroll taxes that working families are liable for. an anti-poverty program, pretty efficient administratively compared to things like the snap program, for example. one problem with the earned income credit is the of session, really, with improper payment rates. recently it was discovered, for example, that by holding these credits at the irs while they verify uncommon eligibility, many families are being deprived of a very important short-term source of cash and turns out that about 40% of the earned income credits that the irs
withheld were improperly withheld themselves in the name of trying to detect improper payments. we have a genuine problem with over auditing in that program. we have a genuine problem, to, with the simplicity of that program. if you were able to claim it example, credit, for you should be able to claim the earned income credit over the same rules. you can't right now. that's why there is a lot of confusion in the program. to play for you the comments from the irs commissioner, he was asked about this at a senate finance hearing last week. here's what he had to say. [video clip] >> i want to ask you now about earned income tax credit zippy and's being more likely to get audited and billionaires being less likely. you heard me go through the numbers. i just think that it's shameful that poor folks in humphreys county, mississippi, have the highest audited -- audit rate in
america. but if you are a high flyer or somebody running a shell company , you are not likely to get audited. earned income tax credit audits make up a higher percentage of total audits since republicans have taken the budget ax to the irs. so, here's my question. is it really the intent of the internal revenue service to audit taxpayers were struggling to make ends meet while increasingly letting millionaires and multinational operations off the hook? is that the intent of the agency? >> no. >> what are you going to do about it? >> we are looking at the earned income tax credit. there is an overpayment each year associated with earned income tax credits. we are going back to see every proposal that has happened i believe since 1975 to reduce the complexity of the credit. the majority of the issues revolve around the definition of
a qualifying child. we would hope that working with congress we can come up with a better application or an understanding or acceptance that this is a social program. the chairman that like him i would set an example to stay within my five minute. look, this is my view. the stark contrast to between the fact that the poorest and most vulnerable get audited more than these multimillionaires is yet more hard evidence that the tax system is stacked in favor of the wealthy. it host: it sounds like they both -- host: it sounds like they both agree on one thing, there are issues with the earned income tax credit and the auditing of people receiving it. guest: there are two issues. on the one hand, we need a much better resourced irs. every dollar that you get -- give the irs saves the government money because they are able to bring in more dollars and do enforcement.
but then we need a radical re-and -- reimplementation of the priorities. as the story showed, it's shocking how much they are focusing on people who are struggling and don't have time to deal with it, it's not a lot of money there. but there is a lot of money in the various we -- loopholes and accounting shenanigans undertaken by the top 1% in corporations and that is where most of the enforcement attention should be and it has not been, recently. the thing where the authors of the pro-public a article got it wrong was that in the audit rates of the largest company, for example, $20 billion in cash flow per year, the audit rate is 54%. it's not as if the irs isn't looking at these companies. the other thing is -- a large portion of the tax gap on the individual side of the $219 billion estimated, almost a half of that is coming from the so-called schedule c filers,
small businesses and sole proprietors. some of them are wealthy, others are not. we have to be careful of the powers we give the internal revenue service. congress just unanimously passed the taxpayer first act to do just that, a great advantage of bipartisanship. that, a great example of bipartisanship. with us forests are another 12 minutes. dave is on the independent line. hi there. caller: i just want to say i do my taxes for myself and for two friends of mine and i found the new forms to be much more complicated because of those six silly schedules that took form
1040 and chop it into schedules. why can't they be put back? i sent a long email out describing how much more complicated. one of my friends was an old 1040 easy filer and now there is another schedule for the designee, this is ridiculous. all of that blank space, put that stuff back on there so that you don't have to send eight pages of for a return that has three numbers on hand for schedules. as for my own, i am playing -- paying a bit more because all of my income is investment income. of personal exemption greatly outweighs an increase in standard induction's, so i end little more taxable income with a marginal rate of about 27% because of the 15% investment, 12% on the ordinary income. the whole thing is lousy for
preparing returns and it costs me a little bit more money. it did save my friends some dollars, though, good for them, but not for me. host: thanks, dave. we will be spending the next hour talking about options to simplify the code. what did you hear in his experience? guest: congress lows to talk they simplification but are most never deliver on it. they have higher priorities. there really is low hanging fruit to make it much more simple for tens of millions of american families and real tax reform would actually do that. you mentioned that you thought the irs was under resourced. you think it has -- it is still reeling from the scandals went through in the obama administration? yeah, if you look at full-time employees or dollars per return filed, you see a downward trend since about 2011.
it's been a real casualty of the budget control act. host: what do you think of days it's -- dave's experience? this is the mantra, the postcard size tax returns, they didn't necessarily think about whether maybe it should just be two sides for everybody. if there is a plural -- proliferation of schedules, it was unnecessary here. when it comes to the irs being under resourced, it needs to be resourced in the right way. part of the trump administration budget proposal has an increase for the irs that is heavily shifted towards enforcement and i think it should more be shifted towards taxpayer service. if you give people good advice on how to comply with the law at the out that, you are going to have fewer problems at the opposite end of the system. on the line is barry, republican line, new jersey.
c-span.good morning, two questions, can you tell us what that status is for the middle class tax cut that was talked about after the tax cut?ent of the new and what does the tax cap provide for golf courses? thank you. [laughter] host: we will let that stand. let's hear from bellevue, washington, democratic line. they have the permanent tax cut and everyone else's temporary. looking at temporary [indiscernible] don't believe that -- well, the entire personal tax ise reduction schedule temporary, whether you are paying the highest rate or not. corporation reduction is permanent, but not only the rate, not the expensing or many of the other provisions. host: the current personal rates
expire in 2025? guest: 2027. host: why did they have an expiration date? >> my guess is that they wanted to keep the 10 year budget deficit smaller than it otherwise would have been. most evil don't think -- well, whatever. i think they wanted to keep the projected deficit smaller. let's hear from marianne, in athens, georgia. go ahead, you are on the air. i have a question. i hear you talking about the unfairness of the tax system, skewed towards the wealthy. what about other taxes? what about medicare, social security? why is there a cap? how can i or a person with low income pay the maximum and then is cut off for the people that have the most money, tell me how that's fair, please.
caller: for medicare -- guest: for medicare, there is no topic medicare, but there is for social security. republicans and democrats are saying -- if we make a deal on helping to maintain social security's financial solvency, maybe you do things like raise the retirement age, change the benefit formula, and you raise or get rid of the cap on payroll taxes. host: what's the current payroll goodness, well over 100 and a quarter? annual gross earnings? we know the last time it has changed? guest: it has been cap there for a long time. the base amount has been that for quite some time. host: let's hear from linda, in
minnesota. back from minnesota, good morning, president headed to minnesota today. linda, go ahead, you are on the air. i always hear about the top 10%. what is the bottom salary for to bring professional people in california, what is the bottom of the 10%? -- people would be quite surprised. and i would like to know what the bottom of the top 5% is. i seem to think that that's where we are and we pay almost 40% of our income in taxes. we have various pensions and such. so, i would really like to know that. it depends on what you measure, but for the income tax at the federal level it's about $139,000.
for the top 5% it's about 190 $7,000. that's what the most recent zero available, 20 seen. host: -- 2016. host: where are we seeing the most significant changes on the personal side? guest: well, there were seven brackets. the will -- the rates were reduced anything between 2% and 4% depending on the bracket. guest: yeah, most of the action was not just in the simple individual rates and brackets. host: on facebook where taking your comments, too. a post here says -- the reduction in a check of holding was just a shell game, i've always got back about $3000 but this year owed $2500. that hurt, a bonus in 2018 up to my tax bracket. i would have paid only $500 with
the old withholdings. seems like asa surprise for this viewer, anyway, was in the withholding. guest: although he says he got a bonus as well. if that does increase your taxable income, that's the progressivity of the system. you are going to pay a progressively higher rate if you are bumped into a higher bracket. host: i guess part of this gets back to the talk of people being aware of their w-2's and where they stand on it. >> absolutely. yeah, i think the lateness of the passage, along with -- again, i don't think it was the most well vetted law in the history of tax reform, i think it happened in a bit of a rush and it left the irs scrambling in terms of instructions to employers. there was worry at the time that that would be a problem, overshooting and undershooting. that there was more
this year than in previous years. let's get one more call for the both of you. harris, republican line. i have a question relating to lower income people and their payment of taxes. i won't forget the men who died who gave that life to me and i gladly stand up next to you today but there ain't no blessi love this land god the usa ♪ prince.mmunication with terrible, terrible fire. you probably saw. some of you have heard. some of you have