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Fantastic job making taxsim more accessible! We've built an open-source version of taxsim called OpenFisca US [1] which we expose in our (also open-source) web app, PolicyEngine US [2]. We haven't yet implemented all of taxsim—we only have the most recent couple of years, and not all states—but we have some advantages like implementing means-tested benefits and being able to simulate custom tax and benefit reforms, both on individuals and the population (e.g. the budgetary and poverty impacts). I'd love to get in touch. Will email you from [email protected]. [1] https://github.com/policyengine/openfisca-us [2] https://policyengine.org/us
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This looks great. Some quick examples of how to use it in the readme would give users a quick and easy way of exploring what it can do.
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Are all the dollar amounts in the simulated tax output at the top of the page inflation adjusted? For example, I inputted married, with no dependents with $500,000 salary and in 1977, the federal amount was $299,864 and in 2020 was $133,947. I assume these amounts can be compared without further adjusting for inflation? Tangentially, did federal taxes really come down that much?
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In the 1970s there were massive tax deductions that don't exist today, so the actual tax incidence was much lower than what is implied by the marginal tax rates. There was a major overhaul of the tax code in the 1980s that simultaneously eliminated many of the tax deductions and offset that loss of deductions with lower the marginal tax rates. The change was approximately revenue neutral but made the tax code simpler.
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What were the biggest deductions that don’t exist today?
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On the individual side, all personal interest (e.g. credit card interest) was deductible and you could claim dependents (and their corresponding deductions) without any evidence (like a child's social security number).
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The second one isn't a deduction, it was inadequate fraud and tax evasion detection. It's like saying that the tax rates didn't matter back then because you were a child and therefore paid no tax.
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The second deduction you mention is just tax fraud. If they didn't have stringent checks that doesn't make it a valid deduction compared to today
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seems like this would render the website pretty useless for anything before that period, right?
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It’s not useless, it’s just data which needs context. Like the claim which GP makes that the Reagan tax reform was “revenue neutral” which is dubious at best.
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Tax revenues grew monotonically across the tax reforms of the 1980s in smoothly boring fashion with no discontinuities. That is pretty much a textbook definition of "revenue neutral". Are you arguing that the tax revenue grew too quickly to be defined as "revenue neutral"? I'm not old enough to have experienced it but the data is really obvious.
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The top tax bracket in 1913, the first year of the federal income tax as it exists today, was equivalent to ~14 million dollars at today's value. Our wealth inequality problems could largely be solved by fixing the tax brackets (especially w.r.t. capital gains). We don't need all sorts of new taxes, certainly not a wealth tax, before fixing the obvious problem. That being said, $500,000 should have been taxed more heavily in 1977 relative to today in a perfect world, because that amount of money was worth a lot more back then. I don't think the numbers are inflation adjusted or it would make sense to do so without a big warning.
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But nobody ever paid it as there were millions of loopholes.
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You have to be actually wealthy for most "loopholes" come into play. Just like today, non-wealthy high earners take the biggest hit in taxes. And there are way more of those than actually wealthy people. Back then, the hit was even bigger, but the group being hit the hardest was smaller. Politically, this setup seems to help keep those high-earners voting for lower taxes, which makes sense to them since they're the ones paying the highest overall rate.
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Employee benefits like company-provided cars were way more common as it was a more favorable tax situation.
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You did have to be wealthy, but $100,000 in 1980 is equivalent to $383,000 today which is pretty wealthy. So it’s basically income above $400,000 today. And many of the tax “loopholes” involved real estate investment which would be accessible at that income level.
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$380k is not wealthy. Most people can live just fine on $380k, don’t get me wrong, but it is basically upper middle class. If $380k/yr is wealthy then what is $20 million/yr?
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While technically a better term for assets than income, we'll continue to use "wealthy". You should realize that multiple things can be wealthy. $380k is wealthy and $20M is also wealthy. $20M is wealthier than $380k. Im the US, an income of $380k is the 99th percentile. In a higher COL state of California, an income of $380k is still in the 99th percentile. And for the very high COL city of San Francisco, an income of $380k is still just about the 99th percentile If a person is making $380k, regardless of what they may believe, they are absolutely not middle class in any way shape or form. They are "wealthy".
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> then what is $20 million/yr? obscenely rich
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“More wealthy”? 100K in 1980 was sufficient to build and compound your wealth. That’s wealthy.
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as others stated there were a lot more loopholes the other thing people don't mention is that companies got around higher tax rates by giving benefits like company cars and other things to entice employees when giving a higher salary would be stupid due to high tax rates. This is how things like health insurance ended up getting tied to employment, always unintended consequences
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It actually wasnt taxes with health insurance. They froze wages during ww2 but exempted health insurance from the cap. Same result. different cause (in this case)
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Yes, the marginal income taxes were high but the capital gain taxes were low, so the rich didn't pay much. For example when the top income tax was 91% in the 1950s the capital gain tax was just 25%. See the historical top income and capital gain tax rates here https://ctj.org/pdf/regcg.pdf
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Do you mean are the brackets themselves tax adjusted or the salaries? Because lets say there is a 300-500k bracket right now - that bracket (if it even existed in the 70s) would have been much, much higher.
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Agreed in principle, but I think you mean much lower?
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This seems beyond misleading it doesn't even have a method to enter most of the now illegal methods to lower your tax bill. Tax straddles were only banned in 1977 before that you should have easily been able to more then halve your tax bill with futures.
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Interesting, this is probably why I never heard of straddles in a futures context They are wildly popular in the options (including futures options) market, but what is described here would be called a calender spread or an unbalanced strangle of some sort. No tax benefits from closing long dated contracts early aside from losses offsetting the gains
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Doesn’t this fit into “other adjustments”? Net operating loss is listed among the examples there.
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Bit late to the party but I just wanted to put one top level comment saying: this is awesome! I'd never have thought that putting a Fortran codebase like this into WASM was so possible. And doing so in this way surfaces great, battle-tested information, that would be herculean to reimplement and test in another language. Really awesome stuff!
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Very cool, especially hearing about the implementation. Feature request: Put the effective overall tax rate calculation somewhere on the page - so often people are confused that they are paying the same percentage tax as their highest marginal tax rate, this tool could help elucidate that mistake.
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The US personal tax code looks extremely complicated to British eyes, but British people have a similar calculator at their disposal at https://listentotaxman.com/ though it only goes back to 2000.
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We've also built an open-source tax and benefit calculator for the UK, which also lets you simulate custom policy reforms: https://policyengine.org/uk
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The tax is not accurate historically, for higher income brackets. Prior to 2018(?) you could deduct the majority of your state income tax from the federal income tax (the "Trump tax cuts"). https://nypost.com/2021/10/05/court-upholds-trump-law-limiti... Basically, prior to that implementation, you were really paying MAX(federal income tax, state income tax). After that implementation, you could only deduct a maximum of $10,000 in state income tax from federal tax. So it looks more like: ADD(federal income tax - $10,000, state income tax)
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I don't believe you're calculating the pre law change correctly. You could deduct your state tax from your income for federal tax purposes. So if you made 100k and paid 17k in state taxes, your federal AGI was 83k. Post change, it would have been 90k. The Trump era change was really a fuck you to high earners in states with high taxes. Shockingly, a majority of those people tended to vote for the Democratic Party.
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Funnily enough, that SALT deduction was disliked by economists, as regressive, inefficient and mostly pointless. It was bashed by policy think tanks from all sides, e.g. Brookings, CRFB, Heritage, CBPP, and Center for American Progress.
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I wonder whether it would be easier to get Fortran in the browser with f2c ( http://www.netlib.org/f2c/) then C to WASM. I had excellent results with f2c on an old Fortran program when I used it.
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Thanks for sharing this! I tried it and indeed it works quite well. This will be much simpler/easier than gfortran+dragonegg, and removes some roadblocks preventing me from using the latest emscripten/llvm.
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I wish this would get written up in mainstream media. Hypothesis being that if more people knew this existed, it would put additional pressure on Congress to simplify tax filing.
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The number of possible inputs for Income is stunning: 15 types of income in total. There are “only” 5 possible inputs under Deductions & Credits but 3 of them are categories with several subitems: Itemized Deductions • Home mortgage interest • Deductible medical expenses • Motor Vehicle registration fees • Charitable contributions • Casulty or Theft losses Other Itemized Deductions • Other state and local taxes • Deductible medical expenses (preference share only) • Miscellaneous expenses Other Adjustments • Alimony Paid • Keogh and IRA contributions • Foreign Income Exclusion • Net Operating Losses
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This is kind of mental. In the UK we have nowhere near as many tax deductible things. An ordinary employed person will only ever get tax deductions for pension contributions or charitable donations. Almost nobody in the UK even has to file a tax return; data is returned automatically to the government by all employers and so there is no need unless you have certain uncommon circumstances. There are some schemes through employers that reduce your taxable income (for e.g. a scheme to purchase a bicycle tax free) but these are handled by your employer and work by sacrificing some salary in exchange for the benefits.
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Because standard deduction is so high now, 90% of US tax filers do not have to worry about itemizing. According to IRS stats website, which I do not have handy on my phone.
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And for all the complexity of the tax code, it often pales in comparison to the version of the tax code we subject low-income families to: rules for means-tested benefits.
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Would be helpful if there was a way to see a graph of how the amounts change over time. I find myself putting in my info and then click minus on the years to see how the years change.
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Sort of tangentially, I'm working with other contributors on https://ustaxes.org, an open source tax filing webapp https://github.com/ustaxes/UsTaxes. Currently, many Federal tax forms are supported, as well as tax filing for the state of Illinois. Filing for Oregon and California is under development!
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When you say “filing” does this mean it actually electronically file the return or it just is able to print out the returns for sending in by post?
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It calculates the tax amounts and fills them into the IRS and state forms to be printed out
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This is amazing. Would there be a way to estimate future year taxes? For example, knowing past years inflation numbers could you run possible scenarios of future tax brackets? The adjustment process seems to be opaque[1] but perhaps you could use a regression to estimate it. Then you would only need the ability to make those adjustments in this program to run future year scenarios. 1: https://www.irs.gov/newsroom/irs-provides-tax-inflation-adju... (I’m uncertain whether this is based on some predetermined formula)
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>Would there be a way to estimate future year taxes? You can't even always estimate current year taxes, since Congress has lately taken to making retroactive changes to the tax code even after the end of the tax year (just extending their long-term habit of making changes in late December of the current year).
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Well I’m not looking for 100% accuracy, and it doesn’t need to cover all types of income. I’m interested in long term investment income with various input types of accounts and investments given different inflation and tax policy scenarios. It just needs to be better than the software I’ve seen which is basically trash (assumes a flat percent tax).
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This is great! If you’re taking feature requests I’d love to see a bar or line chart showing the amount of taxes paid for the Y axis and year on the X axis. Would make comparing over time much easier.
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That's brilliant work, thanks! Imagine if IRS would produce something like this (open sourced) and we could file our returns like this.
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The IRS can already calculate your taxes for you. In other countries you just have to confirm what the revenue department calculates as your liability and hit "submit". You have to do the calculations yourself because TurboTax et al., and accountants lobbied so taxes are complicated and must be completed by the filer (or their accountant).
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From the abstract of NBER paper I mentioned [1]: > Each year Americans spend over two billion hours and $30 billion preparing individual tax returns, and these filing costs are regressive. To lower and redistribute the filing burden, some commentators have proposed having the IRS pre-populate tax returns for individuals. We evaluate this hypothetical policy using a large, nationally representative sample of returns filed for the tax year 2019. Our baseline results indicate that between 62 and 73 million returns (41 to 48 percent of all returns) could be accurately pre-populated using only current-year information returns and the prior-year return. Accuracy rates decline with income and are higher for taxpayers who have fewer dependents or are unmarried. We also examine 2019 non-filers, finding that pre- populated returns tentatively indicate $9.0 billion in refunds due to 12 million (22 percent) of them. [1] https://www.nber.org/system/files/working_papers/w30008/w300...
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One problem is that information is not tabulated by the IRS in time for a mid-April return date. Order your tax “transcript of account” in late March and again in late August. It’ll be substantially more complete in late August.
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I didn't point that out: I originate from a country in which I used to get a postcard summarizing what they thought I owed with a "Yes, I agree" checkbox and a field to sign. You could always file an extensive return if desired, but unless you had complicated (notably international) transactions, the return was basically accurate. This only works because there's a high level of trust in the government and low corruption, and having detailed tracking isn't (very) controversial. The US is almost the exact opposite on every metric so it wouldn't work for it.
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The US demands extremely detailed tracking of your income. We just get nothing in return for it.
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>We just get nothing in return for it. Maybe you don't, but a lot of wealthy people who can afford to hire tax professionals do. For example, how certain famous billionaires[0] have received billions of tax free income because they took the position that it could be classified as a certain type of income. [0]https://www.bloomberg.com/news/articles/2021-06-24/peter-thi...
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> The IRS can already calculate your taxes for you Only if 100% of your income is reported to the IRS. Small amounts (under $600) often aren't, and while you might be able to get away with not reporting it, its obviously not legal. I had some slightly unusual small sources of income the past couple of years that I had to keep records of, report, and pay taxes on. Granted, a lot of people arent going to have much more than a W2 and maybe some interest income.
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As much as I hate doing it now the first few years I did my taxes I went all paper and it really helped give me a foundational understanding of it all. Especially when you make that one typo.
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Congress won't let the IRS do it. To avoid that, Turbo Tax and the others promised to give free filing software out. That it didn't have all the deductions (pay for that) and was filled with anti-patterns to get people to sign up was something Congress ignored. I assume there were also some campaign contributions that changed hands.
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NBER's biggest contributors are the US government. Ironically, the IRS isn't one of them.[1] As an aside, I'd love to see US gov research grants start requiring the work product to be made open source. [1]: https://www.nber.org/about-nber/support-funding
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Imagine if the tax code itself were written in Python. def computeTax(**kwargs):
.. blah blah ..
return how_much_you_owe
Of course we all know what comes next... from scipy.optimize import minimize
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My team at PolicyEngine [1] is also now further reimplementing Tax-Calculator in the Python-based OpenFisca framework [2]. OpenFisca US [3] includes all tax logic in Tax-Calculator, plus many means-tested benefit programs like SNAP, and some state tax logic (currently only Massachusetts is complete, though we'll finish the country in the next 12-18 months). You can try it in our PolicyEngine US web app [4]. (OpenFisca US is part of the Policy Simulation Library, and it's developed by a number of former Tax-Calculator developers, myself included.) [1] https://policyengine.org [2] https://openfisca.org [3] https://github.com/policyengine/openfisca-us [4] https://policyengine.org/us
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It has been proposed in professional tax forums that this is in fact how tax code should be legislated, using some kind of pseudo-code. Even just using symbols for things such as >=, <, and so on would eliminate a lot of the garbage in the verbal version.
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This would be incredible -- it feels like the tax form documentation is written in a dialect of Accounting English from the 50s, and just little things like adding some parentheses to group and/or con/disjunctions would go a long ways. Nearly every year I don't feel confident that I've filled out my taxes accurately, and it's not for lack of trying.
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Is there an option to add some cities or counties, like new york city's local tax?
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I made tiny typo (an extra digit in spouse age) and got a giant error, though at least it was actionable “TAXSIM: Unbelievable spouse age”
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This error message is hilarious, so I tried to find where the threshold is. Apparently it's not believable that people 115 years or older would be filing taxes.
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I was curious to see how many kids it would take to lower my taxes to zero. Apparently, you’re not allowed to have more than 15 dependents.
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Cool use of emscripten. Is this handling inflation at all? Fixed-number items like standard deduction will be impacted by that. I think it gives a general idea of the tax situation, but possibly decreasing accuracy at high incomes, where a tax strategy can be implemented specific to the special deductions/credits each year, which are difficult to include in this form.
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My tax was 50% higher in 1988 than in 2020. Did taxes really come down to this extend over the past 30 years?
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Historically, taxes fluctuated quite a bit. IIUC, income taxes have been unusually stable the last ~20 years.
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How do we know how many percent of people paid tax during these times
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This is awesome! Permanently bookmarked!
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You can use the gear icon in the upper right to turn the sliders into text boxes.
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This is really cool.. nicely done @tmm1. I've been meaning to dig into WASM and this is even more reason to do so.
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This is great. I would also love to see a graph of the federal tax over time from 1960 to today.
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This is really cool, but I have to say that sliders are the absolute worst way to input income and benefits. Why not just use a simple textbox?
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You can switch to text boxes via the gear at the top right.
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This is awesome! Two features requests: 1. A plot over time 2. Could you adjust the income for inflation, so when you click back 1yr your income goes down accordingly?
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SmartAsset is only a rough approximation based on standard deductions/exemptions and the rate structure. It excludes tax credits and other provisions that make taxsim much more accurate, especially for low-income households.
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This is very interesting. I learned that the last year I made enough money to pay AMT is the year they got rid of AMT. Damn!
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No one "got rid" of AMT, it is still alive and well in both the federal tax code and some states, such as California. In fact, it is more popular than ever: the temporary TCJA tax changes (2018-2025) for individuals mostly consisted of moving features of AMT into the regular tax regime. No personal exemptions, large standard deduction, no mortgage interest deduction for equity debt, limited state and local tax (SALT) deduction, mostly no miscellaneous itemized deductions, flatter tax brackets, etc.
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> no mortgage interest deduction for equity debt Wait, what? When did that happen? And did the "for equity debt" mean that it still applies to houses?
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A slider for inputting multi digit numbers? Pain.
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Why is the income limited to 500000$?
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This is great. Could you add a box that displays effective tax rate and marginal rate? It would also be great to provide a line graph that shows the result for all years. There’s no reason to have to select each year one-by-one.
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Didn’t take a close look but the 1986 (?) tax code update close major tax avoidance pathways (passive loses and tax shelters in wiki link). I think one issue with calculators like this is it doesn’t account for excluding revenue that now has to be included. https://en.m.wikipedia.org/wiki/Tax_Reform_Act_of_1986
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