Local tax experts say new tax plan will benefit most area taxpayers

Staff report

YOUNGSTOWN

President Donald Trump on Friday signed into law a tax overhaul that experts say will have wide-ranging effects on taxpayers.

Here’s how Mahoning Valley taxpayers can expect the new tax plan to affect them:

OVERALL IMPACT

“The new tax law is going to affect just about everybody in one way, shape or form,” said Andrew B. Reigstad, owner of Tax 29.

Local experts agree the tax plan will be widely, but perhaps not deeply, beneficial to Valley taxpayers.

“The economic analysis suggests that it’s going to benefit a lot more people than it hurts,” said A.J. Sumell, an economics professor at Youngstown State University.

Projections show about 90 percent of people will receive either a tax cut or, at the very least, not pay more in taxes, Sumell said.

Most taxpayers who will see an increase live in high-property-tax states such as New York and California, he added.

“Very few people in the Mahoning Valley will be negatively impacted in terms of having to pay more next year as a result of this tax bill,” Sumell said.

The greatest benefits in the bill, however, will go to the wealthiest Americans, who Sumell said have not historically struggled economically.

Sumell said the bill will make income inequality worse.

“So, to that extent, not many people in the Mahoning Valley will see significant benefits,” he said.

All individual tax cuts in the bill are set to expire in 2025, while corporate cuts will remain permanent.

Sumell is not optimistic that a 14-point cut in the corporate tax rate from 35 percent to 21 percent will result in more jobs for people in the Valley.

Most studies show the corporate tax rates do not have a significant effect on employment, he said.

“Most of those savings will go to stock buybacks and increase stock prices, which are largely received by owners and investors,” he said.

If there is an increase, it will be because people spend extra money received through the tax cut on goods and services produced in the area, Sumell said.

He also doesn’t think employers will increase wages just because they’re seeing increases in the bottom line.

“If employers have to pay more in order to hire qualified workers, they will,” he said, “But if they don’t, they’re not going to pay more just because they can.”

He also said it will add to the country’s deficit, and the idea of self-funded tax cuts are “totally bogus.”

“It’s pure political fantasy,” Sumell said.

Tom Picino, managing partner at Diamante Capital Partners in Poland, which buys smaller companies that fit into a niche market and helps them expand, sees the change in tax law as a good thing.

“From a business perspective, we believe that this is good for working-class people and people who run the business at home,” Picino said. “We believe that across the board, it is good for business and good for folks who are going to be hiring employees.”

DEDUCTIONS

One group of taxpayers who stand to gain from the new tax law are people with children.

“Anybody who has children is likely to see their tax situation improve,” Reigstad said.

The tax bill doubles the Child Tax Credit from $1,000 to $2,000.

In Reigstad’s view, one of the bill’s most significant changes is the removal of the dependent exemptions. To make up for that, he said, the tax bill drastically increases the standard deduction – from $6,350 to $12,000 for individuals and from $12,700 to $24,000 for married couples.

Bill Yurchyk of certified public accounting firm Yurchyk & Davis Accounting noted a few deductions that are going away: tax-return preparation advisory fees, investment advisory fees and employee business expenses.

“That affects a lot of people,” he said of the business-expense deduction.

Another change he noted is that, starting in 2019, individuals paying alimony will no longer be able to deduct it, and those receiving alimony will no longer pay taxes on it.

Carl Heltzel, financial adviser for Raymond James Financial Services in Canfield, says consumers should look to re-evaluate the financial plans they have established and consider future contributions for retirement after they review how the new tax law will impact their income.

“It looks like, for most people, that the effect of the new tax laws is that it will allow for higher contributions to be made to retirement plans,” Heltzel said. “Obviously, that’s a plus.”

And Heltzel says those with scheduled contributions toward 401(k)s may want to recalculate what their after-tax income is going to look like.

“They are probably going to find that they are going to be in a better position,” he said.

PREPARATIONS

Tax preparers not only are getting ready for the busy filing season for 2017, but also are getting themselves up to speed on the changes so they can answer clients’ questions about their 2018 taxes.

Some are preparing for some extra business, too.

“This tax bill was marketed by the politicians as, ‘This is going to make taxes simpler. You’re going to be able to file on a postcard,’” said Reigstad. “The reality is there is more confusion right now with our customers.”

If the changes remain in effect for several years, however, he believes the confusion will die down.

In the meantime, his company is ready to answer questions, he said.

“We welcome that. We’re going to be ready for that,” he said.