Among the Tax Bill’s Biggest Losers: High-Income, Blue State Taxpayers(nytimes.com)
nytimes.com
Among the Tax Bill’s Biggest Losers: High-Income, Blue State Taxpayers
https://www.nytimes.com/interactive/2017/12/05/us/politics/tax-bill-salt.html
274 comments
There are numerous items written by economists that discuss in detail why state and local taxes and mortgage interest should not be deductible from federal taxes. It's very highly agreed upon. Perhaps you should seek out some of this literature.
I also strongly suspect that you are overestimating the magnitude of the tax increase you will see but if course it's very hard to know without the details of your particular financial situation. In particular I will note that the mortgage interest deduction is grandfathered in for current homeowners and the elimination only applies to loans over 500k (and that's only in the house bill. the deduction remains completely in the senate bill. it remains to be seen what happens in reconciliation).
I also strongly suspect that you are overestimating the magnitude of the tax increase you will see but if course it's very hard to know without the details of your particular financial situation. In particular I will note that the mortgage interest deduction is grandfathered in for current homeowners and the elimination only applies to loans over 500k (and that's only in the house bill. the deduction remains completely in the senate bill. it remains to be seen what happens in reconciliation).
That's all fine, but IN CONTEXT, OP is still getting robbed. They're paying higher taxes while the super-rich pay lower taxes.
They could have passed a bill that eliminated those deductions and gave corresponding tax breaks to the middle class. They could have passed a bill that skipped the tax breaks for the super-rich and actually cut the deficit. I'm OK with paying my fair share if we were actually solving problems.
But no. We've gotta pay higher taxes while still blowing a hole in the deficit? In what world does that make sense?
They could have passed a bill that eliminated those deductions and gave corresponding tax breaks to the middle class. They could have passed a bill that skipped the tax breaks for the super-rich and actually cut the deficit. I'm OK with paying my fair share if we were actually solving problems.
But no. We've gotta pay higher taxes while still blowing a hole in the deficit? In what world does that make sense?
There are tax breaks to the middle + lower classes. Lower bracket rates are lowered, the standard deduction (which is used by people on the lower end of the income spectrum much more) is dramatically increased, and the child tax credit is increased.
The relevant quantity is standard deduction + personal exemption(s) which is barely increasing for single people and declining drastically for families.
> There are tax breaks to the middle + lower classes.
The net impact is a tax increase on the very poorest in the short term; and on pretty much the whole segment up to a bit above median income over the 10 year period. Yes, there are individual provisions that, taken in isolation, benefit the working class, but in net it's a loss not a gain.
The net impact is a tax increase on the very poorest in the short term; and on pretty much the whole segment up to a bit above median income over the 10 year period. Yes, there are individual provisions that, taken in isolation, benefit the working class, but in net it's a loss not a gain.
1) If we're also talking about how the cost of health insurance might change then you could be correct about the very poorest. It's a bit hard to say.
If we're only talking about taxes paid, then you are wrong there.
2) I think that the whole "over the 10 year period" is a bit of a red herring. The US tax system isn't getting set in concrete with the (potential) passage of this bill. Numerous things will almost certainly change over the next 10 years. Tax breaks set to expire will get extended. Rates will get tinkered with. It's hard to know what might happen. Because of this I think the short term effects matter much much more than what is theoretically set to happen in 10 years.
If we're only talking about taxes paid, then you are wrong there.
2) I think that the whole "over the 10 year period" is a bit of a red herring. The US tax system isn't getting set in concrete with the (potential) passage of this bill. Numerous things will almost certainly change over the next 10 years. Tax breaks set to expire will get extended. Rates will get tinkered with. It's hard to know what might happen. Because of this I think the short term effects matter much much more than what is theoretically set to happen in 10 years.
Regarding 2:
This tax law has specifically baked in expirations of some portions. When they come up for renewal the GOP will whine and moan about the unbalanced expenditures and they'll either lapse or be supplemented with additional cuts, the corporate side of these cuts is not subjected to this.
It's fine to say "Oh, things may change down the road" but today they designed a tax cut that will benefit the rich, I do hope we're saved from this ridiculous hand out down the line, but that will be by the actions of other people, these politicians have written the bill as they desire it.
This tax law has specifically baked in expirations of some portions. When they come up for renewal the GOP will whine and moan about the unbalanced expenditures and they'll either lapse or be supplemented with additional cuts, the corporate side of these cuts is not subjected to this.
It's fine to say "Oh, things may change down the road" but today they designed a tax cut that will benefit the rich, I do hope we're saved from this ridiculous hand out down the line, but that will be by the actions of other people, these politicians have written the bill as they desire it.
Specifically, what will happen is Democrats will have to clean up the mess, and the GOP and their cheerleaders will call the fix 'job killing tax hikes'.
But that's later! Right now it's a red herring to call the mess a mess.
But that's later! Right now it's a red herring to call the mess a mess.
> When they come up for renewal the GOP will whine and moan
They didn't do this in 2013 when some of the Bush tax cuts expired. There is little reason to think that they will do so in this case.
They didn't do this in 2013 when some of the Bush tax cuts expired. There is little reason to think that they will do so in this case.
The main argument is that richer people buy more expensive houses and get bigger deduction then lower income people and basically lower income people are subsiding rich people mansions. BUT there is a cap which I would guess would work good enough to mitigate this.
Also people who buy are subsidized by those who rent. We don't need a cap, the deduction shouldn't exist at all. In fact, homeowners should pay taxes on imputed rent like they do in The Netherlands, Iceland & Switzerland.
>pay taxes on imputed rent
What does this mean? Rent that the home would go for?
What does this mean? Rent that the home would go for?
Thanks.
I wonder how that would work out in LA where we already have high rents, high houses prices, and lower wages.
I don't quite know how much one can deduct off their mortgage in taxes but I would assume the imputed rent would be a similar amount in such a market?
I wonder how that would work out in LA where we already have high rents, high houses prices, and lower wages.
I don't quite know how much one can deduct off their mortgage in taxes but I would assume the imputed rent would be a similar amount in such a market?
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> There are numerous items written by economists that discuss in detail why state and local taxes and mortgage interest should not be deductible from federal taxes. It's very highly agreed upon. Perhaps you should seek out some of this literature.
Could you show at least one? When I look for this, I don't see articles supporting your position.
Could you show at least one? When I look for this, I don't see articles supporting your position.
California is the insane state with created the taxes. The government is trying to simplify the tax code, that means you should be able to say: "I'm taxed at 15%, and that means out of $100k you get $85k take home" Not all the deductions.
I'm not really, for or against this bill. I used to live in Alameda, CA and thought the taxes were insane. The bag tax, the income tax, the property tax, literally if you didn't have deductions out of $100k you might have a $30k take home. That's the crazy part.
Perhaps we should rethink the government being the biggest employer, and actually make taxes simple and uniform.
I'm not really, for or against this bill. I used to live in Alameda, CA and thought the taxes were insane. The bag tax, the income tax, the property tax, literally if you didn't have deductions out of $100k you might have a $30k take home. That's the crazy part.
Perhaps we should rethink the government being the biggest employer, and actually make taxes simple and uniform.
Simplification is a red herring (notice how corporate state taxes are still deductible). Republicans needed a pay-for for reducing corporate/passthrough taxes and eliminating the estate tax. It just so happens that high wage earners in high tax states tend to be Democrats.
> literally if you didn't have deductions out of $100k you might have a $30k take home.
That is just not true. Up until very recently, I had ZERO deductions I could take. I made over $100k in San Francisco and my take home was about 65% of my income.
That is just not true. Up until very recently, I had ZERO deductions I could take. I made over $100k in San Francisco and my take home was about 65% of my income.
If you paid state income tax, you should have been able to deduct that at the very least (probably around 6k, or about the same as the standard deduction).
I would always try to itemize my deductions, but every time the standard deduction always ended up being more.
which makes it not worth the paperwork effort to do so.
The effort is something like filling in one line, adding up a handful of numbers, copying the result to another line, selecting which of two numbers is larger and copying that one to another line.
That hardly even merits the word "effort"...and if you are using tax prep software instead of filling out the forms by hand it isn't even that...it's just entering one number in one field.
That hardly even merits the word "effort"...and if you are using tax prep software instead of filling out the forms by hand it isn't even that...it's just entering one number in one field.
why would you file itemized when your deductions are less than the standard deduction?
> The government is trying to simplify the tax code
False; the tax reform creates a whole host of new targeted tax breaks; it's not about simplification, just moving the tax burden. And, in net, moving it to the poor.
False; the tax reform creates a whole host of new targeted tax breaks; it's not about simplification, just moving the tax burden. And, in net, moving it to the poor.
Reducing the number of brackets and removing a few of the simplest deductions while mostly leaving untouched or even increasing the hundreds or thousands of deductions that are generally only usable by companies and very wealthy people is not in any meaningful way simplifying the tax code.
>>Perhaps we should rethink the government being the biggest employer, and actually make taxes simple and uniform.
And pensions.
Pretty much bulk of the tax money collected goes out to pay pensions and various other social security benefits, which people awarded themselves way back in time assuming the coming generations will happily pay for with taxes.
Nobody and nothing can satisfy people who think they are entitled to free money.
And pensions.
Pretty much bulk of the tax money collected goes out to pay pensions and various other social security benefits, which people awarded themselves way back in time assuming the coming generations will happily pay for with taxes.
Nobody and nothing can satisfy people who think they are entitled to free money.
Good luck, every single prop aimed at raising the California income taxes passed overwhelmingly. The financial bind of those who make $200,000 and live in SF is not quite shared by voters in San Bernardino, Sacramento or even east LA.
It might also turn out that the pension plans for state employees, teachers, prison guards and police have been underperforming, and unless those pension funds loaded up on Bitcoin at the right time, the California taxpayers are on the hook to make up the difference.
There’s a silver lining, of course - once the high-speed rail is completed, the ticket revenues for the masses excited to go between LA and SF will surely pay for everything.
It might also turn out that the pension plans for state employees, teachers, prison guards and police have been underperforming, and unless those pension funds loaded up on Bitcoin at the right time, the California taxpayers are on the hook to make up the difference.
There’s a silver lining, of course - once the high-speed rail is completed, the ticket revenues for the masses excited to go between LA and SF will surely pay for everything.
>>It might also turn out that the pension plans for state employees, teachers, prison guards and police have been underperforming
More like they award themselves pensions that can be funded through these means. For eg: http://www.mercurynews.com/2016/11/01/bart-janitor-grossed-2...
There are many such articles written over the years, including those by Arnold Schwarzenegger, about the impossibility of paying pensions the tune to half a million dollars a year per person, for decades(Given how long people live these days).
Unions graciously award over time to employees to inflate their net compensation package in the last few years(as that is what decides the pensions).
Even productive people, who are at the peak of their performance struggle to make $500K/year. Paying that kind of cash for every single person disproportionate to the value they create/created is possible by only one means- Taxes.
More like they award themselves pensions that can be funded through these means. For eg: http://www.mercurynews.com/2016/11/01/bart-janitor-grossed-2...
There are many such articles written over the years, including those by Arnold Schwarzenegger, about the impossibility of paying pensions the tune to half a million dollars a year per person, for decades(Given how long people live these days).
Unions graciously award over time to employees to inflate their net compensation package in the last few years(as that is what decides the pensions).
Even productive people, who are at the peak of their performance struggle to make $500K/year. Paying that kind of cash for every single person disproportionate to the value they create/created is possible by only one means- Taxes.
People have been clamoring for more taxes on the rich. Well, this is what it looks like.
Oh wait! You didn't think you were rich, right?
Oh wait! You didn't think you were rich, right?
But... this tax bill dramatically _lowers_ taxes on people who make a lot more money or have a lot more assets. So sure, this guy is rich relative to an unemployed coal miner. But you're being a little disingenuous by implying that this guy is remotely close to "the rich" who people commonly think of raising taxes on, and doubly so in implying that people who want higher taxes want them for everyone but themselves. I would gladly pay more in exchange for better services and safety nets.
You are being disingenuous. He's not just rich compared to an unemployed coal miner, or an employed one for that matter. He is rich compared to the vast majority of the US, and and even more vast majority of the world. Based in the GP, he's likely in the 3rd percentile for income in the US, and the .1 percentile for the world. This is essentially a minor noble complaining that the major nobles have nicer things than he does, and that the king should redistribute it (but not too much, we can't have the peasants wasting any of our precious resources)
>>Based in the GP, he's likely in the 3rd percentile for income in the US, and the .1 percentile for the world.
Most people don't understand this. When they are talking about 'the rich' or 'the 1%', they are really talking about your every day doctors, managers in most software companies, lawyers etc.
Its very hard to notice how poor and how many poor there are in the remainder of the world.
Most people don't understand this. When they are talking about 'the rich' or 'the 1%', they are really talking about your every day doctors, managers in most software companies, lawyers etc.
Its very hard to notice how poor and how many poor there are in the remainder of the world.
No, this is a hit on the upper middle class. The actual rich aren't feeling the pain.
It's actually a hit on economic growth, since it discourages local tax-funded programs that produce a net gain in output (even after considering their costs); it literally creates a structural incentive for reduced economic growth through suboptimal local and state decision-making.
It's a product of of irrational anti-tax dogmatism.
It's a product of of irrational anti-tax dogmatism.
Spoiler alert: if you make over $200,000 a year, you are the rich compared to most of the rest of the country.
I love that a factual statement is getting downvoted, btw. Get a grip on your frame of reference, HN.
I love that a factual statement is getting downvoted, btw. Get a grip on your frame of reference, HN.
Rich is relative to housing costs.
Your $200,000 a year will get you by very nicely here in the Midwest. We even have jobs and accept the same currency you're paid in over in SV, imagine that!
Feel free to move.
Rich in the bay area is somewhere in the neighborhood of $500k-$1MM/year.
"in the bay area" is not relevant. Living in the bay area is not a right. If the taxes or cost of living is too high, then you can't live in the bay.
Wealth is relative. "In the bay area" is absolutely relevant. Companies in SF pay so much because the cost of living is so high. Someone with $20 is not richer than someone with $10 if it costs the first person $15 to buy lunch and it costs the second person $2 to buy the equivalent lunch.
I realize that cost of living has an impact on wealth.
But, we're talking about taxes and mostly about a couple specific provisions: SALT deduction, mortgage interest deduction, and the higher-end tax rate. Relative wealth is definitely not relevant to the SALT and mortgage interest deductions. (To review, the mortgage interest deduction subsidizes the rich and the SALT deduction forces people in low tax states to subsidize people in high tax states)
The only one left is tax brackets. You could argue that tax brackets should take into account cost of living. So, if you earn 100k in Nebraska you'd pay a higher percentage of that than a similar person living in SF. But, I think that doesn't take into account the fact that SF is such an in-demand place to live. You don't have to live in SF. Basically, I'm not convinced that cost of living differences should play a role in taxes.
But, we're talking about taxes and mostly about a couple specific provisions: SALT deduction, mortgage interest deduction, and the higher-end tax rate. Relative wealth is definitely not relevant to the SALT and mortgage interest deductions. (To review, the mortgage interest deduction subsidizes the rich and the SALT deduction forces people in low tax states to subsidize people in high tax states)
The only one left is tax brackets. You could argue that tax brackets should take into account cost of living. So, if you earn 100k in Nebraska you'd pay a higher percentage of that than a similar person living in SF. But, I think that doesn't take into account the fact that SF is such an in-demand place to live. You don't have to live in SF. Basically, I'm not convinced that cost of living differences should play a role in taxes.
Honestly the upper middle class should do pretty well, if you're not currently earning income through a pass-through s-corp I'd suggest looking into setting one up.
We dev folks will be fine, it's the classic american middle-management folk who will be put through the ringer with this bill.
We dev folks will be fine, it's the classic american middle-management folk who will be put through the ringer with this bill.
Depends on if you mean rich for California, rich for the USA, or rich for the world.
Oh wait! They didn’t think wealth was relative, right?
Oh wait! They didn’t think wealth was relative, right?
[deleted]
> People have been clamoring for more taxes on the rich.
But this “tax reform”, in net, does exactly the opposite.
But this “tax reform”, in net, does exactly the opposite.
Yet this particular reform _does_ tax the rich more. It's mostly those making >$200k that will be hit, and it removes what were basically subsidies for the richest states in the country.
... And then it removes the alternative minimum tax, starts to phase out the estate tax and lowers pass through income tax rates. This tax cut might hit some really stupid rich people hard, but anyone wise enough to hire an accountant is going to get a lot more take home.
Looking at the new tax law as a whole, you are right, but the focus of this article is on changes to the state and local tax deduction, which currently favors rich states with high taxes.
People in expensive states are not somehow better off, dollar amounts are just higher in both the labor and real estate markets. It’s better understood as localized inflation than localized wealth.
If you mean by rich, Bill Gates and Warren Buffet level rich, then there are only a few dozen people whom you can tax that way.
Also tax is on income, not wealth. Unless Bill Gates sells his stocks, its pretty much untouchable.
Also tax is on income, not wealth. Unless Bill Gates sells his stocks, its pretty much untouchable.
There are wealth taxes. (property tax is one of them, estate tax is another -- phased out by this bill) In my opinion, we could do with a lot more wealth taxes.
> People have been clamoring for more taxes on the rich. Well, this is what it looks like.
How exactly is this a tax increase on the rich?
How exactly is this a tax increase on the rich?
People making more than $200,000 per year will pay more taxes. How is it not a tax increase on the rich?
> People making more than $200,000 per year will pay more taxes. How is it not a tax increase on the rich?
I'm not sure of that, though, because that only seems true if you're filing single. MFJ at the same income level puts you in a lower bracket than today. I know there are more single filers than married, and that married filers pay close to 3/4 of all income taxes, but I'm unsure if that results in an overall increase.
Besides, this whole tax plan seems to lighten the tax burden on wealth. The estate tax exemption gets larger (and eventually eliminated in the house plan), and the small business tax rate drops to 25% (S-Corps, LLC, Partnerships, Sole Proprietors) - that's almost entirely going to benefit entities used to manage passive income/wealth like PE, hedge funds, etc. The house plan is a little better here since it reduces taxes on small businesses who don't make enough to benefit from the senate version.
Put another way, if this were really a tax increase on the rich, why are we projecting that the deficit (and national debt) will increase as a result? With income distribution the way it is right now, the only way you arrive at the deficit number is to tax the rich less, not more. The issue here is that everyone is getting a tax cut, and that seems unwise to me without some adjustment to spending.
I'm not sure of that, though, because that only seems true if you're filing single. MFJ at the same income level puts you in a lower bracket than today. I know there are more single filers than married, and that married filers pay close to 3/4 of all income taxes, but I'm unsure if that results in an overall increase.
Besides, this whole tax plan seems to lighten the tax burden on wealth. The estate tax exemption gets larger (and eventually eliminated in the house plan), and the small business tax rate drops to 25% (S-Corps, LLC, Partnerships, Sole Proprietors) - that's almost entirely going to benefit entities used to manage passive income/wealth like PE, hedge funds, etc. The house plan is a little better here since it reduces taxes on small businesses who don't make enough to benefit from the senate version.
Put another way, if this were really a tax increase on the rich, why are we projecting that the deficit (and national debt) will increase as a result? With income distribution the way it is right now, the only way you arrive at the deficit number is to tax the rich less, not more. The issue here is that everyone is getting a tax cut, and that seems unwise to me without some adjustment to spending.
The "rich" don't earn a salary.
I'm fine with paying tax if we get something good like universal healthcare out of it.
I don't want to pay more tax and cut medicare just to subsidize corporations and billionaires.
I don't want to pay more tax and cut medicare just to subsidize corporations and billionaires.
The median home value in Alameda County is $796,600. Median income is $97,000, total comp for software engineers at your company ranges between 100 and 255K/year, so you are already above the median income in that county.
According to: https://www.investopedia.com/news/how-much-income-puts-you-t... "The top 5% of households earn an annual income of $214,462 or higher"
Most folks in the US, or the world would consider you rich and deserving of paying more taxes.
For comparison, "the U.S. Census Bureau reported in September 2017 that real median household income was $59,039 in 2016".
According to: https://www.investopedia.com/news/how-much-income-puts-you-t... "The top 5% of households earn an annual income of $214,462 or higher"
Most folks in the US, or the world would consider you rich and deserving of paying more taxes.
For comparison, "the U.S. Census Bureau reported in September 2017 that real median household income was $59,039 in 2016".
Thank you for posting the numbers to back this up.
The counter argument is, why should the rest of the country and generally lower income tax payers be subsidizing the high State taxes, high property taxes, and higher mortgage deductions on your expensive homes?
If you want to lower your State tax bill then lobby your State representatives. If you want to lower your property taxes then lobby your local officials. Or vote with your feet and move somewhere that doesn’t subscribe to those high tax policies.
If you want to lower your State tax bill then lobby your State representatives. If you want to lower your property taxes then lobby your local officials. Or vote with your feet and move somewhere that doesn’t subscribe to those high tax policies.
> The counter argument is, why should the rest of the country and generally lower income tax payers be subsidizing the high State taxes, high property taxes, and higher mortgage deductions on your expensive homes?
They aren't. The high tax states generally are net contributors to the federal treasury, the low tax states are generally net drains.
They aren't. The high tax states generally are net contributors to the federal treasury, the low tax states are generally net drains.
California already pays more to the federal government than it takes out. It is subsidizing poorer states, not the other way around.
[deleted]
>The counter argument is, why should the rest of the country and generally lower income tax payers be subsidizing the high State taxes, high property taxes, and higher mortgage deductions on your expensive homes?
No one asks this question, because the premise is completely flawed.
http://www.businessinsider.com/the-states-the-most-and-least...
No one asks this question, because the premise is completely flawed.
http://www.businessinsider.com/the-states-the-most-and-least...
> The counter argument is, why should the rest of the country and generally lower income tax payers be subsidizing the high State taxes, high property taxes, and higher mortgage deductions on your expensive homes?
High tax states tend to pay in more than they see back in benefits.
High tax states tend to pay in more than they see back in benefits.
Rich people or corporations that live in high tax states pay that money, and everybody else that lives there doesn't deserve any credit for who their neighbors are.
Lifelong Californian here. Recently moved to Florida.
You should consider complaining to your local and state government about your high taxes. Why should workers in other states subsidize local taxes for higher cost of living areas through federal deductions? Force your politicians to justify what you are paying.
You should consider complaining to your local and state government about your high taxes. Why should workers in other states subsidize local taxes for higher cost of living areas through federal deductions? Force your politicians to justify what you are paying.
"Why should workers in other states subsidize local taxes for higher cost of living areas through federal deducations"
Because those workers do not in fact subsidize my local taxes. As a Californian, I subsidize those low tax states as CA residents pay more in federal taxes than the state gets in federal benefits.
Because those workers do not in fact subsidize my local taxes. As a Californian, I subsidize those low tax states as CA residents pay more in federal taxes than the state gets in federal benefits.
#1 in gross collections, but per capita is a different story.
https://en.wikipedia.org/wiki/Federal_tax_revenue_by_state
https://en.wikipedia.org/wiki/Federal_tax_revenue_by_state
I don't see revenue vs outlays in that link.
You can say that about any deduction. Why should taxpayers who aren't Christian subsidize donations to churches?
I agree that a church should not be broadly exempt from taxation as the current system allows. Perhaps it could be narrowed to only exempt the value of actual goods and services provided to the community (like operating a homeless shelter or soup kitchen)
Why should donations that pay for churches to operate homeless shelters be tax deductible, while taxes that pay for state/city governments to operate homeless shelters aren't tax deductible?
This bill is just a GOP assault on states' rights.
This bill is just a GOP assault on states' rights.
Why should you get to make all those deductions in the first place? Just because you bought an expensive house doesn't mean you should pay that much less tax than a renter living in the same county as you.
The House version of the tax bill keeps property taxes deductible, because Texas has high property taxes and votes GOP.
Deduction used by GOP voters? Keep! Deduction used by Democrat voters? Remove!
This bill is a weaponization of the tax code against majority Democrat voting states.
Deduction used by GOP voters? Keep! Deduction used by Democrat voters? Remove!
This bill is a weaponization of the tax code against majority Democrat voting states.
I'm approaching from the opposite situation - I have a paid off house in my lower cost of living state and am relocating to the Bay Area for a job next month. I will not be selling my current home, nor buying in the Bay Area, until the fallout of this tax bill is known. At the very least, housing prices may come down where I'm going, but likely not where I'm moving from (since the mortgage interest deduction on most homes around here will wash out with the doubling of the standard deduction, but even if it does, it's percentages of far smaller numbers comparatively). Meanwhile, it sounds like nothing's changing in what I'll be able to deduct as a landlord. At least, that's my thought.
That said, it's always been a little odd to me that we could deduct our mortgage interest and property taxes, but a renter cannot even though they're paying a good portion of that on our behalf.
That said, it's always been a little odd to me that we could deduct our mortgage interest and property taxes, but a renter cannot even though they're paying a good portion of that on our behalf.
"That said, it's always been a little odd to me that we could deduct our mortgage interest and property taxes, but a renter cannot even though they're paying a good portion of that on our behalf."
I'm not going to suggest that it is as simple as the following, but the underlying rationale is that the renter benefits from lower rent than it would otherwise be because the landlord has lower expenses.
I'm not going to suggest that it is as simple as the following, but the underlying rationale is that the renter benefits from lower rent than it would otherwise be because the landlord has lower expenses.
Landlords don’t charge their own expenses + some fixed margin. They charge what the market will bear. Expensive blue state housing markets are at no risk of seeing rents fall below landlords’ costs.
The government was subsidizing your lifestyle -- owning an expensive house in a state with a high income tax. It does not want to do this anymore. It makes as much economic sense as other subsidies do.
Props for figuring out that taxation is theft though. Maybe next time don't vote for state government with highest state income tax in US?
Government subsidizes a ton of lifestyles. People with children. People who go to church. People with "pass throughs". People with estates. People with businesses. But somehow income tax in blue state is the target.
[deleted]
Instead of selling, if you move out and rent out your house, the rent you collect will only be taxed at a max rate of 25%. The federal income tax rate on passive income from S-corporations (which are pass through entities) maxes out at 25%.
Who are the ultra-rich getting a tax cut?
I'm under the impression that it's the corporations getting the biggest big tax cut in this bill -- so possibly your employer.
I'm under the impression that it's the corporations getting the biggest big tax cut in this bill -- so possibly your employer.
The CBO projects that those with income of greater than 1M a year get a tax cut.
If a housing-crash is an unintended consequence of this bill, I'd count it a win.
However, it's quite possible you won't have a crash but simply a consolidation as homeowners who can't afford the taxes are replaced by ultra-rich landlord-speculators.
And of course, this makes sense to the ultra-rich.
However, it's quite possible you won't have a crash but simply a consolidation as homeowners who can't afford the taxes are replaced by ultra-rich landlord-speculators.
And of course, this makes sense to the ultra-rich.
Disclaimer: This bill adversely affects me as well, and I'm not in favor of it, but:
>This tax bill utterly fucks me, to the point I'm considering selling my house to get ahead of the inevitable housing crash.
Can you imagine any type of reasonable tax reform that would not cause someone's tax to go up? Just the fact that some folks' taxes will go up does not make it a poor plan.
If your deductions are about $60K, then whether you feel like it or not, you are rich. And most tax overhauls would likely tax wealthier people more. This bill is a bit problematic as it taxes people in the upper middle class the most - whereas the rest of the lower/middle class and upper class get a break.
>This tax bill utterly fucks me, to the point I'm considering selling my house to get ahead of the inevitable housing crash.
Can you imagine any type of reasonable tax reform that would not cause someone's tax to go up? Just the fact that some folks' taxes will go up does not make it a poor plan.
If your deductions are about $60K, then whether you feel like it or not, you are rich. And most tax overhauls would likely tax wealthier people more. This bill is a bit problematic as it taxes people in the upper middle class the most - whereas the rest of the lower/middle class and upper class get a break.
This is not a reasonable tax reform - its a net negative 1.5 trillion dollars to the federal budget, but really it's giving even more than that to corporations and the rich while increasing taxes on people who primarily make their income from labor (vs capital rents).
Bingo!
"If your deductions are about $60K, then whether you feel like it or not, you are rich."
You are confusing income with wealth. They are somewhat causally related to be sure, but totally different. Case in point: I started receiving a high income at the age of 40 in SF, where before I earned a poverty wage. At 42, I have much less wealth than your average SF school teacher of the same age.
You are confusing income with wealth. They are somewhat causally related to be sure, but totally different. Case in point: I started receiving a high income at the age of 40 in SF, where before I earned a poverty wage. At 42, I have much less wealth than your average SF school teacher of the same age.
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Define "highish". You'll only get a tax increase if you're making more than 350K.
https://jsfiddle.net/381rkrsq/
https://jsfiddle.net/381rkrsq/
I'm not ultra rich, and these tax changes benefit me. From what I understand, the tax changes do benefit a high number of people. But the amount they appear to negatively impact those that don't benefit from them, also appears to be high (which of course, isn't great)
I have not looked in depth at the tax changes (ie read the changes in detail), but I do think there's more to the changes than just giving the ultra rich a tax cut.
It seems to me that those living in high tax states, with expensive housing, appear to be negatively impacted.
I have not looked in depth at the tax changes (ie read the changes in detail), but I do think there's more to the changes than just giving the ultra rich a tax cut.
It seems to me that those living in high tax states, with expensive housing, appear to be negatively impacted.
> I cannot see this bill as anything short of theft. Why do I have to pay double-digit percentage more on my taxes to give the ultra rich a tax cut? In what fucking world does that make any economic sense.
My rent isn't tax deductible. Why is yours blessed with such a status (In the form of a mortgage, and property tax deduction)?
All that mortgage tax deductions do, economically, is increase the overall price of homes, and have non-homeowners subsidize home-owners.
My rent isn't tax deductible. Why is yours blessed with such a status (In the form of a mortgage, and property tax deduction)?
All that mortgage tax deductions do, economically, is increase the overall price of homes, and have non-homeowners subsidize home-owners.
FWIW, only the interest is deductible, not the entire payment.
I agree with the sentiment though. The realtors have arguably the most effective lobbying efforts, and to be able to tie their industry in with the "American Dream" has been very effective.
I was out in DC earlier this year speaking with my congressional representatives about some changes to the bankruptcy code. We were working with a lobbyist who said something along the lines of "everybody knows when the realtors are in town. Nobody tries to get meetings that week because they have such a great mobilization effort, everyone gets booked up."
I agree with the sentiment though. The realtors have arguably the most effective lobbying efforts, and to be able to tie their industry in with the "American Dream" has been very effective.
I was out in DC earlier this year speaking with my congressional representatives about some changes to the bankruptcy code. We were working with a lobbyist who said something along the lines of "everybody knows when the realtors are in town. Nobody tries to get meetings that week because they have such a great mobilization effort, everyone gets booked up."
Relax. You’re not subsidizing anyone. Homeowners pay a larger share than renters to begin with. And if you know anything about Western society, home ownership creates stable societies—that’s why ownership is encouraged.
>Relax. You’re not subsidizing anyone. Homeowners pay a larger share than renters to begin with.
As someone who knows many landlords: Completely wrong.
They buy properties with a loan. They pay interest on that loan. The money the renter pays goes towards the interest payments. Renters are essentially buying the properties for the owners.
And landlords can keep deducting it, no matter how many properties. Homeowners can deduct only for two houses. And renters deduct none of it. The landlords literally deduct what their tenants are paying (interest, which is part of their rent).
And not sure about your other comment, but rarely do renters of similar size houses/apartments pay less than homeowners. As an example, my house I bought only a few years ago: I pay just a little more than some 3 bedroom apartments (which are much smaller than my house). Most 3 bedroom apartments in desirable areas in my city pay more in rent than my monthly payment.
And then with all the deductions I was getting, I was effectively paying less than most 2 bedroom apartments, and some single bedroom apartments. And if I take into account the amount going towards the principle, I'm paying about the same as most single bedroom apartments in my area.
I did not put in a huge down payment. Less than 20%, in fact.
As someone who knows many landlords: Completely wrong.
They buy properties with a loan. They pay interest on that loan. The money the renter pays goes towards the interest payments. Renters are essentially buying the properties for the owners.
And landlords can keep deducting it, no matter how many properties. Homeowners can deduct only for two houses. And renters deduct none of it. The landlords literally deduct what their tenants are paying (interest, which is part of their rent).
And not sure about your other comment, but rarely do renters of similar size houses/apartments pay less than homeowners. As an example, my house I bought only a few years ago: I pay just a little more than some 3 bedroom apartments (which are much smaller than my house). Most 3 bedroom apartments in desirable areas in my city pay more in rent than my monthly payment.
And then with all the deductions I was getting, I was effectively paying less than most 2 bedroom apartments, and some single bedroom apartments. And if I take into account the amount going towards the principle, I'm paying about the same as most single bedroom apartments in my area.
I did not put in a huge down payment. Less than 20%, in fact.
Businesses generally get to deduct interest on loans used for the business, so landlords would probably be able to deduct mortgage interest under that even if there was no specific mortgage deduction in the tax code.
Accordingly, I'm not sure it makes sense to discuss landlords when discussing the mortgage interest deduction.
Accordingly, I'm not sure it makes sense to discuss landlords when discussing the mortgage interest deduction.
As a point of comparison, Massachusetts does not have a mortgage interest deduction for individual homeowners, but for landlords income is computed using the federal Schedule E with only a few state-specific adjustments, so mortgage interest is still deductible. Of course landlords also pay tax on their rental income (minus expenses of course), while individual homeowners don't have to pay any tax on imputed rent.
Uhhh, the topic was about taxes. The homeowner demographic is statistically a higher earner than the renter demographic, thus pay more taxes.
The rationale is to encourage home ownership, because that gives people an incentive to care about upkeep and the community. It's hard to create good neighborhoods with renters who can just pack up and leave.
Mortgage interest and property taxes are costs on top of the actual cost of the house. My mortgage itself isn't tax deductible.
It's still a concession to homeowners that renters don't get.
We want taxes to be fair, no?
We want taxes to be fair, no?
Not really. Trying to make taxes fit some arbitrary definition of fair is most of the problem. We should be looking at macro effects on our whole economy when making decisions on taxes.
Ok, lets play this game. From now on its renters that have to pay 50% of the property tax. No? But you get to deduct it! an extra deduction for you! whats not to like?!
> Ok, lets play this game. From now on its renters that have to pay 50% of the property tax. No? But you get to deduct it! an extra deduction for you! whats not to like?!
Renters already are paying a piece of the property tax. It's built into the rent. They just can't deduct it.
Renters already are paying a piece of the property tax. It's built into the rent. They just can't deduct it.
Ok that may be true but why should they be allowed to deduct it? They are not a business owner (unlike the landlord). Its like allowing people to deduct 10% of everything they buy from Amazon because they are paying a part of Amazon’s warehousing costs.
I'm not advocating for renters to be able to deduct a piece of the underlying property tax. I don't think it makes sense to have property tax as a federal deduction at all.
In general, I'm not sure how great it is that we favor home ownership over renting in our tax policy. My bigger issue is being able to deduct mortgage interest but not rent. Mortgage interest is essentially rent on money, so I've always thought it'd be fair to make rent (or a percentage of it at least) deductible as well. Or, even better, eliminate the mortgage interest deduction entirely.
Full disclosure, I'm a homeowner. Fuller disclosure, my home is paid off, so it's easy for me to say these deductions shouldn't exist. I would gladly give up the property tax deduction if that additional revenue was used for something other than cutting taxes for the wealthy, though.
In general, I'm not sure how great it is that we favor home ownership over renting in our tax policy. My bigger issue is being able to deduct mortgage interest but not rent. Mortgage interest is essentially rent on money, so I've always thought it'd be fair to make rent (or a percentage of it at least) deductible as well. Or, even better, eliminate the mortgage interest deduction entirely.
Full disclosure, I'm a homeowner. Fuller disclosure, my home is paid off, so it's easy for me to say these deductions shouldn't exist. I would gladly give up the property tax deduction if that additional revenue was used for something other than cutting taxes for the wealthy, though.
OK, I see your point with mortgage interest interested being deductible.
Renters are already paying all of the property tax. The expenses for any business (including being a landlord) are, in the long term, paid by the customers. Otherwise the business becomes insolvent.
I concede renters may be paying a part of it.
However if a landlord is like a business owner, and property tax is a business expense, why should they not be allowed to deduct it (just like any other business expense)?
Amazon has expenses too related to storing products in warehouses, which they can deduct. Part of that cost is priced into the product. So in theory, customers should be able to deduct a portion of every product they buy from Amazon?
However if a landlord is like a business owner, and property tax is a business expense, why should they not be allowed to deduct it (just like any other business expense)?
Amazon has expenses too related to storing products in warehouses, which they can deduct. Part of that cost is priced into the product. So in theory, customers should be able to deduct a portion of every product they buy from Amazon?
Just my opinion, but society benefits from having manageable costs of living. I acknowledge that landlords have a business to run, but we also have a policy favoring ownership. Not allowing a property tax or non-occupied mortgage interest deduction raises the costs of being a landlord, disfavoring that activity a bit from a policy perspective. That, in turn, may lower housing costs (and increase owner-occupation of primary residences) by taking some landlords out of that market.
We built a broad middle class by favoring home ownership, allowing regular folks to build wealth in the form of their primary residence. I think we need to get back to that, and that does mean making policy decisions that eats into the margins of landlords.
We built a broad middle class by favoring home ownership, allowing regular folks to build wealth in the form of their primary residence. I think we need to get back to that, and that does mean making policy decisions that eats into the margins of landlords.
> allowing regular folks to build wealth in the form of their primary residence
Sometimes that's true, sometimes it isn't. Sometimes people wind up with underwater mortgages, rather than building wealth.
Sometimes that's true, sometimes it isn't. Sometimes people wind up with underwater mortgages, rather than building wealth.
I don't think other business expenses should be deductible either, as that incentivizes inefficient businesses.
I would favor eliminating all business deductions, combined with lowering the tax rate enough to make the change revenue neutral.
I would favor eliminating all business deductions, combined with lowering the tax rate enough to make the change revenue neutral.
Because the person that owns the property you rent is receiving those benefits.
it is not theft to remove a deduction. state and city taxes should never have been deductible before this. That deduction favored those who could itemize, the well off.
People harp all the time on this site about the plight of the poor, the undeserved, and more but damn you guys don't suck. You are damn generous when it comes to some other person's money but have you pay more and it is Armageddon. Quit bemoaning the wealthy and recognize you are one of them. It doesn't take millions to be wealthy in this country and certainly not billions.
As with the city/state tax issue, all deductible taxes favor the wealthy. This takes an otherwise overly progressive tax system to steals it back by slight of hand. Politicians can show the poor who the exploit "see these high rates" and then bury a myriad of breaks in the system to give back to those who provided the funds needed for election.
Hell i am going to get walloped and I will adjust. I qualify for the 7500 EV rebate for my purchase in 17 and I am glad it is going; though for two reasons the first being the rich don't need help buying cars and the second manufactures late to the game should not get the benefit born out by the early adoption manufacturers.
The Joint Committee on Taxation finds no reason to not favor the bill. Deficits we experience don't come because of tax cuts, it comes because baseline budgeting out paces inflation and GDP growth.
Guess what guys, its time we pony up and pay for what we want. We don't get to pontificate on forums all day long. We have to pay the piper just like everyone else and many of us will benefit from the cut as well as suffer some losses but in the end those on the lower brackets will see nearly all their tax burden decreased and isn't that what we all keep saying we want, to help them up?
People harp all the time on this site about the plight of the poor, the undeserved, and more but damn you guys don't suck. You are damn generous when it comes to some other person's money but have you pay more and it is Armageddon. Quit bemoaning the wealthy and recognize you are one of them. It doesn't take millions to be wealthy in this country and certainly not billions.
As with the city/state tax issue, all deductible taxes favor the wealthy. This takes an otherwise overly progressive tax system to steals it back by slight of hand. Politicians can show the poor who the exploit "see these high rates" and then bury a myriad of breaks in the system to give back to those who provided the funds needed for election.
Hell i am going to get walloped and I will adjust. I qualify for the 7500 EV rebate for my purchase in 17 and I am glad it is going; though for two reasons the first being the rich don't need help buying cars and the second manufactures late to the game should not get the benefit born out by the early adoption manufacturers.
The Joint Committee on Taxation finds no reason to not favor the bill. Deficits we experience don't come because of tax cuts, it comes because baseline budgeting out paces inflation and GDP growth.
Guess what guys, its time we pony up and pay for what we want. We don't get to pontificate on forums all day long. We have to pay the piper just like everyone else and many of us will benefit from the cut as well as suffer some losses but in the end those on the lower brackets will see nearly all their tax burden decreased and isn't that what we all keep saying we want, to help them up?
"but in the end those on the lower brackets will see nearly all their tax burden decreased and isn't that what we all keep saying we want, to help them up"
Go read the CBO report. This is blatantly false. If you believe this and are not a troll, please educate yourself.
Go read the CBO report. This is blatantly false. If you believe this and are not a troll, please educate yourself.
I went to an open house in SF Saturday. The realtor had been planning to list the house in February but the seller is so worried about the tax situation they put it on the market and want it sold ASAP.
Any chance you'd be willing to, roughly, show your work? I'm curious to see if your calcs are accurate and how you are getting to that number. Understand if you prefer not to. Thanks.
The upper middle class is apparently a minority that is politically safe to do economic harm to.
Bingo. Working and middle class say, “fuck you, you’re rich.” Upper class says, “fuck you, only peasants get paid in wages/salary.”
Same with housing. The rich see single family homes as a good investment at any price. The poor see anything other than BMR as not for them. No one wants to house yuppies other than a constituency which is too privileged to have liberal credibility and too poor to leverage policies driven by the rich.
Same with housing. The rich see single family homes as a good investment at any price. The poor see anything other than BMR as not for them. No one wants to house yuppies other than a constituency which is too privileged to have liberal credibility and too poor to leverage policies driven by the rich.
When the federal government gives high tax states tax cuts, that means those areas give less to the federal government, meaning those generally rich states end up getting federally subsidized by the poorer states.
How does _that_ make sense? Shouldn't the richer areas help pay for the poor? Why not do something about the high taxes in your state instead?
How does _that_ make sense? Shouldn't the richer areas help pay for the poor? Why not do something about the high taxes in your state instead?
> When the federal government gives high tax states tax cuts, that means those areas give less to the federal government, meaning those generally rich states end up getting federally subsidized by the poorer states.
Except those generally rich states are, in fact, currently net federal tax subsidizers of the rest of the country; this tax reform will actually reduce that because the rich people who are concentrated on those states will get huge tax cuts, whereas poorer people in the rest of the country will get big tax increases.
> Shouldn't the richer areas help pay for the poor?
So, what you are saying is we shouldn't adopt a tax “reform” that massively reduces progressivity transferring tax burden from the rich too the poor?
If so, on that much we agree.
Except those generally rich states are, in fact, currently net federal tax subsidizers of the rest of the country; this tax reform will actually reduce that because the rich people who are concentrated on those states will get huge tax cuts, whereas poorer people in the rest of the country will get big tax increases.
> Shouldn't the richer areas help pay for the poor?
So, what you are saying is we shouldn't adopt a tax “reform” that massively reduces progressivity transferring tax burden from the rich too the poor?
If so, on that much we agree.
We do subsidize poor states. You speak as though Red states contribute anything to the federal government. With the exception of Texas, Georgia and some oil rich states, all of the Red states are takers and just about all of the Blue states are givers.
Red states also tend to have a lot more poverty and less economic development. Why should rich areas of the country receive just as much federal aid as poor areas? It makes sense that different states receive different aid.
They don't. For every dollar we send the Federal government, we (California) gets back 88 cents. Mississippi gets something like $4 for every $1 it sends to the Federal government.
So you lost your special interest deductions and now have to pay taxes on your actual income? Doesn't sound unfair to me.
It doesn't, and that's why a large majority of economists were wholly against it.
>>I cannot see this bill as anything short of theft
Welcome to libertarianism ;)
Welcome to libertarianism ;)
I don't see why state taxes should be federally deductible to begin with.
Two families both make $250,000 a year. One is in New York and one is in Texas. The family in Texas is carrying more of the federal tax burden than the family in New York. Why? Both are (in theory) receiving the same benefits from the Federal Government and should pay the same in taxes.
If you're a progressive this should make even less sense: rich states are currently keeping additional funds for themselves local, in their rich states, via high taxes, that are then shielded from the federal government via deductions.
Two families both make $250,000 a year. One is in New York and one is in Texas. The family in Texas is carrying more of the federal tax burden than the family in New York. Why? Both are (in theory) receiving the same benefits from the Federal Government and should pay the same in taxes.
If you're a progressive this should make even less sense: rich states are currently keeping additional funds for themselves local, in their rich states, via high taxes, that are then shielded from the federal government via deductions.
> Both are (in theory) receiving the same benefits from the Federal Government and should pay the same in taxes.
New York gets about $0.80 for every $1 of taxes paid. Texas gets about $1.50. [1]
[1] https://www.theatlantic.com/business/archive/2014/05/which-s...
New York gets about $0.80 for every $1 of taxes paid. Texas gets about $1.50. [1]
[1] https://www.theatlantic.com/business/archive/2014/05/which-s...
OP is talking about comparing families specifically. This talking point doesn't mean anything on the level of a single taxpayer.
You could argue that the family in Texas is getting more services for their tax dollar. But, that is almost certainly false, because people who actually make enough to pay taxes don't tend to consume the kind of services that cost tons of money (aka. social services).
You could argue that the family in Texas is getting more services for their tax dollar. But, that is almost certainly false, because people who actually make enough to pay taxes don't tend to consume the kind of services that cost tons of money (aka. social services).
Both states still recieve the same benefits from the federal government, it's mostly just demographic and economic differences that cause different states to receive different amounts of aid. Or do you really think West Virginians, who are mostly poor, should receive exactly the amount as New York, who is much more rich overall?
You think it's just an accident that the rich states are high tax? No, the rich states have done much more to invest in education, safety nets, and regulation (work place safety, environment, police activity, etc.). That is why they have better economies. This tax bill just takes a look at all that investment and says: nope.
What's worse is that it actively sabotages responsible governance so rural and red state voters can get their revenge for being left behind.
> You think it's just an accident that the rich states are high tax? No, the rich states have done much more to invest in education, safety nets, and regulation (work place safety, environment, police activity, etc.). That is why they have better economies. This tax bill just takes a look at all that investment and says: nope.
This right here is the issue: removing the SALT deduction discourages public investment that is a net win before considering the distorting effect of federal taxation, while preserving the deduction means that federal taxes don't have a distorting effect. I've written up a very simplified scenario illustrating this:
https://news.ycombinator.com/item?id=15855955
This right here is the issue: removing the SALT deduction discourages public investment that is a net win before considering the distorting effect of federal taxation, while preserving the deduction means that federal taxes don't have a distorting effect. I've written up a very simplified scenario illustrating this:
https://news.ycombinator.com/item?id=15855955
That is why they have better economies.
That's a bit of a stretch, no? The EU has higher tax rates than the US coastal states and their economies generally lag the US.
And Texas has been one of the fastest growing states in the US, yet has some of the lowest taxes.
Should I go on?
That's a bit of a stretch, no? The EU has higher tax rates than the US coastal states and their economies generally lag the US.
And Texas has been one of the fastest growing states in the US, yet has some of the lowest taxes.
Should I go on?
> Both states still recieve the same benefits from the federal government, it's mostly just demographic and economic differences that cause different states to receive different amounts of aid. Or do you really think West Virginians, who are mostly poor, should receive exactly the amount as New York, who is much more rich overall?
That isn't correct. Pork spending and state-targeted spending to bribe lawmakers has been a traditional political activity since the founding of the US.
That isn't correct. Pork spending and state-targeted spending to bribe lawmakers has been a traditional political activity since the founding of the US.
> Two families both make $250,000 a year. One is in New York and one is in Texas. The family in Texas is carrying more of the federal tax burden than the family in New York. Why? Both are (in theory) receiving the same benefits from the Federal Government and should pay the same in taxes.
This assertion isn't true. Federal policies already heavily favor funding Red, rural states over more urban states. It "sounds" true when you think about a person/household but when you factor in the other state services being funded (i.e. roads) it falls apart.
https://taxfoundation.org/federal-taxes-paid-vs-federal-spen...
5 of 24 years (1981-2005) CA has received less. And if you look up the scattering (but less concentrated) stats from 2005-2017, CA has been getting less than 80% of its money back from the Federal government. So its really 31 of the past 36 years that CA has been drained to help red states.
https://taxfoundation.org/states-rely-most-federal-aid/
> If you're a progressive this should make even less sense: rich states are currently keeping additional funds for themselves local, in their rich states, via high taxes, that are then shielded from the federal government via deductions.
That is a strawman.
Progressive taxation has nothing to do with aggregate wealth and everything to do with individual wealth.
This assertion isn't true. Federal policies already heavily favor funding Red, rural states over more urban states. It "sounds" true when you think about a person/household but when you factor in the other state services being funded (i.e. roads) it falls apart.
https://taxfoundation.org/federal-taxes-paid-vs-federal-spen...
5 of 24 years (1981-2005) CA has received less. And if you look up the scattering (but less concentrated) stats from 2005-2017, CA has been getting less than 80% of its money back from the Federal government. So its really 31 of the past 36 years that CA has been drained to help red states.
https://taxfoundation.org/states-rely-most-federal-aid/
> If you're a progressive this should make even less sense: rich states are currently keeping additional funds for themselves local, in their rich states, via high taxes, that are then shielded from the federal government via deductions.
That is a strawman.
Progressive taxation has nothing to do with aggregate wealth and everything to do with individual wealth.
>Federal policies already heavily favor funding Red, rural states over more urban states. It "sounds" true when you think about a person/household but when you factor in the other state services being funded (i.e. roads) it falls apart.
Much of that funding goes to subsidies (farming, energy, etc) for which the whole country enjoys the benefits, if not proportionally. A state like SC that has a disproportionate amount of military bases is going to receive far more per capita government funds, though the local SC taxpayers only get marginally more benefit than the rest of the country.
That's not to say you are wrong that rural states get better de facto tax treatment than urban-focused states but it's a bit more intertwined than it sounds.
Much of that funding goes to subsidies (farming, energy, etc) for which the whole country enjoys the benefits, if not proportionally. A state like SC that has a disproportionate amount of military bases is going to receive far more per capita government funds, though the local SC taxpayers only get marginally more benefit than the rest of the country.
That's not to say you are wrong that rural states get better de facto tax treatment than urban-focused states but it's a bit more intertwined than it sounds.
> local SC taxpayers only get marginally more benefit than the rest of the country.
I wouldn't agree its marginally more benefit. Those bases being shut down would crush SC's economy within 50 miles of every base.
Economically, they enjoy 100% of the benefit and pay less than 5% of the costs.
The US is not, in any real sense, threatened militarily that I benefit from a large defense budget. Similar is true of food and energy subsidies. They have strategic value but they don't benefit me economically. There is a reason food and energy imports are still competitive despite the subsidies.
The benefits of what you mention is it helps broaden the US's foreign policy options, not actual economic value to the average American.
I wouldn't agree its marginally more benefit. Those bases being shut down would crush SC's economy within 50 miles of every base.
Economically, they enjoy 100% of the benefit and pay less than 5% of the costs.
The US is not, in any real sense, threatened militarily that I benefit from a large defense budget. Similar is true of food and energy subsidies. They have strategic value but they don't benefit me economically. There is a reason food and energy imports are still competitive despite the subsidies.
The benefits of what you mention is it helps broaden the US's foreign policy options, not actual economic value to the average American.
And we haven't even discussed defense spending from an efficiency/ROI perspective.
Two questions:
----
1. What about the property tax deduction? Why are property taxes deductible, but income taxes are not?
----
2. How do you feel about the mortgage interest deduction? A very similar question could be asked.
Two families both make $250,000 a year. One took out a $750k mortgage and one took out a $300k mortgage. Why should the second family carry more of federal tax burden than the first?
I don't have the right answer, but it's something to consider.
----
1. What about the property tax deduction? Why are property taxes deductible, but income taxes are not?
----
2. How do you feel about the mortgage interest deduction? A very similar question could be asked.
Two families both make $250,000 a year. One took out a $750k mortgage and one took out a $300k mortgage. Why should the second family carry more of federal tax burden than the first?
I don't have the right answer, but it's something to consider.
Two separate issues -- State and Local Taxes (SALT) are income, property and other taxes collected at the non-federal level. They have been deductible since the creation of the federal income tax. In part, because the federal government recognizes that resources are more efficiently allocated locally. And that is one reason why higher taxed states pay more into the federal government's budget than they receive in benefits. [1]
The Mortgage Interest Deduction is simply a wealth transfer from people who don't own homes to people who do own homes.
[1] https://www.theatlantic.com/business/archive/2014/05/which-s...
The Mortgage Interest Deduction is simply a wealth transfer from people who don't own homes to people who do own homes.
[1] https://www.theatlantic.com/business/archive/2014/05/which-s...
The mortgage interest deduction is a way for home owner/occupants to get cost parity vs landlords who could own the exact same property at a lower cost because the interest of a loan is a business expense.
Under the proposed tax cut, it could very well be cheaper for two neighbors to own each others houses and charge one another rent (collected via pass-thru corporations even) than it would be for them to own and live in their own houses with the same mortgage terms.
Under the proposed tax cut, it could very well be cheaper for two neighbors to own each others houses and charge one another rent (collected via pass-thru corporations even) than it would be for them to own and live in their own houses with the same mortgage terms.
> Under the proposed tax cut, it could very well be cheaper for two neighbors to own each others houses and charge one another rent (collected via pass-thru corporations even) than it would be for them to own and live in their own houses with the same mortgage terms.
Morw to the point, normal homeowners who have trouble with the setup cost of such an arrangement would pay higher taxes to subsidize the rich, who do not have trouble with the cost of setting up such a tax avoidance scheme.
Morw to the point, normal homeowners who have trouble with the setup cost of such an arrangement would pay higher taxes to subsidize the rich, who do not have trouble with the cost of setting up such a tax avoidance scheme.
> They have been deductible since the creation of the federal income tax. In part, because the federal government recognizes that resources are more efficiently allocated locally.
Perhaps more to the point, not deducting them mathematically creates structural incentives for inefficient local decisions.
Perhaps more to the point, not deducting them mathematically creates structural incentives for inefficient local decisions.
The right answer is to get rid of the deduction. It's regressive (as you point out) and reflected in the costs of housing anyway (people choose the monthly payment they can afford not the house they can afford).
> people choose the monthly payment they can afford not the house they can afford
It's the same thing - the house you can afford is one for which you can afford monthly payments. Unless you buy cash, which on the average almost nobody does for low-mid-range market.
It's the same thing - the house you can afford is one for which you can afford monthly payments. Unless you buy cash, which on the average almost nobody does for low-mid-range market.
My phrasing is in-artful. The point is buyers make a decision about what payment to make and the seller gets the benefit of the tax credit.
> 1. What about the property tax deduction? Why are property taxes deductible, but income taxes are not?
There's no objective reason why it should be. But since deductions are largely arbitrary policy instruments anyway - because property tax deduction encourages and makes easier home ownership (at least this is the theory) and the government wants more home ownership. State tax deduction does not really have such goal (unless you see moving people to high-tax states as a goal, but I don't think federal government identifies such goal).
> 2. How do you feel about the mortgage interest deduction? A very similar question could be asked.
Same as above. Only much bigger - given 20% down mortgages, mortgage interest - especially for new mortgages on standard equal-payment plan - is very substantial. So, tax deduction makes owning home easier - and, on the reverse, removing this deduction would seriously hurt current mortgage owners and discourage new ones.
The difference here is that with property-related taxes there is a policy goal linked to it, and also long-term choice individuals make based on this policy, which would make them very upset if the policy changes. With state taxes, there's no real policy goal (for federal government at least) and most people don't choose state to live it because of state tax deduction.
There's no objective reason why it should be. But since deductions are largely arbitrary policy instruments anyway - because property tax deduction encourages and makes easier home ownership (at least this is the theory) and the government wants more home ownership. State tax deduction does not really have such goal (unless you see moving people to high-tax states as a goal, but I don't think federal government identifies such goal).
> 2. How do you feel about the mortgage interest deduction? A very similar question could be asked.
Same as above. Only much bigger - given 20% down mortgages, mortgage interest - especially for new mortgages on standard equal-payment plan - is very substantial. So, tax deduction makes owning home easier - and, on the reverse, removing this deduction would seriously hurt current mortgage owners and discourage new ones.
The difference here is that with property-related taxes there is a policy goal linked to it, and also long-term choice individuals make based on this policy, which would make them very upset if the policy changes. With state taxes, there's no real policy goal (for federal government at least) and most people don't choose state to live it because of state tax deduction.
> The difference here is that with property-related taxes there is a policy goal linked to it, and also long-term choice individuals make based on this policy, which would make them very upset if the policy changes.
Wouldn't you agree that choosing to live in particular state is just as much of a long term decision as choosing to live in a particular house?
Wouldn't you agree that choosing to live in particular state is just as much of a long term decision as choosing to live in a particular house?
Yes, but how much state tax deduction figures in that choice? I wouldn't say it's a lot. Presence and absence of state income tax - maybe, but presence of deduction - not very likely. And of course, if the state wanted to compete on that metric, they could easily lower the taxes, but I haven't seen many high-tax ones to be willing to.
Of course it's a significant factor. You're talking about a pretty large portion of a household's budget.
> State tax deduction does not really have such goal
State tax deduction has an even better goal: avoiding discouraging tax and spending decisions that pay for themselves and provide additional returns before considering federal tax distortions.
State tax deduction has an even better goal: avoiding discouraging tax and spending decisions that pay for themselves and provide additional returns before considering federal tax distortions.
You're missing one even more heinous point, renters. A family paying off their 300k mortgage is getting a decrease in taxes owed while being subsidized for paying into an asset. The renting family is not being subsidized and they will never again see the money they are spending on rent. In most areas this is particularly twisted as mortgages will run beneath rental costs for the same standard of living. So the only real difference is that renters don't have to deal with the costs of damage to their asset... no money out of pocket for repainting or replacing appliances or structural issues and if their building slides into the sea they aren't out the value of the property.
Often times this also gets a bonus racist angle since minorities have a harder time securing a mortgage which traps them into overpaying for housing while struggling to save to pay less for their housing.
Often times this also gets a bonus racist angle since minorities have a harder time securing a mortgage which traps them into overpaying for housing while struggling to save to pay less for their housing.
> The renting family is not being subsidized
Guess what happens to rent if cost of ownership rises due to interest not being deductible?
Guess what happens to rent if cost of ownership rises due to interest not being deductible?
My guess is housing prices fall and rents follow?
Nope, at least not in the short term. In the short term, house price is locked for the current owner, and usually by their payments to the mortgage holder. If the expenses rise, so do the prices. And since this will happen on the whole market, the price rise would not be substantially constrained by the competition.
On the long term, this could depress the housing market and thus lead to lower prices. That would depend on the overall market state - in markets with housing shortage that probably won't happen anyway.
On the long term, this could depress the housing market and thus lead to lower prices. That would depend on the overall market state - in markets with housing shortage that probably won't happen anyway.
If the expenses rise, so do the prices.
Not sure I understand. If expenses rise, housing prices fall, not increase.
And yes, a landlord might say "my expenses went up so rent will go up as well". However, the market sets prices, not landlords. He might raise the price, the tenant leaves and his place sits empty.
There are plenty of people out there losing money as landlords because their rents are higher than what people will pay.
Not sure I understand. If expenses rise, housing prices fall, not increase.
And yes, a landlord might say "my expenses went up so rent will go up as well". However, the market sets prices, not landlords. He might raise the price, the tenant leaves and his place sits empty.
There are plenty of people out there losing money as landlords because their rents are higher than what people will pay.
Because they are vastly wealthier to afford a house that costs ~3x the median?
You got it mixed around. Income is equal for both parties, but the family in the 300k house pays more in taxes because they deducted less interest from their income.
How do you know that the second family is vastly wealthier?
Either way, if you want to tax wealthy people then you can introduce a wealth tax.
Either way, if you want to tax wealthy people then you can introduce a wealth tax.
You can make the same argument about every single deduction. Texas family makes large donations to Christian churches. Why does a secular family in blue state subsidize that deduction ? Texas has higher property taxes ? Why does a California family with low property taxes subsidize that ? Texas did not expand Medicaid. Which means an average citizen can have higher medical spending ? Why does another state with expanded Medicaid subsidize that deduction ? I can keep going on the myriad of all other deductions. Out of all these, there is a reason only SALT was chosen to be eliminated. It is not some equalizer of burden. It is a political deduction.
>You can make the same argument about every single deduction.
And there's a good reason to eliminate most deductions. A lot of deductions complicate the tax code, and many likely exist to create loopholes by which people can avoid taxes.
The purpose of a deduction usually is to promote a certain type of activity (buying homes, giving in charity).
>Out of all these, there is a reason only SALT was chosen to be eliminated. It is not some equalizer of burden. It is a political deduction.
While it may be politically motivated, I should point out that interest on mortgages and property taxes were both considered at some point, but ultimately ruled out as being politically untenable. So it's a bit of both.
And there's a good reason to eliminate most deductions. A lot of deductions complicate the tax code, and many likely exist to create loopholes by which people can avoid taxes.
The purpose of a deduction usually is to promote a certain type of activity (buying homes, giving in charity).
>Out of all these, there is a reason only SALT was chosen to be eliminated. It is not some equalizer of burden. It is a political deduction.
While it may be politically motivated, I should point out that interest on mortgages and property taxes were both considered at some point, but ultimately ruled out as being politically untenable. So it's a bit of both.
> I should point out that interest on mortgages and property taxes were both considered at some point, but ultimately ruled out as being politically untenable.
The GOP house Ways and Means head is from Texas which is a red state, relies heavily on property taxes and has no income tax.
Coincidence? I think not.
The GOP house Ways and Means head is from Texas which is a red state, relies heavily on property taxes and has no income tax.
Coincidence? I think not.
Tax payments which directly fund public schools (SALT) are no longer deductible but they added the ability for private school tuition to be deductible. This is going to have dire consequences for America's public school system.
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You have a very wrong assumption there. Those blue states were already paying more in federal taxes than they were taking in spending. Families in red states already carried less federal tax burden...
This is all a crazy moot discussion anyway, because it's not even a balanced cut - its a cut that put the whole nation into a huge deficit while increasing taxes on labor-based incomes. So some already very wealthy capital owners are getting a very massive transfer.
This is all a crazy moot discussion anyway, because it's not even a balanced cut - its a cut that put the whole nation into a huge deficit while increasing taxes on labor-based incomes. So some already very wealthy capital owners are getting a very massive transfer.
Taxes aren't based on how much you benefit from government.
Progressive tax rates make sense because the wealthy can afford to pay a larger share of their paycheck to support shared society. Not because they necessarily derive more benefits than the middle class.
If we taxed people based on the benefits they receive from the government, then the homeless would pay a fortune.
If we taxed people based on the benefits they receive from the government, then the homeless would pay a fortune.
> If we taxes people based on the benefits they receive from the government, then the homeless would pay a fortune.
This is a comical simplification. The public and legal infrastructure in America overwhelmingly helps companies and investors make money. Where would UPS be without public roads? Where would Warren Buffet be without a stable legal framework for investment? That's not to mention the military spending that secures all of these fortunes against foreign aggression.
To claim that the poor disproportionately benefit from government spending is missing the forest for the trees.
This is a comical simplification. The public and legal infrastructure in America overwhelmingly helps companies and investors make money. Where would UPS be without public roads? Where would Warren Buffet be without a stable legal framework for investment? That's not to mention the military spending that secures all of these fortunes against foreign aggression.
To claim that the poor disproportionately benefit from government spending is missing the forest for the trees.
I think I phrased that poorly. My point is that how much the government spends "on you" is not relevant to what your income tax rate should be.
> If we taxes people based on the benefits they receive from the government, then the homeless would pay a fortune.
This is provably and patently false. Homeless people don't have their good protected by the police, don't get fire protection, don't drive, don't get deductions for businesses, don't get inheritance from their wealthy, millionaire parents, don't get lobbying influence. The entire system is set up to the benefit the rich with a few social stability benefits for the poor, which in turn keep them from uprising and storming the gates of the wealthy.
This is provably and patently false. Homeless people don't have their good protected by the police, don't get fire protection, don't drive, don't get deductions for businesses, don't get inheritance from their wealthy, millionaire parents, don't get lobbying influence. The entire system is set up to the benefit the rich with a few social stability benefits for the poor, which in turn keep them from uprising and storming the gates of the wealthy.
My point was that we are not taxed based on the benefits we consume (if we were they'd be fees not income taxes). I did not mean to imply the homeless have it easy.
I'm sorry I must not have been clear. My point wasn't that you were saying the homeless had it easy, my point was that the homeless cannot use the system because the benefits of the system belong to those who already have money.
I like the other replies, but I'd like to add something that I haven't seen discussed much. The median income in New York and California is probably much higher compared to any random flyover red state. Your average household in NY and CA is going to be at a higher marginal tax rate than say Nebraska. I haven't done the math, but I'd suspect the deduction flattens this difference to some extent.
I don't see why state taxes wouldn't be federally deductible.
Roughly: if I work 6 hours, I have to work an additional hour a day just to earn money to give to the state; you're suggesting I should work an additional 15 minutes to earn money to give to the feds just because I earned the money to give to the state.
Absolutely I shouldn't be paying taxes on money earned just to pay taxes. It's not like I'm "shielding my earnings", because those earnings are earned specifically to get confiscated - you want me to earn more just because someone else took my money.
Roughly: if I work 6 hours, I have to work an additional hour a day just to earn money to give to the state; you're suggesting I should work an additional 15 minutes to earn money to give to the feds just because I earned the money to give to the state.
Absolutely I shouldn't be paying taxes on money earned just to pay taxes. It's not like I'm "shielding my earnings", because those earnings are earned specifically to get confiscated - you want me to earn more just because someone else took my money.
With the same logic, every expense should be deducted. If I work additional hour to give money to the landlord/clothes store/pub owner, why should I work additional 15 minutes to give money to the feds just because I earned money to give to the landlord/clothes store/pub owner? Because tax is charged on the income, not on money left in your pocket after paying everybody else. That's why it is income tax, not wealth tax or savings tax or any other tax.
Taxes are fundamentally different from other expenses. I'm not opting to purchase a service (or not, just saving the money) when paying taxes, I'm facing the implication of a gun to my head (the ultimate enforcement of government power). No other expense comes directly from simply how much I earn, and is not compulsory based thereon. If there's going to be deductions at all, the first should be taxes paid to other levels of gov't.
I do not see how compulsory nature of the expense matters in this particular case. You need to eat to live - should food expenses be deducted? What if you're sick and need to pay for medicine - should that be deducted? You need to be clothed to go on the street - should clothing expenses be deducted? You can find argument for many of those, but ultimately the decision is arbitrary based on preferred policy by state. If the state police would favor improving the clothing situation of the population - you may very well get clothes deduction. Depending on what the government wants to promote or suppress, you may get various policy deductions.
Income earned for mundane food/clothing/shelter/healthcare costs SHOULD be deductible. That's basically what the poverty line is: the minimum income necessary for basic sustenance in national standard culture. If you're functioning at that level, you shouldn't pay taxes - precisely because you can barely care for yourself & your own, so you shouldn't be compelled to pay for others (with a bureaucracy siphoning off a significant percentage for themselves). Insofar as sales taxes are a thing, all documentable taxes paid should be refunded if your income is below the poverty line[1], and even those above that line should be able to deduct "mundane sustenance" costs including taxes paid.
[1] - exactly how the transition from "below poverty line" to "above" should be handled, to mitigate the tax cost transition, will require a bit more thought than this casual comment. Suffice to say we pay representatives to sanely figure out such things.
[1] - exactly how the transition from "below poverty line" to "above" should be handled, to mitigate the tax cost transition, will require a bit more thought than this casual comment. Suffice to say we pay representatives to sanely figure out such things.
> Income earned for mundane food/clothing/shelter/healthcare costs SHOULD be deductible
That gets into a rabbit hole pretty quickly. What's mundane? Am I allowed to shop in Whole Foods or only eat at McDonalds? What if I care about my health - should I be penalized by taxes for wanting to eat heathy (and therefore more expensive) food? What if I don't eat a lot but I must buy very expensive clothes because of peculiar set of allergies? Managing all those would make each tax return like a PhD thesis and make handling 300M of those infeasible.
> If you're functioning at that level, you shouldn't pay taxes
That is what is happening for low income people in US right now. Lowest quintile pays virtually no federal income tax.
> , all documentable taxes paid should be refunded if your income is below the poverty line
Since it's impossible to prove who bought certain thing, this would be huge motivation for abuse. Do you want to pay 10% sales tax on $100K car or pay a poor person $500 and have them "buy" that car, get the tax refunded and save $10K? Of course, you say, there are title records. For cars. Which need now to be checked (welcome another thousand of government employees, with their salaries, pensions, etc.). And how many expensive things don't even have formal ownership registration? These things get very complex and expensive to handle very quick.
> That's basically what the poverty line is
Poverty line is usually defined as percentage of median income. This is largely arbitrary and handwavy, and used because people need to use something. But it's a flimsy base for the tax policy.
> exactly how the transition from "below poverty line" to "above" should be handled,
This is called "poverty trap". It's a well-known phenomenon, especially in a welfare state.
> Suffice to say we pay representatives to sanely figure out such things.
We do pay them, and pay them very well, but their delivery on the "sane" part is very short of the desired, so far.
That gets into a rabbit hole pretty quickly. What's mundane? Am I allowed to shop in Whole Foods or only eat at McDonalds? What if I care about my health - should I be penalized by taxes for wanting to eat heathy (and therefore more expensive) food? What if I don't eat a lot but I must buy very expensive clothes because of peculiar set of allergies? Managing all those would make each tax return like a PhD thesis and make handling 300M of those infeasible.
> If you're functioning at that level, you shouldn't pay taxes
That is what is happening for low income people in US right now. Lowest quintile pays virtually no federal income tax.
> , all documentable taxes paid should be refunded if your income is below the poverty line
Since it's impossible to prove who bought certain thing, this would be huge motivation for abuse. Do you want to pay 10% sales tax on $100K car or pay a poor person $500 and have them "buy" that car, get the tax refunded and save $10K? Of course, you say, there are title records. For cars. Which need now to be checked (welcome another thousand of government employees, with their salaries, pensions, etc.). And how many expensive things don't even have formal ownership registration? These things get very complex and expensive to handle very quick.
> That's basically what the poverty line is
Poverty line is usually defined as percentage of median income. This is largely arbitrary and handwavy, and used because people need to use something. But it's a flimsy base for the tax policy.
> exactly how the transition from "below poverty line" to "above" should be handled,
This is called "poverty trap". It's a well-known phenomenon, especially in a welfare state.
> Suffice to say we pay representatives to sanely figure out such things.
We do pay them, and pay them very well, but their delivery on the "sane" part is very short of the desired, so far.
> Poverty line is usually defined as percentage of median income.
Not in the US. The main US measure is based on three times the cost established for a ”minimun food diet” in 1963, adjusted by the standard inflation measure (CPI-U) since then.
Not in the US. The main US measure is based on three times the cost established for a ”minimun food diet” in 1963, adjusted by the standard inflation measure (CPI-U) since then.
> You need to eat to live - should food expenses be deducted?
Reasonably necessary ones should be, or a value to cover them rolled into blanket deduction everyone gets, sure.
> You need to eat to live - should food expenses be deducted?
That's why there is a medical costs deduction. (It only cuts in at costs above 10% of AGI, which is a bit wonky, though.)
> You need to be clothed to go on the street - should clothing expenses be deducted?
Same answer as for food.
Reasonably necessary ones should be, or a value to cover them rolled into blanket deduction everyone gets, sure.
> You need to eat to live - should food expenses be deducted?
That's why there is a medical costs deduction. (It only cuts in at costs above 10% of AGI, which is a bit wonky, though.)
> You need to be clothed to go on the street - should clothing expenses be deducted?
Same answer as for food.
> With the same logic, every expense should be deducted.
That's essentially how business taxes work, so why not?
That's essentially how business taxes work, so why not?
Why income tax is not "free cash" tax? I guess because it's massively easier to tax income than "free cash" and more exceptions you allow more avoidance you get. Most countries don't even have this system of deductions US has - there's just income tax, which usually is paid automatically by wage deduction, and some kind of sales/VAT tax for businesses, and very little opportunity to deduct any personal expenses. US uses deductions as policy tools, so they need a lot of it. But that's in no way the only way possible.
Howdy, I'm a progressive!
This is actually the one portion of the tax cut that I'd like to see retained... but I am really struggling as to why they wanted to remove the SALT exemption except to punish blue states. The party of states rights just removed the ability for individual states to try and innovate on budgetary matters and optimize spending into certain sectors of their economy they find particularly relevant - repealing this is a federalist policy which doesn't really meld with their messaging.
This is actually the one portion of the tax cut that I'd like to see retained... but I am really struggling as to why they wanted to remove the SALT exemption except to punish blue states. The party of states rights just removed the ability for individual states to try and innovate on budgetary matters and optimize spending into certain sectors of their economy they find particularly relevant - repealing this is a federalist policy which doesn't really meld with their messaging.
> I don't see why state taxes should be federally deductible to begin with.
The same reason legitimate business expenses (including, of course, state and local taxes paid by businesses, which are not affected by this reform) should be and are, and the same reason lots of personal expenses (some of which are, some of which are not currently) should be: expenses which are essential prerequisites to or consequence of earning income should be netted against income before taxing it.
My state and local income, property, and sales tax are the support payments for the physical and social infrastructure that allows me to earn the income I do. With the federal deduction (and assuming state taxes with a marginal rate below unity), it's in my interest to engage politically to optimize for my net return before federal taxes; without the federal deduction, it becomes worthwhile to sacrifice income (before and after) state taxes for lower state taxes, so long as the reduced federal tax cost of the lower pre-state-tax income is enough to offset the reduced net-of-state-tax-but-before-federal-tax income.
This encourages producing less market value when the net after state taxes is equal, encouraging economic contraction.
For illustration, suppose, for simplicity, a federal flat marginal tax rate of 30% percent, and the ability to make $100K with a state tax rate of 10% or $94K with a state tax rate of 5%, and no other deductions.
Ignoring federal tax, the optimum choice is to choose the $100K income with the 10% tax: it provides an $90K net (of state taxes) income, compared to $89.3K in the lower-base-pay regime.
If you deduct state taxes from federal taxes, the incentives are unchanged, the net becomes $63K vs. $62.51 with the high-income, high-tax choice providing the higher net income.
But if you don't deduct the state taxes, the incentives are flipped: producing less market value even after the cost of local infrastructure becomes preferable, with the net being $60K vs. $61.10K.
Supporters of this proposal say it punishes people in high-tax states for bad political decisions; but the math is that it punishes them for good political decisions—for choosing increased taxes when the increase in market value produced that those taxes enable is greater than the value of the taxes.
The same reason legitimate business expenses (including, of course, state and local taxes paid by businesses, which are not affected by this reform) should be and are, and the same reason lots of personal expenses (some of which are, some of which are not currently) should be: expenses which are essential prerequisites to or consequence of earning income should be netted against income before taxing it.
My state and local income, property, and sales tax are the support payments for the physical and social infrastructure that allows me to earn the income I do. With the federal deduction (and assuming state taxes with a marginal rate below unity), it's in my interest to engage politically to optimize for my net return before federal taxes; without the federal deduction, it becomes worthwhile to sacrifice income (before and after) state taxes for lower state taxes, so long as the reduced federal tax cost of the lower pre-state-tax income is enough to offset the reduced net-of-state-tax-but-before-federal-tax income.
This encourages producing less market value when the net after state taxes is equal, encouraging economic contraction.
For illustration, suppose, for simplicity, a federal flat marginal tax rate of 30% percent, and the ability to make $100K with a state tax rate of 10% or $94K with a state tax rate of 5%, and no other deductions.
Ignoring federal tax, the optimum choice is to choose the $100K income with the 10% tax: it provides an $90K net (of state taxes) income, compared to $89.3K in the lower-base-pay regime.
If you deduct state taxes from federal taxes, the incentives are unchanged, the net becomes $63K vs. $62.51 with the high-income, high-tax choice providing the higher net income.
But if you don't deduct the state taxes, the incentives are flipped: producing less market value even after the cost of local infrastructure becomes preferable, with the net being $60K vs. $61.10K.
Supporters of this proposal say it punishes people in high-tax states for bad political decisions; but the math is that it punishes them for good political decisions—for choosing increased taxes when the increase in market value produced that those taxes enable is greater than the value of the taxes.
Yes, liberals love high taxes when it hits someone but themselves. No one likes paying taxes.
I don’t mind paying higher taxes if society as a whole benefits. The good people of California vote for taxe increases all the time for things like better schools or improved infrastructure.
If my taxes were going up to pay for something like single payer, I wouldn’t complain for one minute. However, in this instance, my taxes are going up to increase Ivanka Trump’s inheritance when that stuttering idiot father of hers dies. That’s some bullshit.
If my taxes were going up to pay for something like single payer, I wouldn’t complain for one minute. However, in this instance, my taxes are going up to increase Ivanka Trump’s inheritance when that stuttering idiot father of hers dies. That’s some bullshit.
First, this article would've been much better off using medians instead of means. High earner outliers tend to skew stats like these.
Second, it's interesting to see people who were in favor of tax increases suddenly change their mind when it hits them. While I agree that tax cuts for the rich seem unnecessary, some tax hikes for the upper middle-class aren't out of line compared with a Democrat led tax plan. I wonder how much our own personal interests in our money affects how we view tax plans? Most people, no matter how rich they are, seem to want those just richer than them to be taxed more.
Finally, although the removal of the SALT deduction will cost me significantly, I'm not sure I understand how the deduction makes sense. Why should a state raising their taxes mean you have less of a federal obligation? It only makes sense to me if states with higher taxes use less federal resources.
Second, it's interesting to see people who were in favor of tax increases suddenly change their mind when it hits them. While I agree that tax cuts for the rich seem unnecessary, some tax hikes for the upper middle-class aren't out of line compared with a Democrat led tax plan. I wonder how much our own personal interests in our money affects how we view tax plans? Most people, no matter how rich they are, seem to want those just richer than them to be taxed more.
Finally, although the removal of the SALT deduction will cost me significantly, I'm not sure I understand how the deduction makes sense. Why should a state raising their taxes mean you have less of a federal obligation? It only makes sense to me if states with higher taxes use less federal resources.
A tax rise to ensure that the poor do not go hungry or that social security and medicare are funded is one thing. A tax rise designed solely to fund a lowering of the corporate tax rate and targeted at blue states? An entirely different thing.
"It only makes sense to me of states with higher taxes use less federal resources." Which is entirely the case.
"It only makes sense to me of states with higher taxes use less federal resources." Which is entirely the case.
> Second, it's interesting to see people who were in favor of tax increases suddenly change their mind when it hits them.
I'm very much in favor of increasing taxes, if that tax increase went to taking care of some societal problem (I don't care what it is, so for the sake of argument, let's just stipulate that it's a problem we both agree needs funding to solve). In this case, anyone paying more in taxes is just subsidizing those who are seeing a cut. It's more of a shift, given that it's projected to increase the federal debt by quite a bit. I'd be okay with that if we were actually putting more spending money in the pockets of the lower and middle classes, but I'm not sure that's the case. If this is really about cutting taxes across the board, I'm okay with that too, but we need to cut spending and I'd like us to take a look at the defense budget before going after social programs.
> Finally, although the removal of the SALT deduction will cost me significantly, I'm not sure I understand how the deduction makes sense. Why should a state raising their taxes mean you have less of a federal obligation? It only makes sense to me if states with higher taxes use less federal resources.
Deducting SALT makes sense in order to avoid double taxation. To me, it makes sense to pay the local govt first, then the state, then the fed, in that order. In theory, they will provide services to us in that order.
Mortgage interest and property tax deductions don't make sense to me, though. I don't really see why I should be able to deduct these, but my hypothetical tenant can't deduct their rent. None of this should have been deductible in the first place.
I'm very much in favor of increasing taxes, if that tax increase went to taking care of some societal problem (I don't care what it is, so for the sake of argument, let's just stipulate that it's a problem we both agree needs funding to solve). In this case, anyone paying more in taxes is just subsidizing those who are seeing a cut. It's more of a shift, given that it's projected to increase the federal debt by quite a bit. I'd be okay with that if we were actually putting more spending money in the pockets of the lower and middle classes, but I'm not sure that's the case. If this is really about cutting taxes across the board, I'm okay with that too, but we need to cut spending and I'd like us to take a look at the defense budget before going after social programs.
> Finally, although the removal of the SALT deduction will cost me significantly, I'm not sure I understand how the deduction makes sense. Why should a state raising their taxes mean you have less of a federal obligation? It only makes sense to me if states with higher taxes use less federal resources.
Deducting SALT makes sense in order to avoid double taxation. To me, it makes sense to pay the local govt first, then the state, then the fed, in that order. In theory, they will provide services to us in that order.
Mortgage interest and property tax deductions don't make sense to me, though. I don't really see why I should be able to deduct these, but my hypothetical tenant can't deduct their rent. None of this should have been deductible in the first place.
Thanks for the response - I think your thoughts on tax increases are quite reasonable. I agree that it's much harder to swallow a tax increase when it seems as if the money is going towards causes you disagree with, and I also feel that way with this tax bill personally.
Not sure if I understand the double taxation argument though. Say local/state/federal tax is 1%/5%/20%. Without the SALT deduction of any form, you get taxed 26% on each dollar which seems intuitive and fair. I think this model makes more sense than exempting certain amounts of money from each subsequent tax-level, but discounting the actual economic implications, I suppose which model seems more intuitive is somewhat subjective.
Not sure if I understand the double taxation argument though. Say local/state/federal tax is 1%/5%/20%. Without the SALT deduction of any form, you get taxed 26% on each dollar which seems intuitive and fair. I think this model makes more sense than exempting certain amounts of money from each subsequent tax-level, but discounting the actual economic implications, I suppose which model seems more intuitive is somewhat subjective.
> Not sure if I understand the double taxation argument though. Say local/state/federal tax is 1%/5%/20%. Without the SALT deduction of any form, you get taxed 26% on each dollar which seems intuitive and fair.
It does seem intuitive and fair, but I could (to myself at least) conclude it's intuitive and fair to not tax the money I use to pay taxes to someone else. To me, it's more that the taxes just keep coming - after those income taxes, I'll pay sales tax, property tax, etc.
I will say that part of my argument is probably a little irrational, and that stems from the fact that I don't agree with how my taxes get spent at the federal level. For what my town takes in property taxes, I feel they do a great job - the roads are in nice shape, the snow is cleared before my morning commute, services are timely, etc. The state does a pretty good job, even if we do pay one of the highest state income tax rates in the US and have a ridiculously bad governor (Maine), and I agree with a lot of where it's going even if we've needed the ballot box to do some of these things (like expand Medicare). My disagreements at the state level to what we're not spending money on, but that's a slightly classier problem than not liking where the money does go. The federal government, by contrast, seems to light a good portion of our money on fire, and then borrows some more and lights that on fire too.
It does seem intuitive and fair, but I could (to myself at least) conclude it's intuitive and fair to not tax the money I use to pay taxes to someone else. To me, it's more that the taxes just keep coming - after those income taxes, I'll pay sales tax, property tax, etc.
I will say that part of my argument is probably a little irrational, and that stems from the fact that I don't agree with how my taxes get spent at the federal level. For what my town takes in property taxes, I feel they do a great job - the roads are in nice shape, the snow is cleared before my morning commute, services are timely, etc. The state does a pretty good job, even if we do pay one of the highest state income tax rates in the US and have a ridiculously bad governor (Maine), and I agree with a lot of where it's going even if we've needed the ballot box to do some of these things (like expand Medicare). My disagreements at the state level to what we're not spending money on, but that's a slightly classier problem than not liking where the money does go. The federal government, by contrast, seems to light a good portion of our money on fire, and then borrows some more and lights that on fire too.
>>Second, it's interesting to see people who were in favor of tax increases suddenly change their mind when it hits them.
Deep down humans just optimize for personal profit.
Which is why one must always see themselves as temporarily embarrassed millionaires and not exploited proletariat.
Deep down humans just optimize for personal profit.
Which is why one must always see themselves as temporarily embarrassed millionaires and not exploited proletariat.
This doesn't really make sense to me. So it appears that the tax bill generally is reducing the tax code and closing loop-holes (which typically is considered "good" to the left, and the right).
In this case, it looks like the tax reductions are reduced in states that have higher taxes. Well that makes sense, because the states with lower taxes have less to write off (as they have 0% in some cases). Of course Texas would be impacted less, because they have no state income tax. New York and California have a state income tax, so the amount that loop holes help people in those states is much higher. So they effectively will be paying higher taxes. Complain to the state governments, who have crazy high taxes (part of the reason I left California)!
This article honestly just seems to be trying to draw a correlation where there really isn't one. They are simplifying the tax code, that means reductions go away. Perhaps, we should lower taxes? I'd be in favor of that, but I'm also in favor of making it simpler to do my taxes.
In this case, it looks like the tax reductions are reduced in states that have higher taxes. Well that makes sense, because the states with lower taxes have less to write off (as they have 0% in some cases). Of course Texas would be impacted less, because they have no state income tax. New York and California have a state income tax, so the amount that loop holes help people in those states is much higher. So they effectively will be paying higher taxes. Complain to the state governments, who have crazy high taxes (part of the reason I left California)!
This article honestly just seems to be trying to draw a correlation where there really isn't one. They are simplifying the tax code, that means reductions go away. Perhaps, we should lower taxes? I'd be in favor of that, but I'm also in favor of making it simpler to do my taxes.
I agree with davexunit. Your analysis is flawed. First, you characterize state and local income and property tax deductions as "loop-holes." That's an interesting bit of logical acrobatics. In reality, the Senate bill hardly closes any loop-holes, and creates a myriad of new ones. For example, the whole pass-through craziness.
This is possibly the worst interpretation of the tax bill I have seen yet, maybe excluding Mitch McConnell's ludicrous statement that the bill is either deficit neutral or reduces the deficit.
Maybe elaborate? Disparagement without correction doesn’t help other readers.
It's well-established that the bill gives a tax break to the very wealthiest people and adds over 1 trillion to the deficit, not to mention that the bill manages to squeeze in allowing for oil drilling in protected arctic areas and anti-abortion legislation. After the the bill passes, the increase in the deficit will be offset by cutting social services like Medicare.
This is a very, very, very bad bill, drafted in secret, and being rushed through without hearings or debate. The people in support of this bill should be ashamed of themselves.
This is a very, very, very bad bill, drafted in secret, and being rushed through without hearings or debate. The people in support of this bill should be ashamed of themselves.
Maybe you can point out flaws with the comment?
Yes, any change will have winners and losers. The winners will be happy, and the losers will be mad. We all support the idea of simpler tax code, but the devil is in the details. I'm not sure that eliminating the state tax deduction really simplifies anything though. It seems like a transfer of power from the states to the federal government.
"It seems like a transfer of power from the states to the federal government."
Bingo, remember that the next time some politician tells you they are in favor of state's rights.
Bingo, remember that the next time some politician tells you they are in favor of state's rights.
I'm not aware of any person who lives in the US who has 0% (of state and local taxes which include income, payroll, property, and sales) Can you provide examples?
There are legitimate criticisms of the bill (e.g. allowing corporations to deduct state taxes, but not individuals, or individual tax cuts expiring but the business ones are permanent).
But putting those aside, I agree with you in principle. Of course the bill hurts people the most who are in high tax states. They want the high taxes, and they got it. Why should the rest of the country subsidize their federal taxes because they are paying more state income taxes? (Actually, there are some good reasons for this, but they should be debated rather than merely dismissing it as a bias against people in those states).
And while I'm not 100% sure, the majority of the population is getting a tax cut - most people could not itemize with a $12000 deduction, and now they're getting another $3-4K ($12K - minus the personal exemptions they're losing).
But putting those aside, I agree with you in principle. Of course the bill hurts people the most who are in high tax states. They want the high taxes, and they got it. Why should the rest of the country subsidize their federal taxes because they are paying more state income taxes? (Actually, there are some good reasons for this, but they should be debated rather than merely dismissing it as a bias against people in those states).
And while I'm not 100% sure, the majority of the population is getting a tax cut - most people could not itemize with a $12000 deduction, and now they're getting another $3-4K ($12K - minus the personal exemptions they're losing).
The high tax states are generally the rich donor states. No one in Mississippi is subsidizing California. It’s actua quite the opposite.
I have very mixed feelings about this part of the tax plan.
For years I've been concerned about the increasing geographic gap between rich and poor in America. All talent, capital, and entrepreneurship is increasingly concentrated in coastal cities. This is impoverishing the interior and at the same time driving real estate hyperinflation on the coasts.
The middle class and the young get caught in a vice here. You either live somewhere with affordable real estate but no career opportunities or you live somewhere where you can advance your career but can never afford a decent home and can never escape ever-increasing rent. Either way you are screwed. Rot in a backwater or spend everything on real estate and never accumulate savings.
I'm tempted to support anything with the potential to reverse this horrible trend.
At the same time I also see this as unfair. Coastal blue states already collectively pay more in taxes than they receive from the Fed.
I'm a bit torn on this. I'm also torn on the corporate income tax cut.
The rest of the tax bill seems mostly bad, so on balance I am not supporting it.
For years I've been concerned about the increasing geographic gap between rich and poor in America. All talent, capital, and entrepreneurship is increasingly concentrated in coastal cities. This is impoverishing the interior and at the same time driving real estate hyperinflation on the coasts.
The middle class and the young get caught in a vice here. You either live somewhere with affordable real estate but no career opportunities or you live somewhere where you can advance your career but can never afford a decent home and can never escape ever-increasing rent. Either way you are screwed. Rot in a backwater or spend everything on real estate and never accumulate savings.
I'm tempted to support anything with the potential to reverse this horrible trend.
At the same time I also see this as unfair. Coastal blue states already collectively pay more in taxes than they receive from the Fed.
I'm a bit torn on this. I'm also torn on the corporate income tax cut.
The rest of the tax bill seems mostly bad, so on balance I am not supporting it.
Overall this bill seems really, really bad and poorly implemented (and costly). But as a renter in the bay area, I do like that increasing the standard deduction and reducing some of the other popular deductions will decrease the large tax break homeowners have been receiving. In my opinion we have been treating renters unfairly by letting homeowners deduct so much mortgage interest, property taxes, etc. We already incentivize home ownership by offering government backed 30-year mortgages. We don't need to use the tax code as well.
If the cost of housing in the bay area goes down due to this, that could be a good outcome depending on your situation.
If owning real estate becomes more expensive, there is a very high likelihood that rents will increase rather than decrease.
I do not believe anyone knows conclusively whether getting rid of those deductions will increase or decrease real estate prices. If the benefit of the deductions was already built in to the price of real estate, prices should come down if you remove the deductions. If removing the deductions limits the supply of homes for sale, prices could go up. My rent is going up every year as it is, so either way I would rather have a more level playing field between renters/owners.
Real estate prices would go down in response to increased costs associated with ownership (namely inability to deduct interest and property taxes).
To illustrate the point, if the carrying cost (i.e. property tax) of real estate was extreme, say 90%, nobody would want to own property and the price would plummet. Losing the deductibility for interest and property taxes is nowhere near that extreme but the direction of the effect is the same.
To illustrate the point, if the carrying cost (i.e. property tax) of real estate was extreme, say 90%, nobody would want to own property and the price would plummet. Losing the deductibility for interest and property taxes is nowhere near that extreme but the direction of the effect is the same.
Only if all of those property owners respond to the increased costs by selling the property, and don't monetize it in another fashion (like renting it).
It directly follows, really. The money for the increased costs has to come from somewhere.
It sounds like you actually don’t think the bill is bad.
Actually, I do think the bill is bad and would not vote to pass it if I was in the position to do so. I think the benefits are skewed way too far in favor of wealthy individuals and corporations and the cuts will not be paid for by growth. However, if the tax bill only got rid of the mortgage interest deduction and property tax deductions, I would happily support it (unfortunately this is not the case). You are allowed to point out some positive things about an overall crappy bill.
If a person in TX or FL, where there in no income tax lives in a Mansion, they also will have increase in Tax, are they worst hit? no but, they did not have State tax deductions to begin with.
It could be argued, the rich people in blue states were paying less federal tax because of the SALT discounts, and now they have to pay the feds whole irrespective of the case at State.
It could be argued, the rich people in blue states were paying less federal tax because of the SALT discounts, and now they have to pay the feds whole irrespective of the case at State.
Coastal liberals are very happy for tax increases except when they have to pay it themselves! This makes the situation more fair - eliminate market warping changes such as the property tax deduction and stop letting states get a free ride when increasing taxes by reducing the federal burden. Seems fair to me.
This is a tax break for the very wealthiest at the expense of everyone else, but sure, keep on that "coastal liberals" nonsense.
Two issues here:
1) I thought the GOP was in favor of strong local governance and believed money is more efficiently allocated at the state level. This action flies in the face of that.
2) _Generally_ the states who are penalized by this change in tax policy already pay more in federal taxes than they receive in benefits.[1]
[1] https://www.theatlantic.com/business/archive/2014/05/which-s...
[1] https://www.theatlantic.com/business/archive/2014/05/which-s...
Florida here, I'm going be paying $4000 ish less in taxes. I hope the tax bill lands and is put to practice quick!
People who make over $200k aren't getting as big a tax break? I don't feel bad about that.
People who make over $200k aren't getting as big a tax break? I don't feel bad about that.
"People who make over $200k aren't getting as big a tax break? I don't feel bad about that."
According to the CBO, people who make less than $75k get a tax increase by 2027 (on average). People who make between 75K and 500K get a very small tax deduction on average. Blue state residents get a tax increase almost across the board at >200K<1M. Almost anyone who makes more than a million a year gets a sizeable tax deduction.
According to the CBO, people who make less than $75k get a tax increase by 2027 (on average). People who make between 75K and 500K get a very small tax deduction on average. Blue state residents get a tax increase almost across the board at >200K<1M. Almost anyone who makes more than a million a year gets a sizeable tax deduction.
>According to the CBO, people who make less than $75k get a tax increase by 2027
Because that's when the cuts expire. Incredibly dishonest framing here.
Because that's when the cuts expire. Incredibly dishonest framing here.
"By 2019, Americans earning less than $30,000 a year would be worse off under the Senate bill, CBO found. By 2021, Americans earning $40,000 or less would be net losers"
This seems win-win to me.
Techies and bankers pay more in taxes.
People in fly-over states get a small tax cut, and maybe can buy a few extra weeks' groceries for their kids.
Techies and bankers pay more in taxes.
People in fly-over states get a small tax cut, and maybe can buy a few extra weeks' groceries for their kids.
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It truly is a win-win. Take a good hard look at the kind of people complaining or trying to paint this tax bill as "bad" or "dangerous". Consider the source!
You are forgetting this is all paid for by a 1.5 trillion dollar increase in the deficit.
Deficits only matter if the other party is in power, obviously.
I'm old enough to remember when we couldn't afford the stimulus and auto-bailouts when we were in recession, even though the economy is currently chugging along well at near full employment.
I'm old enough to remember when we couldn't afford the stimulus and auto-bailouts when we were in recession, even though the economy is currently chugging along well at near full employment.
"People in fly-over states get a small tax cut, and maybe can buy a few extra weeks' groceries for their kids."
And where are you getting this? It is demonstrably untrue by 2027. Read the CBO report.
And where are you getting this? It is demonstrably untrue by 2027. Read the CBO report.
So people making over 200K a year will pay more taxes, cry me a river.
That was my feeling too. I read it and kept looking for the downside, but people making over 200k(!) having to pay more taxes doesn't seem to have a downside.
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It doesn't, the tax bill is generally good for lower income people who take the standard deduction. Everyone's screeching about it because of the people in the top income brackets are saving the most, which is a total "no shit" moment given how much more they pay in overall.
This is what a lot of commenters aren't getting. Complaints about raising my taxes to lower corporate taxes is kinda ironic because 200K+ is rich as far as most of America is concerned.
People don’t live in “most of America,” they live in their specific real estate and job markets. The bill punishes expensive areas indiscriminately, not people who are rich in context.
I'm just saying that that's not how a lot of people see it. Living in an expensive market is not a right.
None of food, shelter, water, or healthcare are rights anywhere in America. Policy is still supposed to promote the general welfare.
You're right that there are parts of this bill not to like, the estate tax stuff for sure and possibly the pass-through rate as well. But, where we disagree are the parts that "punishes expensive areas indiscriminately". Removing the SALT and mortgage deductions are good IMO.
A commenter in another thread posed a hypothetical about a family in CA vs. TX making $250k. Why should the one in CA get a big writeoff because CA has high taxes?
Of course, a state is free to tax it's citizens as much as it likes. But, that tax should not be deductible from state taxes, because it leaves families in other states to shoulder the burden.
Meanwhile, the mortgage interest deduction subsidizes people who can afford houses (in fact it incentivizes buying larger houses, which is also bad IMO). These are not the people who should be getting tax breaks.
A commenter in another thread posed a hypothetical about a family in CA vs. TX making $250k. Why should the one in CA get a big writeoff because CA has high taxes?
Of course, a state is free to tax it's citizens as much as it likes. But, that tax should not be deductible from state taxes, because it leaves families in other states to shoulder the burden.
Meanwhile, the mortgage interest deduction subsidizes people who can afford houses (in fact it incentivizes buying larger houses, which is also bad IMO). These are not the people who should be getting tax breaks.
Why should working people pay more so that corporations, wealthy inheritors and rent-seekers pay less?
Why should we explode the deficit if we need to make CHIP funding revenue neutral?
Why do we need stimulus in a booming economy?
Why should we explode the deficit if we need to make CHIP funding revenue neutral?
Why do we need stimulus in a booming economy?
You can't buy a decent house in the bay area on 200k.
There are really good jobs (and nice places to live) outside of the bay area.
Could you please list some examples? Butte county and San Diego are nice, but not many tech jobs.
The weather outside California is not great, unless there are places that have warm weather, not too much rain/snow, not too much humidity, no issues with tornadoes, hurricanes, flooding.
Maybe there’s some real gems I don’t know about. Would love to hear of them!
The weather outside California is not great, unless there are places that have warm weather, not too much rain/snow, not too much humidity, no issues with tornadoes, hurricanes, flooding.
Maybe there’s some real gems I don’t know about. Would love to hear of them!
Yeah, it does depend on what you consider a nice place to live. I dislike the sun and heat, so anyplace that is predominantly cool and cloudy I would consider nice ;-)
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Idk. I'm a high income tax payer in a blue state. According to my calculations, I'll be paying less taxes next year.
In fact, according to my calculations, almost every one will be paying less, except a miniscule population that will have their taxes raised by a couple of hundred per year. And even that might get legislated away in the conference.
In fact, according to my calculations, almost every one will be paying less, except a miniscule population that will have their taxes raised by a couple of hundred per year. And even that might get legislated away in the conference.
This article is more descriptive, not mentioning why the bill is setup like this. But, it's worth saying that this is working as intended from a GOP perspective. This hits mostly democrats. And even if it didn't, high state taxes are seen as propping up big (state) government.
I love how the articles make it look like Democrats are more likely to be hit by higher taxes. Yes, those states where taxes are going up are majority democrat, but the split isn't that far off from 50/50. Plenty of wealthy Republicans will be paying more tax too.
That's correct, and they're mad as hell too
http://www.washingtonexaminer.com/gop-donors-in-new-york-sou...
http://www.washingtonexaminer.com/gop-donors-in-new-york-sou...
The tax bill has multiple ploys, most central of which is a giant corporate tax reduction. (Note how that tax cut is permanent, while personal tax cuts are temporary.), along with long standing GOP wish list items like elimination of the estate tax and pass through income.
That said, there is also an animous towards the rich Democratic states, which this disproportionately hurts. The short game is to stick it to the libs. The long game is to try to eliminate state income taxes.
That said, there is also an animous towards the rich Democratic states, which this disproportionately hurts. The short game is to stick it to the libs. The long game is to try to eliminate state income taxes.
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Here's a visualization of the changes with some settings.
https://jsfiddle.net/381rkrsq/
The AMT changes are a huge tax benefit, even to those in California. Especially if you're married
https://jsfiddle.net/381rkrsq/
The AMT changes are a huge tax benefit, even to those in California. Especially if you're married
Just to be clear, the article is talking about HOUSEHOLDS making more than 200k, not individuals.
With a National average salary for software developers of $109k(per Glassdoor), a family of 2 tech professionals across the nation will see their tax liabilities significantly increase
With a National average salary for software developers of $109k(per Glassdoor), a family of 2 tech professionals across the nation will see their tax liabilities significantly increase
Let's just hope this doesn't get flagged off the front page either. It needs to be talked about, as it directly affects most people's livelihoods.
And just like that... it's gone.
I cannot see this bill as anything short of theft. Why do I have to pay double-digit percentage more on my taxes to give the ultra rich a tax cut? In what fucking world does that make any economic sense.