Tax Reform Update

[Zam-Zam]

Behold! The 'Sacred Cow'!:

Tax Reform: What do you call a tax break that delivers 88% of the benefits to upper-income families and subsidizes rich states at the expense of poor ones? If you're a Democrat, you call it a sacred cow.

One provision of the Republican's tax-cutting plan that has drawn intense opposition from Democrats is the elimination of state and local tax deductions for those who itemize.

Rep. Nancy Pelosi said it was "an insidious effort to raise taxes on middle class families … across America." Sen. Ron Wyden said that "hardworking middle-class folks are not going to appreciate Congress double taxing them." New York Gov. Andrew Cuomo called it "a pure tax increase."

So what is it that Democrats are valiantly trying to protect?

This SALT deduction, as it's sometimes called, will cost the federal government $1.8 trillion over the next decade, according to the Tax Foundation.

And the benefits go almost entirely to upper-income families.

Fewer than 22% of tax filers even claim the state and local tax deduction, and the vast majority of these are higher-income families. While 78% of those with incomes above $200,000 claim the deduction, just 7% of those making between $30,000 and $40,000 do. For most taxpayers, the standard deduction is more valuable.

In addition, because the wealthy pay more in state and local taxes, and are taxed at higher rates at the federal level, the value of this tax break sharply increases with income.


Complete text: https://www.investors.com/politics/...ate-and-local-tax-deductions-in-tax-cut-plan/


The spin will be that they're looking out for 'the little guy'. The truth is they're looking out for themselves.......

 

[connieb]

Behold! The 'Sacred Cow'!:

Tax Reform: What do you call a tax break that delivers 88% of the benefits to upper-income families and subsidizes rich states at the expense of poor ones? If you're a Democrat, you call it a sacred cow.

One provision of the Republican's tax-cutting plan that has drawn intense opposition from Democrats is the elimination of state and local tax deductions for those who itemize.

Rep. Nancy Pelosi said it was "an insidious effort to raise taxes on middle class families … across America." Sen. Ron Wyden said that "hardworking middle-class folks are not going to appreciate Congress double taxing them." New York Gov. Andrew Cuomo called it "a pure tax increase."

So what is it that Democrats are valiantly trying to protect?

This SALT deduction, as it's sometimes called, will cost the federal government $1.8 trillion over the next decade, according to the Tax Foundation.

And the benefits go almost entirely to upper-income families.

Fewer than 22% of tax filers even claim the state and local tax deduction, and the vast majority of these are higher-income families. While 78% of those with incomes above $200,000 claim the deduction, just 7% of those making between $30,000 and $40,000 do. For most taxpayers, the standard deduction is more valuable.

In addition, because the wealthy pay more in state and local taxes, and are taxed at higher rates at the federal level, the value of this tax break sharply increases with income.


Complete text: https://www.investors.com/politics/...ate-and-local-tax-deductions-in-tax-cut-plan/


The spin will be that they're looking out for 'the little guy'. The truth is they're looking out for themselves.......

Absolutely! I said something similar in another post. Many low and middle income families do not own property even so no mortgage deduction, no property tax and no income tax deductions for them. Plus those that do generally do not spend more than what they are talking about as the standard deduction for all three. So if the standard deduction is raised to the point that it gives the same amount of deduction to those people then it's a wash for them. We pay about 30k in state and property taxes so it's a big loser for me. But in practice it is a wash or a benefit assuming the standard is raised for families making under 100k.

Now there are a lot of people who make just over that or as a family make between 1 and 200 k. That consider themselves middle class. I know we do even though we make more than that income wise because we do not make or live like the rich people do. No private schools for us. No new cars, etc. and it seems people like my family are going to get screwed unless there is a drastic drop in our tax rates. But if the loss of these deductions also come with a big enough change in the rates and rate scale then it can be fine or a wash.

What this is doing is forcing high tax states to quit passing their burden on to others. And face their bloated tax rates because they will be under a lot of pressure now.

 

[as seen on tv]

this can only work if they phase it out over a period of time (5 years?)

ending overnight would instantly result in negative cash flow for homeowners who have recent/new mortgages which take up a heft part of their income.

 

[Bugsy McGurk]

Behold! The 'Sacred Cow'!:

Tax Reform: What do you call a tax break that delivers 88% of the benefits to upper-income families and subsidizes rich states at the expense of poor ones? If you're a Democrat, you call it a sacred cow.

One provision of the Republican's tax-cutting plan that has drawn intense opposition from Democrats is the elimination of state and local tax deductions for those who itemize.

Rep. Nancy Pelosi said it was "an insidious effort to raise taxes on middle class families … across America." Sen. Ron Wyden said that "hardworking middle-class folks are not going to appreciate Congress double taxing them." New York Gov. Andrew Cuomo called it "a pure tax increase."

So what is it that Democrats are valiantly trying to protect?

This SALT deduction, as it's sometimes called, will cost the federal government $1.8 trillion over the next decade, according to the Tax Foundation.

And the benefits go almost entirely to upper-income families.

Fewer than 22% of tax filers even claim the state and local tax deduction, and the vast majority of these are higher-income families. While 78% of those with incomes above $200,000 claim the deduction, just 7% of those making between $30,000 and $40,000 do. For most taxpayers, the standard deduction is more valuable.

In addition, because the wealthy pay more in state and local taxes, and are taxed at higher rates at the federal level, the value of this tax break sharply increases with income.


Complete text: https://www.investors.com/politics/...ate-and-local-tax-deductions-in-tax-cut-plan/


The spin will be that they're looking out for 'the little guy'. The truth is they're looking out for themselves.......

Those same Blue states subsidize the Red states bigtime when you look at where federal tax revenue comes from, and where it gets spent.

Stop that Red state leeching and we can talk about ending deductions for state and local taxes.

 

[connieb]

this can only work if they phase it out over a period of time (5 years?)

ending overnight would instantly result in negative cash flow for homeowners who have recent/new mortgages which take up a heft part of their income.

Not necessarily if they lower rates sufficiently and or they raise the standard deduction enough that it covers what would have been the state local and interest deduction for most families .

 

[SW48]

Behold! The 'Sacred Cow'!:

Tax Reform: What do you call a tax break that delivers 88% of the benefits to upper-income families and subsidizes rich states at the expense of poor ones? If you're a Democrat, you call it a sacred cow.

One provision of the Republican's tax-cutting plan that has drawn intense opposition from Democrats is the elimination of state and local tax deductions for those who itemize.

Rep. Nancy Pelosi said it was "an insidious effort to raise taxes on middle class families … across America." Sen. Ron Wyden said that "hardworking middle-class folks are not going to appreciate Congress double taxing them." New York Gov. Andrew Cuomo called it "a pure tax increase."

So what is it that Democrats are valiantly trying to protect?

This SALT deduction, as it's sometimes called, will cost the federal government $1.8 trillion over the next decade, according to the Tax Foundation.

And the benefits go almost entirely to upper-income families.

Fewer than 22% of tax filers even claim the state and local tax deduction, and the vast majority of these are higher-income families. While 78% of those with incomes above $200,000 claim the deduction, just 7% of those making between $30,000 and $40,000 do. For most taxpayers, the standard deduction is more valuable.

In addition, because the wealthy pay more in state and local taxes, and are taxed at higher rates at the federal level, the value of this tax break sharply increases with income.


Complete text: https://www.investors.com/politics/...ate-and-local-tax-deductions-in-tax-cut-plan/


The spin will be that they're looking out for 'the little guy'. The truth is they're looking out for themselves.......

Always remember, to get a tax break, you actually have to pay taxes.

 

[SW48]

Those same Blue states subsidize the Red states bigtime when you look at where federal tax revenue comes from, and where it gets spent.

Stop that Red state leeching and we can talk about ending deductions for state and local taxes.

City leeching. Doesn't matter the color of the state its the cities that leech the most.

 

[Bugsy McGurk]

City leeching. Doesn't matter the color of the state its the cities that leech the most.

Not true. Check the data. Most cities help their Blue states subsidize the Red states.

https://www.google.com/amp/s/www.wa...ize-red-states-now-red-states-want-even-more/

http://www.politifact.com/truth-o-m...ate-socialism-graphic-says-gop-leaning-state/

 

[SW48]

Not true. Check the data. Most cities help their Blue states subsidize the Red states.

https://www.google.com/amp/s/www.wa...ize-red-states-now-red-states-want-even-more/

It is not right to call a state red or blue. Cities are blue even in "red states" and its the cities that leech the most.

 

[Bugsy McGurk]

It is not right to call a state red or blue. Cities are blue even in "red states" and its the cities that leech the most.

Just not true. Cities are where most of the highest earners live, and where business HQ's are located. That's where most of the tax revenue comes from.

 

[SW48]

Just not true. Cities are where most of the highest earners live, and where business HQ's are located. That's where most of the tax revenue comes from.

If you don't think cities in red states are blue then you are just not being truthful.

 

[Bugsy McGurk]

If you don't think cities in red states are blue then you are just not being truthful.

Cities tend to vote Dem no matter where they are, but that is a different question than asking if they pull their weight fiscally.

 

[Days]

If you don't think cities in red states are blue then you are just not being truthful.

Bugs; not truthful?
say it isn't so!

 

[Bugsy McGurk]

Bugs; not truthful?
say it isn't so!

The usual challenge - show that something I said was untruthful.

Give it your best shot.

;-)

 

[Zam-Zam]

Always remember, to get a tax break, you actually have to pay taxes.

That's unfair!

 

[Arkady]

Behold! The 'Sacred Cow'!:

Tax Reform: What do you call a tax break that delivers 88% of the benefits to upper-income families and subsidizes rich states at the expense of poor ones? If you're a Democrat, you call it a sacred cow.

One provision of the Republican's tax-cutting plan that has drawn intense opposition from Democrats is the elimination of state and local tax deductions for those who itemize.

Rep. Nancy Pelosi said it was "an insidious effort to raise taxes on middle class families … across America." Sen. Ron Wyden said that "hardworking middle-class folks are not going to appreciate Congress double taxing them." New York Gov. Andrew Cuomo called it "a pure tax increase."

So what is it that Democrats are valiantly trying to protect?

This SALT deduction, as it's sometimes called, will cost the federal government $1.8 trillion over the next decade, according to the Tax Foundation.

And the benefits go almost entirely to upper-income families.

Fewer than 22% of tax filers even claim the state and local tax deduction, and the vast majority of these are higher-income families. While 78% of those with incomes above $200,000 claim the deduction, just 7% of those making between $30,000 and $40,000 do. For most taxpayers, the standard deduction is more valuable.

In addition, because the wealthy pay more in state and local taxes, and are taxed at higher rates at the federal level, the value of this tax break sharply increases with income.


Complete text: https://www.investors.com/politics/...ate-and-local-tax-deductions-in-tax-cut-plan/


The spin will be that they're looking out for 'the little guy'. The truth is they're looking out for themselves.......

Isn't it funny how the right-wingers screech like banshees about "double taxation" when it comes to the ultra-rich getting taxed on unearned wealth left to them in estates, yet they seem to have no problem at all with double taxation when it comes to getting taxed on income that already went out the door to pay another tax at the state level?

Anyway, the reason the right-wingers are open to this change is obvious: it's better for the very rich. Despite the spin-job you copied and pasted, for the very rich, trading lower marginal federal rates for the loss of the state tax write-off is a nice deal.

For starters, they have more flexibility to recognize income in lower-tax states, so an effective tax hike at the state level means less to them -- if you own several homes around the country and control businesses, it's easy to use accounting fictions to shift income around to wherever the taxes are lowest. I remember back when George H. W. Bush, a Mainer living in DC, was listed as a Texas resident for tax purposes.

http://articles.baltimoresun.com/19...2050100_1_capers-pork-loin-stuffed-doonesbury

Moreover, the wealthy inevitably get the largest marginal rate cut under the Republican federal tax 'reform' plans. The very rich will have their top rate drop from 39.6% to 35%. That's a 4.6-point decline. Because of the way the math works, a 4.6-point decline in your federal rate is worth as much to you as deductibility for a 10.6519% state tax.

Say you earn $5 million and pay 10.6519% on your state tax. So, that's $532,595 in state tax. Deduct that from your earnings for federal tax purposes, and you're taxed on
$4,467,405 at the federal level. Run that up through the current individual brackets and you pay $1,725,262. You pay the exact same $1,725,262 if the state tax isn't deductible but the 39.6% bracket is eliminated so all your income above the 35% threshold is taxed at the 35% rate.

So, for the very rich, who currently pay lots of tax in the 39.6% bracket, giving up state tax deductibility will be a good deal for them in nearly every state, if it's in exchange for eliminating that top bracket. That's why you see the idea championed by the party that consistently does the bidding of the very rich.

But say, instead, you're an upper-middle-class earner, with an income of $150,000 -- say a freshly minted lawyer, a young doctor, or a senior cop or firefighter. And say you're only getting a 3-point cut, from 28% to 25%, on your top bracket (Trump hasn't specified what the income ranges will be for his brackets, but there's no 28% any more, in his plan, so I'm just applying the next-lower surviving rate on that income). Now, how much would the state tax have to be for eliminating deductibility of the state tax to have the same value for you as reducing your top tax bracket from 28% to 25%? Turns out, the answer is 4.2%. If your state tax is higher than 4.2%, you're better off with the current system and state tax deductibility than you are with the new system and no deductibility.

In short, the swap the Republicans are proposing is a slam dunk windfall for the very rich. For the upper-middle-class, it's a horrible deal, unless you happen to live in a very low-tax state. For the poor, it's a non-issue, since they won't pay federal income tax either way.

 

[connieb]

Isn't it funny how the right-wingers screech like banshees about "double taxation" when it comes to the ultra-rich getting taxed on unearned wealth left to them in estates, yet they seem to have no problem at all with double taxation when it comes to getting taxed on income that already went out the door to pay another tax at the state level?

Anyway, the reason the right-wingers are open to this change is obvious: it's better for the very rich. Despite the spin-job you copied and pasted, for the very rich, trading lower marginal federal rates for the loss of the state tax write-off is a nice deal.

For starters, they have more flexibility to recognize income in lower-tax states, so an effective tax hike at the state level means less to them -- if you own several homes around the country and control businesses, it's easy to use accounting fictions to shift income around to wherever the taxes are lowest. I remember back when George H. W. Bush, a Mainer living in DC, was listed as a Texas resident for tax purposes.

http://articles.baltimoresun.com/19...2050100_1_capers-pork-loin-stuffed-doonesbury

Moreover, the wealthy inevitably get the largest marginal rate cut under the Republican federal tax 'reform' plans. The very rich will have their top rate drop from 39.6% to 35%. That's a 4.6-point decline. Because of the way the math works, a 4.6-point decline in your federal rate is worth as much to you as deductibility for a 10.6519% state tax.

Say you earn $5 million and pay 10.6519% on your state tax. So, that's $532,595 in state tax. Deduct that from your earnings for federal tax purposes, and you're taxed on
$4,467,405 at the federal level. Run that up through the current individual brackets and you pay $1,725,262. You pay the exact same $1,725,262 if the state tax isn't deductible but the 39.6% bracket is eliminated so all your income above the 35% threshold is taxed at the 35% rate.

So, for the very rich, who currently pay lots of tax in the 39.6% bracket, giving up state tax deductibility will be a good deal for them in nearly every state, if it's in exchange for eliminating that top bracket. That's why you see the idea championed by the party that consistently does the bidding of the very rich.

But say, instead, you're an upper-middle-class earner, with an income of $150,000 -- say a freshly minted lawyer, a young doctor, or a senior cop or firefighter. And say you're only getting a 3-point cut, from 28% to 25%, on your top bracket (Trump hasn't specified what the income ranges will be for his brackets, but there's no 28% any more, in his plan, so I'm just applying the next-lower surviving rate on that income). Now, how much would the state tax have to be for eliminating deductibility of the state tax to have the same value for you as reducing your top tax bracket from 28% to 25%? Turns out, the answer is 4.2%. If your state tax is higher than 4.2%, you're better off with the current system and state tax deductibility than you are with the new system and no deductibility.

In short, the swap the Republicans are proposing is a slam dunk windfall for the very rich. For the upper-middle-class, it's a horrible deal, unless you happen to live in a very low-tax state. For the poor, it's a non-issue, since they won't pay federal income tax either way.

Better tell that to all the dems who are whining and lying about this deduction that hurts the middle class.

 

[Zam-Zam]

Better tell that to all the dems who are whining and lying about this deduction that hurts the middle class.

Are they whining and lying? Or are they screeching like banshees?

 

[Deleted member 21794]

Absolutely! I said something similar in another post. Many low and middle income families do not own property even so no mortgage deduction, no property tax and no income tax deductions for them. Plus those that do generally do not spend more than what they are talking about as the standard deduction for all three. So if the standard deduction is raised to the point that it gives the same amount of deduction to those people then it's a wash for them. We pay about 30k in state and property taxes so it's a big loser for me. But in practice it is a wash or a benefit assuming the standard is raised for families making under 100k.

Now there are a lot of people who make just over that or as a family make between 1 and 200 k. That consider themselves middle class. I know we do even though we make more than that income wise because we do not make or live like the rich people do. No private schools for us. No new cars, etc. and it seems people like my family are going to get screwed unless there is a drastic drop in our tax rates. But if the loss of these deductions also come with a big enough change in the rates and rate scale then it can be fine or a wash.

What this is doing is forcing high tax states to quit passing their burden on to others. And face their bloated tax rates because they will be under a lot of pressure now.

I would like to see if this means for state property taxes on investment properties. I would think that would remain a business expense, but who knows what they're thinking in DC?

 

[connieb]

Are they whining and lying? Or are they screeching like banshees?

Lol. Good point.