Support NeoGAF

[emag]

SALT: State And Local Tax

Currently, if you itemize your taxes, you can deduct your state and local taxes from your income for federal taxation purposes. Paul Ryan et al. would like to remove this deduction as a means of paying for other proposed tax deductions, such as a cut to the nominal corporate tax rate.

https://www.washingtonpost.com/powe...26d506-9a26-11e7-b569-3360011663b4_story.html

Last year, the congressional Joint Committee on Taxation estimated the deduction’s cost to the Treasury at more than $368 billion through 2020, and the Congressional Budget Office reported that simply capping the deduction would cut deficits by $955 billion over a decade.

The other individual tax provisions whose elimination could generate close to that revenue are even more politically sacred — including the favored treatment for retirement savings, employer-paid health-care premiums, investment income and mortgage interest.

“People in states that have balanced budgets, whose state governments have done their job and kept their books balanced and don’t have big massive pension liabilities, they’re effectively paying for states that don’t,” he [Paul Ryan] said. “What it is is a fairness issue. . . . Let’s let people see their true cost of government.”

The deduction clearly favors states where taxes are relatively high, and where incomes are high enough that it is worthwhile for taxpayers to itemize their deductions and claim it. According to the conservative Tax Foundation, filers in six states — California, New York, New Jersey, Illinois, Texas and Pennsylvania — claim more than half of the dollar value of the deduction.

With the exception of Texas, those states are overwhelmingly represented by Democrats, but a handful of Republicans, mainly in the House, are threatening a revolt if the GOP tax plan is balanced on their constituents.

“The question is: Should taxpayers in low-tax states be subsidizing the taxpayers in high-tax states?” said Sen. Patrick J. Toomey (R-Pa.), a member of the tax-writing Senate Finance Committee. “It’s not clear to me why that’s good policy.”

Hmmm.

https://mises.org/blog/which-states-rely-most-federal-spending

Double tax me if old.

 

[RPGamer92]

Yay, can't wait for states to become even more fucked than they already are.

 

[WedgeX]

Effect on states:

Eliminating the deduction for state and local taxes. Taxpayers who itemize deductions on their federal income tax returns can deduct state and local property taxes, as well as either state and local income taxes or general sales taxes. State and local taxes have been deductible since the federal income tax was created in 1913, on the theory that income paid in state and local taxes is not disposable income, so taxing it at the federal level is double taxation.

The deduction gives taxpayers who itemize a discount from the federal government for the state and local taxes they pay. That’s particularly important in states with higher and more progressive income taxes. Without that deduction, many of these taxpayers would likely demand less progressive state income taxes and/or tax cuts. They also may be less likely to support the tax increases that other parts of the Administration’s agenda may force upon states in order to maintain their residents’ quality of life.

https://www.cbpp.org/blog/trump-tax-plan-would-make-states-job-still-harder

 

[Geist-]

Lmao, increasing taxes to lower rich people taxes. Not even trying to hide it anymore.

 

[Xelinis]

So, wait, just to be clear, does this mean Republicans are trying to raise taxes on the rich?

 

[kirblar]

Ignoring that it's the GOP proposing this, is this a net good thing or bad thing in terms of making taxes more regressive vs more progressive?

 

[gcubed]

So, wait, just to be clear, does this mean Republicans are trying to raise taxes on the rich?

But they are in blue states, so they don't count.

 

[Xelinis]

But they are in blue states, so they don't count.

Not getting your point. Blue states are where the wealthiest people in the country live.

 

[Linkura]

These motherfuckers....

 

[butzopower]

So, wait, just to be clear, does this mean Republicans are trying to raise taxes on the rich?

Wouldn't this literally be raising taxes on everyone, if one assumed everyone deducted their state and local taxes (obviously everyone doesn't)?

 

[GaimeGuy]

Can a mod edit the title? Coming into this thread,I legit thought it was about salt, not local taxes.

 

[geomon]

This is income distribution, pure and simple. We're going to take tax breaks away from the poor to give more tax breaks to the rich.

 

[Geist-]

Wouldn't this literally be raising taxes on everyone, if one assumed everyone deducted their state and local taxes (obviously everyone doesn't)?

I'm no expert, but raising taxes on everyone and lowering corporate taxes seems to be a net gain for people who own corporations.

 

[WedgeX]

Wouldn't this literally be raising taxes on everyone, if one assumed everyone deducted their state and local taxes (obviously everyone doesn't)?

Yes. And the GOP will claim it is then up to the states to lower their taxes, which will hurt states with progressive taxes the most should people listen to GOP talking points.

Which people often do.

 

[Xelinis]

Wouldn't this literally be raising taxes on everyone?

Only those that fully itemize, and even then, if you're making under $100k, the difference this makes is negligible. This actually affects wealthy taxpayers far more than anyone else.

 

[Raylan Targaryen]

Can a mod edit the title? Coming into this thread,I legit thought it was about salt, not local taxes.

It's in all capitals which implies its an acronym (op isn't Trump) and the title mentions a tax plan, why would Republicans care about table salt in regards to a tax plan?

 

[Battle Litany]

Wouldn't this literally be raising taxes on everyone, if one assumed everyone deducted their state and local taxes (obviously everyone doesn't)?

No, because the wealthy are more likely to earn a disproportionate amount of their income from dividends and capital gains, compared to the middle and lower class whose income comes almost entirely from wages.

This raises personal income tax but lowers corporate taxes, which leads to higher dividend and capital gains income by shareholders due to higher earnings from the underlying company.

 

[emag]

The idea of preventing the federal government from taxing money that citizens must pay to state and local tax collectors goes back to the Civil War, and the deduction was included in the first income tax legislation. One fear, articulated by Alexander Hamilton in the Federalist Papers, was that the federal government might try to monopolize taxation ”to the entire exclusion and destruction of state governments."
https://www.nytimes.com/2017/04/27/business/economy/state-local-income-tax-deduction.html?mcubz=3

So, wait, just to be clear, does this mean Republicans are trying to raise taxes on the rich?

Throwing six-figure earners under the bus to benefit 7+ figure earners.

Ignoring that it's the GOP proposing this, is this a net good thing or bad thing in terms of making taxes more regressive vs more progressive?

On its own, it hurts the upper-middle class, while having little to no direct effect on the poor or rich (but raising federal revenues). Indirectly, it puts pressure on states to cut spending (on infrastructure and social programs). It certainly kills any sort of state-level single-payer insurance option, for example.

The Partnership for New York City, a group of large employers, estimated that the value to New York City taxpayers of itemized deductions for state and local taxes was $7.7 billion in 2014, or $6,600 per affected taxpayer. For those earning more than $200,000, the average deduction for state and local taxes exceeded $30,000. Pressure to cut local taxes is likely to mean less spending on programs and services.

Conservatives have complained that the deduction causes low-tax, often poorer, states to subsidize high-tax areas.

But as Kathryn S. Wylde, president of the partnership, pointed out, even with those deductions, New York City still sent far more money to the federal government than it received back. City residents paid $96 billion in personal income taxes, and businesses paid $19 billion. In return, the city received about $61 billion from Washington.
https://www.nytimes.com/2017/04/27/business/economy/state-local-income-tax-deduction.html?mcubz=3

 

[KevinRo]

*edit*

looks like op responded above

 

[Republic of Ezo]

Wouldn't this literally be raising taxes on everyone, if one assumed everyone deducted their state and local taxes (obviously everyone doesn't)?

Social Democrat from NY here. No, if you use the Standard Deduction this doesn't hurt you at all or affect you in anyway (in fact they were talking about doubling the standard deduction, which is a good idea in the direction of UBI, but I dunno if that's still on the table). For instance I made about 100k last year and the Standard Deduction was worth way more than itemizing my deductions including state and local tax deductions. Only very high earners (primarily in high tax states) will be affected but that may end up balanced by lower overall rates for those same people. Effectively it is a shifting of resources from high income people in blue states to primarily benefit high income people in red states.

This deduction would be a lot more useful though if we had single-payer in a state like California and NY (only one vote away in state senate) since the tax burden would go up to pay for those and this deduction could come into play a lot more often.

 

[GaimeGuy]

It's in all capitals which implies its an acronym (op isn't Trump) and the title mentions a tax plan, why would Republicans care about table salt in regards to a tax plan?

I dunno, why would the party of small, localized government try to discourage localities from taking a bigger role?

 

[jetjevons]

Newsflash. There are fewer rich people than poor people. Ergo who would this affect the most?

 

[badrang]

Newsflash. There are fewer rich people than poor people. Ergo who would this affect the most?

The wealthy.

 

[WedgeX]

The wealthy.

Well, not quite as CBPP points out in my link above.

 

[NYCmetsfan]

this is bad thread title

SALT is Strategic Arms Limitation Talks

 

[emag]

*edit*

looks like op responded above

I'll respond here, too. Doubling the standard deduction is directly good for everyone (although those that don't own houses, don't live in high-tax locales, and don't contribute to charities will get the biggest benefits), but it comes at a hefty cost (CRFB estimates it would be $150 billion a year, which is more than twice the SALT deduction) which has to be made up for somewhere else.

IMO, which is admittedly biased by my own personal situation, charitable donation deductions are absolutely off-limits, and SALT, child/childcare, 401(k)/IRA savings, and mortgage deductions follow closely behind. The top two most costly "deductions", by the way, are the Employer Health Insurance Exclusion (~$150 billion) and Capital Gains and Dividend lower rates (~$120 billion).

 

[JaggedSac]

This is income distribution, pure and simple. We're going to take tax breaks away from the poor to give more tax breaks to the rich.

Do the poor often itemize?

 

[Chumly]

I think this is a terrible idea for none other than the fact that it would put significant pressure on states to reduce their taxes and spending.

Considering the fact that the wealthy are going to get a huge tax cut anyways this is negligible on them.

 

[Linkura]

The wealthy.

No. Most people who own a house itemize. Not everyone who owns a house is wealthy.

 

[butzopower]

So what is Ryan's end game with this? Is it to offer more corporate deductions or does the dude hate taxes enough that he wants to make sure other states with higher taxes than his suffer? His quote makes me feel the later. whynotboth.gif I guess. Though for the supposed party of states rights, dude sure likes to tell other states what they should be doing.

 

[Parmadillo Marshmallow]

As a homeowner in CA, this would suck for me personally.

 

[butzopower]

As a homeowner in CA, this would suck for me personally.

Should have stuck with eating avocado toast then.

 

[Locke562]

Inequality for all!

 

[tokkun]

No. Most people who own a house itemize. Not everyone who owns a house is wealthy.

The higher your income, the more it benefits you in both absolute and relative (unless you are in a flat-rate state) terms.

 

[Drkirby]

Its the perfect plan for Republicans, its a change that primarily hurts states with heavy Democratic voting populations.

 

[Linkura]

The higher your income, the more it benefits you in both absolute and relative (unless you are in a flat-rate state) terms.

Of course. But to say it only benefits the wealthy is silly.

 

[entremet]

So, wait, just to be clear, does this mean Republicans are trying to raise taxes on the rich?

Idiots keep voting these cretins. Things will need to get worse before they got better it seems.