“Even with the cap, the SALT deduction remains pro-rich, with around three-quarters of the benefit going to families in the top fifth of the income distribution “Most of the top one fifth of income households is not rich. Most are upper middle class. People bought homes with the presumption of the SALT deductions. At the very least it should be phased out (over a 15 year period) for existing homeowners and eliminated for new buyers.
FloydVanPeter
2 years ago
In the absence of SALT-like mechanism an individual might possibly be taxed more than 100% of income.
Imagine federal tax equivalent to 52% and state tax of 51%, each of the total income.
The only way we will have legitimate discussions about being taxed too much / wasteful spending / pension reform is if everyone feels the tax pain. If some are able to get deductions to ignore taxes then they won’t care about how high the tax bill goes because they aren’t feeling it. The SALT deduction is the same issue California (and increasingly Florida) has with Prop 13 where the identical house next to you may be paying half the amount of tax you are just because they’ve lived there for 20 or 30 years.
If a state even gets close to that, anyone that stays in that state deserves it. I just don’t understand the argument that people who live in high tax states shouldn’t have to contribute to the Federal Government, too. If people think state taxes are too high, they should fight to limit state spending and taxes, not expect the Federal Government to do without.
whirlaway
2 years ago
Why not compromise and move the SALT deduction limit to $20K? It doesn’t have to be $10K or infinity.
The House actually passed such a measure in late 2019 –
Now they are acting as if they never did anything like that! Why?
shamrock
2 years ago
Who the f**k was the person who came up with the idea that 2 single people can deduct a combined $20,000 in SALT but the same exact 2 people, when married, can only deduct $10,000? That’s an extra $3,000 marriage penalty on top of the existing marriage penalties. Damn I am pissed off about that.
My ex-wife and I were high earners and always hit the “marriage penalty” for well into 5 figures. I suggested that we fly to Jamaica for Christmas every year, divorce, then marry again on Jan 1 and fly home, explaining that the tax savings would pay for the vacation. She never went for it.
My current wife is a SAHM and we have 3 kids, so now I’m on the good end of all our stupid tax policies. With an S-Corp that received a PPP in 2020, we paid $0 in Federal taxes last year and received hand-outs left and right (despite having income and converting a 6-figure IRA to a Roth — thank you CARES Act).
To all of you paying the marriage penalty now, I say “ha!” Your turn. Stop voting for morons.
Yeah, married with 1 income has by far the best of it in the federal tax code. Married with 2 incomes is the worst. I wish they would just drop the “married” concept for income taxes and just everyone file their own fucking return. Same tax tables for everyone.
Casual_Observer2020
2 years ago
I think the solution here to make the SALT cap indexed. Effectively the cap should go down the more you make. Right now it is 10k for everyone. Bernie can start by proposing $0 SALT cap for those in the top 1% of income. This sounds like a Bernie proposal.
Casual_Observer2020
2 years ago
For those thinking that limiting SALT somehow made wealthy people’s taxes go up, it didn’t. They got more writeoffs and deductions and brackets were lowered under TCJA. I was heavily affected by SALT cap at 10k supposedly but my tax rate has effectively been the same for the last 10 years I’ve been in California. It has been a zero sum game with SALT cap. It allowed the federal government to redistribute more money to red states. Now payback is going to happen to the blue states one way or another.
Casual_Observer2020
2 years ago
Most & Least Federally Dependent States
John S Kiernan, Managing EditorMar 17, 2021
Federal assistance to states has come into the spotlight recently during the coronavirus pandemic, where some states have received far more money per case than others. For example, in the initial $150 billion given to states from the stimulus package, which was allocated by population, New York got link to apnews.com per positive case while Alaska received over $3.3 million. While the second stimulus package passed in December didn’t include any direct assistance to states, the government still faces questions about whether its initial distribution was truly equitable and efficient, and whether any future aid will be as well.
For years, Americans have looked at federal assistance programs with growing scrutiny, and the number of people dependent on government assistance was link to nytimes.comprior to the coronavirus crisis. Regardless of overall trends, though, it is clear that some states receive a far higher return on their federal income-tax contributions than others.
In order to find out exactly how big the difference in federal dependence is from state to state, WalletHub compared the 50 states in terms of three key metrics. Read on for our findings, commentary from a panel of experts, and a detailed explanation of our methodology.
The SALT deduction favors all states. This is why it is a good idea. It allows states to keep money that Washington wouldn’t otherwise have sent them. If you are for redistribution, then you are against the SALT deduction not for it. If every state got back all the dollars they sent Washington and no more or no less then this is fair. The SALT deduction helped out states that weren’t getting back every dollar they sent Washington. Now redistribution to states is worse because effectively a handful of states are sending money to the other 45. So why are Republicans for redistribution when it favors their state ?
In all the years I lived in states with no income tax I resented the SALT deduction because it unfairly rewards people for allowing their income to be taxed at the state level (it’s bad enough to be taxed at all, let alone at the federal level).
Eddie_T
2 years ago
I took a slightly deeper dive into this subject….Trump’s cap on the SALT tax cost me 14K in deductions in 2019….in Texas, which as you no doubt know, is a high property tax state…..so it isn’t just people in blue states that got screwed on that deal. At my 35% marginal rate, that amounted to $4900 in extra tax I actually paid…….thanks to Mr. Trump.
So it isn’t just the uber wealthy…it’s simply anybody who pays a lot of state and local tax. This is how tax cuts always work for the mom & pops…..Trump’s cut was a corporate break paid for by the upper middle class.
When I hear a President say the words “tax cut” it alway makes my butt pucker. Some break.
But didn’t your overall rate go down ? We dropped to a lower bracket and the limiting of SALT to 10k really was a wash because federal taxes went down by approximately what we lost in deductions.
I don’t really think so. I dropped from a 39.6% marginal rate down to 35….but I never had much in that 39.6% bucket to start with. I lost more than half my tax deductions for state and local taxes. Admittedly it hurt me worse because I own several properties. But a wash? Maybe if I only had the homestead to claim it might have worked out that way.
TomTheBozo
2 years ago
In addition to the SALT taxes benefitting the wealthy, aren’t states exporting the cost of their policies onto the rest of the nation?
Dr. Manhattan23
2 years ago
I agree with this, “In a “Middle Class Memo” link to brookings.edu “The SALT tax deduction is a handout to the rich. It should be eliminated not expanded“”
I also think they should do away with the mortgage interest deduction. If you itemize, and don’t take the standard deduction, you can still take advantage. It’s a handout to NAR, if anything. There are other countries that don’t offer any tax deduction for mortgage interest and the homeownership rate is higher than the US. Its a complete waste of resources in my opinion
The SALT cap at $10K also raises about $90 billion a year in taxes for the government, so repealing it would mean the federal govt gets less, so Im not sure Biden will be so enthusiastic to repeal a revenue generator
We already have a more-or-less flat tax system – if you consider *ALL* taxes and not just Federal income tax. Replacing the latter with a flat tax could end up making the overall system *regressive*.
IOW, the poor will get screwed (even more). No wonder the rich love the plan!
You are right that many taxes are regressive, and that a lot of people don’t realize which taxes are regressive. For example, most people think that corporate taxes are progressive, because the owners of corporations are wealthy. Yet, are the taxes paid by the owners? In actuality, the owners get very little from the corporation, perhaps a 1-2% dividend, and occasionally a stock repurchase (which is mathematically identical to a dividend). The reality is that the corporate portion of payroll taxes is paid by workers, and all other corporate taxes are passed on to consumers, and both are regressive.
Note, I’m not suggesting doing away with corporate taxes. Corporations are very, very efficient tax collectors, and completely invisible. When taxes are built into the prices of products, people don’t even realize they are paying taxes. If government actually taxed the consumers directly, the consumers would scream! When the taxes hide in the price of gas, the price of food, the price of soap, the price of a movie, the price of computers, etc, government can collect a lot from consumers who don’t even realize they are paying taxes as a part of their purchase. In reality, perhaps 20% of the price of every single purchase you make, ends up at the government. Even better, even those whose “income” comes from illegal sources, such as drug dealers, have to pay these taxes.
I’ve always thought a good combo would be: modest flat income tax, sales tax (excluding food and medical), drop annual property tax but apply the sales tax on properties too, carbon tax as a multiplier of the sales tax when applicable (fuel, etc), and a flat estate tax (above some amount such as 2X median home price).
No deductions (excepting the estate tax, which would be a flat amount indexed to home prices).
No capital gains tax.
It’s a pipe dream. Legislators aren’t looking for ideal. Their motives aren’t altruistic.
TCW
2 years ago
It’s a conundrum, either lower taxes along with public union pay/pensions or keep ’em high and watch the rich tax base bail to red states.
Tengen
2 years ago
SALT was one of few actions where I really agreed with Trump. I’m not sure what his original motivations were, but even if he was just trying to stick it to coastal elites who snubbed him it was still good for the country.
As stated in the article here, repealing SALT would overwhelmingly benefit the wealthy at the expense of everyone else. Aren’t our deficits already massive enough, and don’t the very wealthy already benefit enough from Fed policy?
Look at the chart a little more closely. It favors mostly the 1%. Again whatever tax changes are made I am all in favor of not affecting 99% of the people. The real problem with our economy is 20% of the people drive 85% of consumer spending. Those in the 1% would not be impacted by losing the 10k cap completely. They were getting writeoffs for buying boats and yachts.
TexasTim65
2 years ago
Anyone who votes to repeal SALT should be voted out at the next election.
One of the few taxes that truly hits the rich and also the real-estate machine (by which I mean all the ways that the government subsidizes real estate via special exemptions).
And while I would personally benefit (slightly) from a SALT deduction I still don’t think it’s a good idea because I’ve also been on the other side (renting) in my life. It’s not only a subsidy for the rich it’s also discriminatory against renters. The government has no business subsidizing real estate.
What are you talking about? Subsidy for rich? Gimme a break, you Commie. Many landlords are smaller investors like myself. I rented too in my life and never had some type of animosity to my landlords. They provided a service and I accepted it. Good for them and good for me now.
You are what is wrong with this country-envy. Read the Bible a little more regarding not coveting what others have.
Regarding SALT, I hope they get rid of the limitation. For once, I agree with Comrade Bernie.
I’m a libertarian, not a commie. I believe in free markets, not subsidizing some investments over others.
As a landlord you should be able to pass on the loss of money on deductions by increasing your rent/decreasing upkeep. If you can’t do that then your business model isn’t viable (you over paid for the house/took on too much mortgage/can’t generate enough income from rent or some combination of that). This is the same problem that’s plaguing us with Tesla (only survives on subsidies) and countless other businesses.
Property taxes are unconstitutional – they are a direct tax on people. If you don’t pay the tax, your property is confiscated, so these taxes, in effect, preclude property ownership.
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“Even with the cap, the SALT deduction remains pro-rich, with around three-quarters of the benefit going to families in the top fifth of the income distribution “Most of the top one fifth of income households is not rich. Most are upper middle class. People bought homes with the presumption of the SALT deductions. At the very least it should be phased out (over a 15 year period) for existing homeowners and eliminated for new buyers.
Now they are acting as if they never did anything like that! Why?
John S Kiernan, Managing EditorMar 17, 2021
Federal assistance to states has come into the spotlight recently during the coronavirus pandemic, where some states have received far more money per case than others. For example, in the initial $150 billion given to states from the stimulus package, which was allocated by population, New York got link to apnews.com per positive case while Alaska received over $3.3 million. While the second stimulus package passed in December didn’t include any direct assistance to states, the government still faces questions about whether its initial distribution was truly equitable and efficient, and whether any future aid will be as well.
For years, Americans have looked at federal assistance programs with growing scrutiny, and the number of people dependent on government assistance was link to nytimes.comprior to the coronavirus crisis. Regardless of overall trends, though, it is clear that some states receive a far higher return on their federal income-tax contributions than others.
In order to find out exactly how big the difference in federal dependence is from state to state, WalletHub compared the 50 states in terms of three key metrics. Read on for our findings, commentary from a panel of experts, and a detailed explanation of our methodology.
IOW, the poor will get screwed (even more). No wonder the rich love the plan!