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Anyone living in a state with high income and/or property taxes will likely pay more this year given the $10k cap on deductions for state and local taxes which

Anyone living in a state with high income and/or property taxes will likely pay more this year given the $10k cap on deductions for state and local taxes which was previously unlimited before the 2018 tax year...

empath75 7y ago
Anyone who pays 10k in state taxes is going to be well into the top 10% of incomes.
- jfim 7y ago
  Top 10% nationwide or state wide? 10k in state tax in California should be hittable with an entry level software engineer job at Google in the Bay area.
  - philwelch 7y ago
    That’s still roughly top 10% of incomes, no?
- tellak 7y ago
  State and property taxes. Not everyone paying exorbitant property taxes is that high in income. Also, income distribution what it is today, 90%tile income is still middle class!
toast0 7y ago
The deduction wasn't limited under the normal tax, but it wasn't allowed under AMT, so it was effectively limited by AMT.
jfk13 7y ago
And why not? I don't see any fundamental reason why your local taxes should be deductible for federal tax purposes.
- AnthonyMouse 7y ago
  Because you don't actually have that money. Suppose that the state and the federal government each had a 55% tax rate. Then you would make $1 and owe $1.10. You would owe more in taxes than you make, so you would quit your job. Of course, there is a simple way for the states to fix this -- move the taxes to the business side. Instead of having state income tax, have payroll tax paid by the employer. Then the employer can still deduct them from its federal taxes. This also improves eligibility for people in your state for various need-based federal programs, because nominal wages will be lower by the amount of the tax when determining eligibility for federal assistance. And it gives everyone a de facto raise until wages adjust to the shifted tax burden.
  - jfk13 7y ago
    If both the state and federal governments each had a 55% tax rate, you'd be justified in questioning the rates and voting for a different government! Just as I expect people would complain if there was just a single tax authority, but it set a rate of 110%. Assume for now that we accept the federal government is entitled to raise money for its programs by taxing people's incomes (yes, some people might disagree, but that's a different discussion). Why should a state be allowed to reduce the federal government's take, and therefore shift the burden of paying for federal services to other states, by choosing to increase its own local tax?
    - justin66 7y ago
      > Why should a state be allowed to reduce the federal government's take Because a state can often do a more effective job of using the money than the federal government. > and therefore shift the burden of paying for federal services to other states If you look at the states with high enough income taxes for this to all be relevant, they tend to be "donor" states that pay a lot more to the federal government than they get back. It might be a good idea to even that all out, but eliminating the local and state tax deduction doesn't help.
      - jfk13 7y ago
briandear 7y ago
“Anyone?” That isn’t accurate because you’re ignoring the doubling of the standard deduction. Higher income people who itemize would be the only ones affected. And with the reduced tax rates offset some of that lack of SALT deductibility. That SALT change only really affected less than 7% of taxpayers (10.9 million filers out of 153 million who filed returns.) https://www.cbsnews.com/news/salt-tax-deduction-on-2018-tax-returns-11-million-taxpayers-taking-a-hit-from-new-tax-law/ https://www.cbsnews.com/news/salt-tax-deduction-on-2018-tax-...
- akhilcacharya 7y ago
  Just putting it out there, 11 million is significantly more than the number of people that lost their insurance in the “if you like your insurance you can keep it” outrage of 2013. So 7% is quite a bit.
- wsdfsayy 7y ago
  I'm talking specifically about high tax states like CA, NY, NJ. If you isolate taxpayers in those states the change affects a lot more than 7% of residents of those states. This change was about Trump's desire to hurt residents of blue, high tax coastal states. To minimize this as something that only affects the .1% is rationalizing his terrible tax policy.

empath75 7y ago

Anyone who pays 10k in state taxes is going to be well into the top 10% of incomes.

jfim 7y ago
Top 10% nationwide or state wide? 10k in state tax in California should be hittable with an entry level software engineer job at Google in the Bay area.
- philwelch 7y ago
  That’s still roughly top 10% of incomes, no?
tellak 7y ago
State and property taxes. Not everyone paying exorbitant property taxes is that high in income. Also, income distribution what it is today, 90%tile income is still middle class!

toast0 7y ago

The deduction wasn't limited under the normal tax, but it wasn't allowed under AMT, so it was effectively limited by AMT.

jfk13 7y ago

And why not? I don't see any fundamental reason why your local taxes should be deductible for federal tax purposes.

AnthonyMouse 7y ago
Because you don't actually have that money. Suppose that the state and the federal government each had a 55% tax rate. Then you would make $1 and owe $1.10. You would owe more in taxes than you make, so you would quit your job. Of course, there is a simple way for the states to fix this -- move the taxes to the business side. Instead of having state income tax, have payroll tax paid by the employer. Then the employer can still deduct them from its federal taxes. This also improves eligibility for people in your state for various need-based federal programs, because nominal wages will be lower by the amount of the tax when determining eligibility for federal assistance. And it gives everyone a de facto raise until wages adjust to the shifted tax burden.
- jfk13 7y ago
  If both the state and federal governments each had a 55% tax rate, you'd be justified in questioning the rates and voting for a different government! Just as I expect people would complain if there was just a single tax authority, but it set a rate of 110%. Assume for now that we accept the federal government is entitled to raise money for its programs by taxing people's incomes (yes, some people might disagree, but that's a different discussion). Why should a state be allowed to reduce the federal government's take, and therefore shift the burden of paying for federal services to other states, by choosing to increase its own local tax?
  - justin66 7y ago
    > Why should a state be allowed to reduce the federal government's take Because a state can often do a more effective job of using the money than the federal government. > and therefore shift the burden of paying for federal services to other states If you look at the states with high enough income taxes for this to all be relevant, they tend to be "donor" states that pay a lot more to the federal government than they get back. It might be a good idea to even that all out, but eliminating the local and state tax deduction doesn't help.
    - jfk13 7y ago

briandear 7y ago

“Anyone?” That isn’t accurate because you’re ignoring the doubling of the standard deduction. Higher income people who itemize would be the only ones affected. And with the reduced tax rates offset some of that lack of SALT deductibility. That SALT change only really affected less than 7% of taxpayers (10.9 million filers out of 153 million who filed returns.) https://www.cbsnews.com/news/salt-tax-deduction-on-2018-tax-returns-11-million-taxpayers-taking-a-hit-from-new-tax-law/ https://www.cbsnews.com/news/salt-tax-deduction-on-2018-tax-...

akhilcacharya 7y ago
Just putting it out there, 11 million is significantly more than the number of people that lost their insurance in the “if you like your insurance you can keep it” outrage of 2013. So 7% is quite a bit.
wsdfsayy 7y ago
I'm talking specifically about high tax states like CA, NY, NJ. If you isolate taxpayers in those states the change affects a lot more than 7% of residents of those states. This change was about Trump's desire to hurt residents of blue, high tax coastal states. To minimize this as something that only affects the .1% is rationalizing his terrible tax policy.