Skip to comments.Senate plan to scrap income and property tax deductions would be a blow to Californians
Posted on 11/10/2017 4:01:25 AM PST by SkyPilot
Congressional Republicans advanced two competing visions of tax reform Thursday, setting up a potentially bruising battle in the weeks ahead as they struggle to agree on a bill President Trump can sign.
With the Senate GOP's unveiling of its tax plan, key differences with the House version became apparent. Among the biggest potential losers in both plans are residents of California and other high-cost states, who rely heavily on itemized deductions for state, local and property taxes.
The Senate plan eliminates all such state and local deductions, while the House proposal retains property tax deductions up to $10,000. As a trade-off, the Senate version would preserve other popular deductions targeted for removal in the House plan, such as for medical expenses.
Both the Senate and House plans would lower the corporate tax rate from 35% to 20%, but the House would make the cut immediately, while the Senate would delay implementation for a year, until 2019, in order to save an estimated $108 billion.
There are also key differences in how new individual rates would be set, the repeal of the estate tax and a variety of other provisions.
Those and other discrepancies will need to be settled, while also making sure the tax breaks dont add to the federal deficit by more than the agreed-upon $1.5 trillion over 10 years.
But Republicans appear motivated to fulfill one of their partys top campaign promises. This weeks GOP losses in state elections served as wake-up call and could provide momentum to push for passage of tax legislation by Christmas, assuming they come to an agreement.
This comprehensive tax reform will make a huge difference for America, said Senate Majority Leader Mitch McConnell (R-Ky.). This is going to be an extraordinary accomplishment.
(Excerpt) Read more at latimes.com ...
Rep. Lee Zeldin (R-N.Y.) said he planned to vote against the tax bill unless it is changed. "I remain a no on both the House and Senate proposals in the current form, he said in a statement. It is disappointing that the draft Senate bill is likely to completely eliminate [state and local tax deductions]. However, the fight is not over."
Lets stop pretending this tax proposal is good for everybody: the middle income people of New York, California, Illinois and New Jersey are footing the bill for a tax break for people elsewhere, wrote Rep. Dan Donovan (R-N.Y.) in the New York Daily News.
The GOP seems to be doing a very good job of chasing away millions of middle and upper middle class voters with this abortion of a Tax Bill.
In fact, the "Rob Joe Six Pack To Pay Mark Zuckerberg Act" will most likely cause the GOP to lose some of the seats for the 35+ Congressman in NY, NJ, IL and CA and other high tax states who will be screwed by this bill.
But the GOP isn't working for the voters anymore.
They are pocketing the checks from their rich donors - who are running the show.
I take the GOP at their word when they tell the press they are writing the legislation for their donors, not for us.
But Californians LOVE taxes.
If the tax cuts in general balance out my high state and local tax federal income tax breaks, Im ok with it. Im retried, the wife aint. The taxes even in the far burbs are high.
I would move to America tomorrow if it werent for family issues.
One of the reasons that NYS property taxes are soaring is that being able to deduct them at tax time softens the blow and makes voters less inclined to hold local and state pols responsible.
Why should the federal taxpayers in the other 49 states be forced to pay for our profligacy? I am a NYS homeowner, BTW.
As for power in Congress, while NY’s Senate seats have always been and will be 2, our representation in the House has gone from 45 districts in the 40’s to 27 now. And we’re rumored to be losing another one or 2 after the next census. Whatever happens with tax reform, NYS will have less to say in the matter. And soaring state and local taxes are a large part of the reason.
What I’m reading is that states that are (property) taxed at a high level are the ones adversely impacted because now they can’t just effectively pass their tax burden on to the feds. Sweet deal for the pols in Sacramento. They’ve been able to get away with it thus far because people think “no biggie, I’ll just write it off on my federal forms...”, well no longer if this goes through.
Just CUT the spending.
And we are supposed to care?
Mexifornia is doomed for any number of reasons, why help delay it?
This plan would reduce my familys federal tax by 25%.
Skypilot, there are multiple tax calculators to check impact. By what percentage do your taxes go up? We save 25%.
History of State and Local Tax Deductibility The deductibility of state and local taxes is older than the current federal income tax itself. The provision has its origin in the nations first effort at income taxation (eventually found unconstitutional) under the Civil War-financing Revenue Act of 1862, and was carried over into the Revenue Act of 1913, the post-Sixteenth Amendment legislation creating the modern individual income tax. The rationale for the original provision only comes down to us in fragments, though a fear that high levels of federal taxation might absorb all [the states] taxable resources, a concern first addressed in the Federalist Papers, appears to have held sway. Lawmakers sought a bulwark against the possibility that all the resources of taxation might by degrees become the subjects of federal monopoly, to the entire exclusion and destruction of state governments, and found it in a federal deduction for state and local taxes.
But sure, red staters, gloat in the fact that, say, Alaska, South Dakota, and Wyoming represent only 0.1 percent apiece of a state share of SALT deductions. As opposed to say, coastal blue states like California, New York, or New Jersey (19.6 percent, 13.3 percent, and 5.9 percent, respectively.) Good on you. Except that you also, if youre being honest, have to calculate that state taxes present a complex multi-faceted picture. (When it comes to federal revenue, all of the sudden, conservative congresspersons are no longer pro-states rights.) For instance, seven states pay no state income tax at all, five of seven of which went red in the last presidential election. And when Wallethub, a personal finance site, calculated which states were most dependent on federal funds, a contrarian picture emerges. The top five federally dependent states were Kentucky, Mississippi, New Mexico, Alabama, and West Virginia. Four out of five of which went for Trump. The five least dependent states? All SALT-deduction lovers who pay more than their fair share of federal taxes: California, Illinois, New Jersey, Minnesota, and Delaware. Five of five of which went blue in the last election.
Hate to break the news to you, Trump-loving Alabamans, but even the SALT-deducting hedge-fund manager in Greenwich isnt the welfare queen that you are. Connecticut = the 42nd most-dependent state on federal finances. Alabama = the fourth most-dependent state. When calculating federal tax revenue by state, six out of the top ten payers are blue states. So despite Republicans haste to punish coastal blue states, who suffer higher costs of living/state taxes, and therefore benefit disproportionately from taking SALT deductions, exactly who is subsidizing who is a very open question.
High tax states are actually the ones subsidizing low tax states via revenue sent to Washington. Period.
Eliminating this deduction is simply a big FU to NY, NJ, IL, CA and other states. The GOP are working for their donors, not us. They need to screw over the middle class to "pay for" the generous and massive tax cut they are about to give Google, Facebook, Apple, Amazon, and every other corporation.
Oh, and here's the best part: that "evil" property, local, and state deduction that is being eliminated for individuals?
Well, both the Senate and House bills will allow corporations to continue to claim these deductions!
This has been an interesting few week on Free Republic.
When the wild fires were devastating homes, business, and taking lives in CA, there were Freepers gloating, applauding, and cheering. If you don't believe me, go back and examine the threads for yourself.
As this tax bill debate has demonstrated, the GOP as a unified party is dead. The same with us as a nation. No "one nation under God" for many Freepers. Instead it is: "I don't care who gets screwed over - especially if I don't like that state."
I guess we might as well allow the Democrats to take over the House of Representatives. Better sooner than later.
As much as I love the idea, it’s going to be a tough fight to get a bill that scraps state income deductions.
Simple solution is to raise the standard deduction to the point that it’s equal to, or more than the itemized deduction for say 90-95% of those making $60K a year. And index it to inflation.
What ever happened to lowering taxes and simplifying the tax code? You couldn’t assemble a bigger collection of losers if you tried.
Good. I am happy for you.
It would be nice if the GOP wrote a tax law where that kind of savings translated to Americans across the board.
But they didn't. They picked winners and losers. This isn't how Reagan approached tax cuts. He made them across the board.
In order to cut the corporate rate from 35% to 20%, the GOP needs somewhere on the order of another $1.5 Trillion that is supposed to come from eliminating deductions (medial expenses, disaster relief, property taxes, etc).
Take the state, local, and property tax deduction: that one seems to be one that they refuse to take out of the equation. You know why? Because they need to Trillions from Americans in order to "pay for" giving the corporations a fat tax cut.
People in states like CA, MA, CT, NJ, NY, IL will be taxed more on the money they already pay on taxes, so that the corporations and rich donors will be happy.
Where is Trump in all of this? I don't see his leadership. He asked for the corporate rate cut, but he has allowed Paul Ryan and Mitch McConnell to play fiddle with their donors and K Street, while millions of his supporters are about to get the shaft.
Could you please run through a tax calculator and tell us just how much worse it is for you? It was your posts that made me check it out.
All taxation is theft. Just because government is stealing more from someone else doesn’t make me feel better.
Skypilot, I am an Illinois resident.
Dont give me cr@p about your state. My state is worse.
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