Tax bill: States look for ways around the new SALT deduction cap

Curbed ^ | Jan 2, 2018 | Jeff Andrews

[Tenacious 1]

2. the employer would be paying the tax and would just reduce wages by an equivalent amount, or not, and go out of business. If the employee gets a lower wage, he is STILL paying the f*cking money!. I swear, the biggest idots are economists!

Obviously you are correct here. But there is the other option which is also bad. Businesses will have to raise their prices to cover the new cost of doing business (taxes). This will increase the cost of goods and services provided in their state and abroad (nationally and internationally). In the home state, the consumer pays the higher price and thus the tax increase (like you said, still no change just moving the pieces).

I think it would motivate companies to seek new homes. Companies leave, tax base shrinks, jobs go away, ......

[11th_VA]

I think the only alternative is for states to raise the sales tax - but they HATE that, because it’s not ‘Progressive’ ... LOL !!!

[kabar]

Here are two good links explaining the impact on businesses:

What Tax Reform Means For Small Businesses & Pass-Through Entities

Everything you need to know about the GOP’s final tax plan in 3 charts

[Sooth2222]

“...This idea would hinge on companies not responding by slashing wages to offset their tax hike, ...”

Also hinges on companies not moving out of state.

Which is a trend that's been in place my entire life. For example, #1 for taxes New York State has lost an amazing 18 seats in Congress (and electoral votes) since 1950. It had 45 congressional districts in 1950. It has 27 districts today. It last had that few in 1813-1823.

So I've expected that they will try this. And that they will find some bat**** crazy Obama judge who doesn't mind being reversed who will agree. And that it will eventually be affirmed by a higher court.

New Jersey has had a $10,000 annual cap on state income tax deductions for property tax payments itself, so it will be interesting to see how they dance around that in court. I think Murphy is whistlin' past the graveyard. This is very, very, very bad for high-tax blue state politicians.

[L,TOWM]

Also make states like Texas, Florida, and Nevada more appealing to employers.

[Hambone 1934]

Smart republicans running in 2018 can point out how hard dems are working to help their rich taxpayers...Soooo,the whole let the rich pay their fair share was a lie?????

[grania]

If those taxes were “charitable donations to the state”, why would people have to pay them?

[Norseman]

I have yet to read an article that makes sense of the impact of the new tax law on the tax collections by the individual states.

For example, all those blue state politicians are worried about their residents facing higher taxes. What higher taxes?

Most blue state residents are seeing a cut in their federal taxes (unless they’re earning over a half million a year or more, and even many of those will still see a significant cut in their federal taxes if they’re not claiming a ton of deductions.

Example: If you live in NYCity and make $2,000,000 and rent, not own, so no mortgage interest and no property tax: Savings of $2,386 per this tax calculator, which is an excellent resource because it’s so simple to use: http://taxplancalculator.com/calc

So, who are these state legislators so concerned about? Those making a million or more a year and own their homes. But what percentage of their constituents do they represent? I’d guess less than 1%.

But here’s the real rub. Take that same example above of the NYCity taxpayer earning $2.0 million. Look at that tax calculator. It also shows Federal Taxable Income both before and after the new tax law. Their taxable income goes from $1.84 million to $1.97 million, up $130,000!

If NYCity and State base their usurious tax rates on federal taxable income, they will collect together an additional $13,000 to $14,000 from that same couple. In other words, it’s New York City and State that will be causing that couple’s taxes to increase UNLESS THEY CUT their tax rates next year.

Once people figure that out, it’s going to really get interesting.

P.S. This line of logic depends upon states applying their tax rates to a person’s Federal Taxable Income, which might not be the case in all, or even most, states. But Federal Taxable Income is going to go up for most people who itemize a lot of deductions.

Any thoughts from others on this?

[Rusty0604]

The low income people will be helped by the new tax law. So they are only worried about the high income taxpayers, their milk cow.

[Norseman]

>>This is very, very, very bad for high-tax blue state politicians.<<

Maybe, but not for the reason people think. (See my post #28 above)

Most of their constituents will get a tax break at the federal level unless they’re making a million a year or more, and even some of them won’t see an increase in federal taxes. Rates were cut across the board, after all.

The real issue, I believe, is that federal taxable income rises in most cases under this law, and if a state bases it’s tax table on federal taxable income, they’ll be the ones increasing taxes on their constituents. So, will they realize that and cut their tax rates? In a red or purple state, maybe, but I wouldn’t bet on it in a blue state.

Say Wisconsin legislators realize this and cut their top rate of 6.94%, and the reason for doing so becomes widely known, i.e., to keep from raising taxes on residents due to the change in the federal law.

But CA, NY, IL, and the other usual suspects decline to do so. That’s when the fun really begins.

[Buckeye McFrog]

A charitable donation to the state is voluntary.

They could make it mandatory and then deem it a "tax".
Thank you, Chief Justice Roberts.

[montag813]

States look for ways around the new SALT deduction cap

HINT: STOP funding overpaid and over-pensioned teachers, janitors administrators, police, and municipal and public works employees.

Or else the people will demand an end to $240,000/yr janitors and $436,000/yr police (both real examples last year from NY and CA), and Democrats will be out of a job.

[Vaquero]

Hey Andrew Cuomo?? What you can do is lower our taxes! That’ll work for me. The criminal thieving taxes, that I get nothing worthwhile in return for, has to go.

[Revel]

Here is another radical Idea. Kick Liberals and all there “Freebies” out of power. Then lower property taxes.

[Calvin Locke]

The last time I checked, NH pays its solons $200/year. NJ is small enough do the same.

That would be a good place to start cutting spending, and at the same time, encourage the NJ State Legislator to see what else it can do without.

I'll speculate that a lot more of them will end up doing time in Club Fed for bribery and extortion, too.

[Alberta's Child]

The reason you’re seeing so much discussion about the “charitable donation to the state” issue is that it has supposedly passed a legal challenge in Federal tax court in the past, with the IRS coming out on the losing end.

[1Old Pro]

The new cap means states might have to drop their tax rates or cut spending, lest they face the wrath of angry constituents with suddenly enormous tax bills.

1) Andy Cuomo will never reduce spending or cut taxes. Today at his state of the state speech his two top priorities, sex harassment training and gun confiscation. 2) The idiots of NYS that elected boy Cuomo will never get angry, they are too stupid to connect the dots and besides, they get too much from their bloated government to care..

[mlo]

"It should not take a "constitutional scholar" to see that the new federal tax law is NOT unconstitutional."

I'm sure that their claim, whatever it might be, won't be based on an infringement of the 16th. Most likely it will be an equal protection claim. That would still be very dubious since the rules apply equally to residents of all states, and it's only the behavior of the states themselves that lead to different results.

[Kickass Conservative]

I’m sure lowering Tax Rates on their Citizens was number one on their list.

[Myrddin]

A tax is inflicted, enforceable theft of income by the state. A "donation" is a discretionary, volitional act. If an employee is not free to not pay the "donation", then it is just a tax by another name. A misnomer.

If states think the payroll tax in place of an income tax is going to just be sucked up by business, they are smoking too much recreational weed. The taxes are assessed against earned income that reflects productive labor by an employee. It doesn't grow on trees. The employees gross income must be tapped to fund that "payroll" tax. A income "cut" that is visible to the employee becomes a consideration for finding a new employer.