Posted on 11/28/2017 9:39:50 PM PST by Oshkalaboomboom
If you have ever wondered why leaders of liberal cities and states become giddy at any new spending opportunity – investments into light rail infrastructure, social programs for illegal aliens, public schools that look like palaces, billion-dollar sports stadiums – it is not because they are more public-minded than Republicans, or possess an innate sense of altruism. It is because such projects get them re-elected, especially when people other than their constituents are picking up the tab. And, thanks largely to the State and Local Tax (SALT) Deduction for federal income tax purposes, that is exactly what is happening.
In the current federal tax code, SALT deductions allow individuals to deduct state and local taxes, including property taxes, from their federal returns. On the surface, this seems like a great idea, as it generally reduces tax burdens, especially for those living in high-tax localities. At its core, however, the deduction is more a clever burden-shifting scheme to make it easier for state and local governments to over-spend, than it is a way to ease the burden on federal taxpayers.
Since state and local taxes can be deducted, the tax burden is shifted from those governments to the federal government, which in turn makes up for this lost revenue by keeping taxes higher on the rest of the country. In effect, taxpayers in low-tax states and cities, like those in the South, are forced to subsidize the lavish public spending of liberals in New York, New Jersey, Connecticut, and California, who have little incentive to reduce the local taxes that fund their pet projects. It is much like making charitable donations online using someone else’s credit card. It does not make you Robin Hood. It makes you a charlatan, which is why rather than pay the bill, the millionaires who helped put these Democrats in power, would rather flee like cowards.
It also makes for a very sticky wicket when it comes to the GOP’s current tax reform proposals, which hinge on finding ways to help offset the “costs” of reducing federal taxes. Eliminating SALT deductions would make a sizeable dent in this gap; potentially $1 trillion in revenue over 10 years. Yet, the objections of Democrats, and even some Republicans from the states most impacted, threaten to derail the entire process because of the political ramifications of exposing taxpayers, for the first time, to the true costs of their elected officials’ fiscal irresponsibility at the local level.
This also illustrates a perennial problem with every modern tax cut bill. Our massive and long-standing tax system is built almost entirely around political favors and deductions. Until we have a complete overhaul of the entire tax system, it will remain extremely difficult, if not next to impossible, to do completely away with any deduction of any meaningful significance, because someone’s prized ox is bound to be gored with every move to drop or scale back a deduction; or just as likely, a new one is added in its place as Congress negotiates with the hold-outs.
In an ideal scenario, Republicans would remember what it is to have a spine, and perhaps we might see real reform, such as a flat tax, where the only debate would be what the new tax rate should be, what should be the annual standard deduction that replaces every other deduction promised over the years as a political handout; and bring spending down to the level necessary to operate within the monies raised by the flat tax.
Of course, even in the ideal scenario, spending at all levels of government remains the central problem. Out-of-control spending at the local level is what causes higher taxes that makes eliminating SALT deductions so controversial. Out-of-control spending at the federal level is why Republicans are struggling to pay for tax reform by only eliminating deductions. And, without a plan for cutting spending – a long-forgotten ideal even of many self-styled congressional “conservatives” – the tax rates proposed in this tax reform are the best we can hope for, as either automatic trigger increases kick in 10 years down the road or the inevitable deficit catastrophe forces rates back up.
And, were this to happen, the GOP would rightfully deserve the fallout for its refusal to address spending. Notwithstanding this dilemma, tax reform is so badly overdue that even without spending cuts in place yet to offset the deficit, it is a worthwhile first step. But, it cannot be the last step either. Until the GOP gets serious about cutting spending, shirking this responsibility in the short term will have even greater consequences in the long-term – unfortunately a perspective not often exhibited in Washington.
Really? As a per capita? I think not considering the top 1% your millionaires pay almost half the tax burden at the federal level and yup you guessed it they reside in states like California, New York, New Jersey, Florida
What really gets to me is that, as crappy as our Senate is, we are getting EXCELLENT JUDGES SEATED, which may well make the difference as to whether our kids and grand kids live in a country like like Switzerland, as we pretty much are now, or Syria, where we break off into sides and have a vicious civil war.
To me that’s a bit more important than handing the Senate to Schumer so as to protect the precious SALT deduction for a relative handful of conservatives - but many on this site who live in those blue states certainly feel that their precious SALT deduction is MORE IMPORTANT than who sits on the Supreme Courts, the Appellate Courts, and the lower courts.
If that’s the case, I guess their kids deserve the NIGHTMARE country we leave to them...
The author is correct about the corrupting nature of our current tax system built on politically charged vote-buying deductions.
The central / general government was designed to be the lightest (on the individual) and most objective level of our federal system. Since our original number one principle of government was protection of individual freedom from the fed level control. And let states, markets, institutions and individuals worry about everything else.
There was no fed level individual tax. But the 16th changed that unfortunately. Now, there are a couple general ways to achieve a correctly object fed level tax. One, the best, would be a consumption tax - the feds don’t even need to know who you are for that.
The most objectively fair option using income taxes is a true flat tax - with absolutely no deductions for anything. Not for SALT, mortgage, charity... nothing.
Looking at the arguments/comments here only makes the author’s point about the awful and wrong-headed nature of a non-objective system such as our current mess of deductions.
However, the author is wrong about one thing: a flat tax is not flat if there is still a standard deduction.
The R party has control of both the levels and the branches of government. If ever there were a time to devolve power and eliminate fed level special interests, it would be now. Should be, anyway.
Obviously, between Trump and the Hill people there are few freedom lovers in DC and even fewer with the originalist wisdom to pursue objectivity at the fed level. So we are NOT going to do the right thing with this current bill, I realize that.
I would be happy if occasionally, instead of endlessly re-defining winners and losers, to hear maybe one party leader explain that: yes, weaning from addictions hurts; yes, the folks who gave us the current system were wrong and/or evil; and yes, we do wish to minimize/amortize the pain... but, we do intend to move in Objectivity’s direction - it is the only fair path forward.
It’really the number of hours per year that you are a virtual slave working for the gov’ts.
Real estate taxes are a largely voluntary wealth tax.
I am not so sure that a repetitive tax on owning something one has worked and sweated for is a wealth tax.
Absolutely it is.
Call it a selective catagory of assets tax if you prefer.
One should be able to add the re tax to the basis for one’s property. (In addition to the inflation of the monetary vzlue)
The same people who believe a person receiving an earned income tax credit is subsidizing someone who pays thirty-fine percent of their income.
I think a whole lot of people commenting don’t itemize and don’t really understand the proposal as a result. State and local taxes are deductible on federal tax returns if you itemize, always have been since the beginning in, what, 1913? While it might seem appealing to some conservatives to stick it to high-tax states that are presumably blue (and most but not all are), it’s still a stealth tax increase by removing the deduction. Texas has bizarrely high residential real estate taxes, Florida is on up there too. Need to stop and think about this, it’s going to impact some people pretty badly and quite a few of them are Republican voters or potential Republican voters. It’s not just hardcore leftists being hit with the taxes they love to impose on everybody else. There will be political fallout, and not all of it will be restricted to blue states.
Without any reduction in spending, agreeing to this tax plan means more will be taken from you now and they will still banckrupt you later. Why is that a good idea?
Flat tax that everyone pays, anything else is more of the socialist same.
This is such bs. No elected official bases their spending level on how much of a deduction someone is going to get from the feds.
I’m a conservative, live in a red state, and I have losing the state and local tax deductions because it means my federal taxes will be going up. Does that make me a Democrat?
Yep - a number of very irate FReepers who don’t see the hypocrisy of their complaints. Would like to get a look at their finances to see how they have over-leveraged and spent beyond their reasonable means....
These two articles explore some of the nuances of the relationships between tax and Federal welfare. Red State Blue State is a myth unless you apply lots of tweaking & ignore all elected officials & concentrate on Presidential elections only.
I fight back only because it’s broad brush thinking and is a tool the liberals use “fairness”to obscure the pivotal point of the issue. The crucial point is that we need to swing the pendulum back towards State’s right for as many areas in Government as possible & shrink Federal over reach.
Getting rid of SALT puts the States on an equal playing field and they can best make the decisions they need to get their States finances in order, acting as 50 laboratories to find the best solutions for each State. The power of the purse is the power to control. Who do we want to have control? The Feds taking our money in & doling it out? Or the citizens of each State voting on the basis of fiscal responsibility of the elected officials.
http://www.americanthinker.com/articles/2013/09/the_myth_of_red_state_welfare.html
Below is one of the best summations I found on the relationship of tax dollars paid by State & benefits received.
https://www.creditloan.com/blog/united-states-federal-tax-dollars/
Once again, the Republicans are displaying how inept they are at messaging. This article by Bob Barr is a perfect example. He is down in the weeds so deep you can’t see the top of his head. The message behind this is simple: “Should a person making $150,000 in a high-tax State like New York or California pay less in Federal tax than someone earning the same amount in a lower tax State like Alabama or Nebraska? The SALT deduction creates this exact scenario.
Others posting before me are saying their taxes will go up if this is eliminated. For some, that may be true - but you have to look at the totality of the bills being proposed to know if this is true, and not just one element of the bill. So if you lose the SALT deduction, but you double your personal exemption and reduce your tax rate, what then is the NET effect on your tax bill?
To me, the best way to assess Federal taxes fairly is with a low flat-tax rate that applies equally to everyone, and no deductions at all. A fall-back position would be the “Fair Tax”, that was a popular solution among conservatives and the Tea Party 10-20 years ago. If you recall him, this was popularized by Atlanta talk-show host Neal Boortz (a libertian).
When Houston built the Texans stadium for the $300,000,000 the naming rights were sold for $300,000,000 and that money was given to the team owner. WTF???
He didn’t build that. He plays less than a dozen games there. And he gets the cash????
Worst management of city assets ever.
And it goes like that down the list (public to private transfer of wealth and assets).
Projects can be paid for without hitting up taxpayers but it’s so easy to do it and it keeps the connected well oiled.
Then blame Mitch and Paul.....that’s where the tax bills come from
Congress is the proper direction for your anger.
They say it's bad for your blood pressure.
The feeling is mutual. Glad to have met you, Freeper Friend.
http://www.rollcall.com/news/policy/mchenry-says-house-leaders-working-income-tax-deduction-tweak-ca
Don’t know what they can do , beside raise the 10,000 limit slightly.
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