Eliminating State & Local Tax Deduction to Pay for Cuts for Wealthy a Bad Deal for Most Americans

[CousinIT]

The tax plan from President Trump and congressional Republican leaders would end the federal deduction for state and local taxes (SALT) — which allows taxpayers who itemize deductions on their federal income taxes to deduct state and local property taxes and either state and local income taxes or general sales taxes. Some proponents argue that ending that deduction would not hurt low- and middle-income households because most of the direct benefits would go to higher-income filers. ELIMINATING THE SALT DEDUCTION WOULD A BAD DEAL FOR MOST AMERICANS, ESPECIALLY LOW- AND MIDDLE-INCOME PEOPLE.To be sure, eliminating the deduction would — by itself — make the federal income tax more progressive. But that ignores the actual tradeoff that the GOP tax plan proposes, which is to eliminate the SALT deduction and use the revenue to pay for marginal income-tax rate cuts. That trade would be a bad deal for most Americans, especially low- and middle-income people, for two reasons.

First, the tax plan’s rate cuts are more tilted to the top than the SALT deduction. That’s part of the reason why by 2027 (when key elements of the plan would be fully in effect), 80 percent of the plan’s net tax cuts would go to the top 1 percent of Americans, the Tax Policy Center estimates.

Second, the SALT deduction helps state and local governments fund public services that provide widely shared benefits. That’s because, with this deduction, higher-income filers are more willing to support state and local taxes. Repealing the deduction would almost certainly make it harder for states and localities — many of which already face serious budget strains — to raise sufficient revenues in the coming years to fund K-12 and higher education, health care, and other services. To balance their budgets with insufficient revenue, state policymakers would likely make cuts in such services that would be widely felt. States and localities could also respond by raising taxes or fees that fall less heavily on the higher-income residents most affected by the deduction’s loss. That would push more costs to middle- and low-income people, and make state and local tax systems even more regressive overall than they already are.

https://www.cbpp.org/research/state-budget-and-tax/eliminating-state-and-local-tax-deduction-to-pay-for-tax-cuts-for

[no_hypocrisy]

1. Consider this:

My home's property tax is $15,000 and climbing. Take away the municipal/county/state income tax, and it's adding $15,000 to my taxable income, a notable amount of money. Pretty soon, to live in my home, I'll be paying $20,000 a year with the elimination of that deduction.

[MyNameIsKhan]

2. Isnt AMT bracket moved up? that will give some breather

[MichMan]

3. It will lower my taxes

I never have enough deductions to come close to itemizing. Married middle income couple with no dependants and no deductions.

I have zero deductions claimed on withholding and still have to pay $1000 per year in April when I file.

The proposed tax plan should be helpful in hopefully eliminating me having to write that check every year.

[CousinIT]

4. Mine will go UP

Elimination of property tax deduction + elimination of personal deduction = over $10000 - they will supposedly double the personal exemption which won't cover that amount. Taxable income will go UP for us. We'll be f*cked.