Oooooh, super

The proposal also gets rid of almost all tax deductions, including those for state and local taxes. This creates a significant increase in tax for residents of high-tax states such as California and New York.

It’s been a huge distortion and removing it will cause no end of pain in those liberal strongholds.

Good. For people should pay the tax for what they voted for, shouldn’t they?

16 comments on “Oooooh, super

  1. State and local taxes are deductible from federal tax? So why on earth do places like Texas bother to boast about their low income taxes? We must be missing some detail.

  2. Local taxes are a significant factor for many US citizens in choosing where they live. For large parts of large states, that may not be wholly practical – if you work in Silicon Valley, living outside California would be a bit of a chore. But for those in smaller, eastern states or near (the US sense of ‘near’ – under a couple of hours drive) a state border, it’s very real.

  3. We are told all the time that tax deductions are a subsidy.

    So why are the poorer states subsidising wealthy states like New York and California?

    Politically this is genius. It hurts the right people. But it is not enough. Trump needs to support Spinal Tap’s law suit against their film company. He needs to end the bizarre accounting that means films never make a profit. At least on paper. Hollywood hates him? Fine. Strike back.

  4. Funny how everyone ends up supporting lower taxes when it suits them.

    It’s only human nature to support things where you directly benefit and to oppose things where you are penalised.

    Despite the view of the government and state supporters on the left we are not meat flavoured sock puppets required to simply comply with their dictats without complaint.

    The US deficit (not the debt) is huge and it is clear that having the world’s 3rd highest corporation tax is not helping as too many companies are using legal offshore structures to avoid paying it 35% taxes on their foreign earnings.

    If the tax was lower than they might be tempted to remit it so that they can pay shareholders rightfully earned dividends.

    If you look over the decades the US tax rates have been as high as 90% and also much lower than today, yet the total government tax take has rarely gone above or below 17%-19% of GDP, so it would be a reasonable argument to remove all double-dipping, simplify and reduce taxes to 20% across the board and focus on those who deliberately evade them.

  5. “gets rid of almost all tax deductions”

    Except those for healthcare and mortgage interest rate payments. Both are yuge.

    Pretty sure the OECD and IMF regularly cover this topic.

  6. TG…,

    “Except those for healthcare and mortgage interest rate payments. Both are yuge.”

    It is charitable donations, not the healthcare deductions, that are staying.

  7. Andrew M said:
    “State and local taxes are deductible from federal tax? So why on earth do places like Texas bother to boast about their low income taxes? We must be missing some detail.”

    I think state taxes are deductible from your income in calculating federal tax, not deductible from (or rather creditable against) the federal tax liability itself.

    So if your federal income tax rate is 25%, you effectively save 25% of your local taxes. And so on.

  8. Federal income taxes in general cause huge distortions. Most states get back more in federal taxes than they pay. Those that don’t are typically the ones with higher state and local taxes. The second order effect will be to increase the amount of tax money redistributed from rich states to poor states. Without changes to spending patterns all we have done is to increase the motivation for poorer states to remain inefficient and therefore relatively poor.

    https://wallethub.com/edu/states-most-least-dependent-on-the-federal-government/2700/#methodology

  9. Liberal Yank,

    States don’t pay Federal income taxes, people do. As long as the Federal tax code remains highly progressive, states that have a lot of rich people are going to contribute more to the Federal coffers than states that don’t. The only way to stop that from happening is to do away with progressive taxation, and who is going to argue for that?

  10. JerryC,

    States are organizations that represent the group of people within the defined borders.

    Doing away with progressive taxation isn’t the only way to reduce redistribution at the state level. My argument is that we should change spending patterns.

  11. “It is charitable donations, not the healthcare deductions, that are staying.”

    For clarity, employers purchasing health insurance with pre-tax dollars is part of the healthcare deduction. I didn’t see anything on getting rid of that, but if I missed it, please let me know.

  12. As far as I can tell the only deductions that are going to be ended are those that individuals can get.

    If we are going to lower the corporate rate I see no reason not to end the deduction for businesses. I see zero chance of ending business deductions passing in the current Congress.

Leave a Reply

Name and email are required. Your email address will not be published.