5 ms·

The Heroic Congressional Fight to Save the Rich

49 points by disgrunt 5y ago

ageek123 5y ago
This hypocrisy from the folks arguing to reinstate this deduction is staggering.
- dmitrygr 5y ago
  They are looking out for their own skin. NY and CA are bleeding people with money. People who pay those state taxes but soon won't. I never thought I'd move for tax reasons. I am moving to TX this year.
  - aksss 5y ago
    Hopefully not to show up and (in)directly vote for more taxes/bonds, and the politicians that promote them.
    - dmitrygr 5y ago
      not even remotely, worry not. I am a libertarian who was de-facto forced to be here for work. No longer forced -> no longer here
    - disgrunt 5y ago
      The irony there is I know a lot of native Texans fleeing the state as they see the Californication of Austin spreading and only getting worse.
  - dragonwriter 5y ago
    > NY and CA are bleeding people with money. Every analysis I've seen is that (1) CA has small net domestic out-migration, but (2) the domestic out-migrants are significantly less well off the domestic in-migrants, and (3) at least before the last couple years (Trump immigration restrictions and then the pandemic probably changed this in the short term, but neither is likely to persist in current form and effect) the net domestic out-migration was more than balanced by international immigration. California isn’t bleeding “people with money”, its bleeding “Americans without money”. Which is in part a sign of real issues that should be addressed, but its also in large part a symptom of success and the rich outbidding the poor for limited real estate.
- jaybrendansmith 5y ago
  The SALT deduction was in place because people are being taxed TWICE. It's very simple. They are taxed on their income by the state, then taxed on that same income by the feds. It's unjust. You can argue all day long who the tax impacts, and how they're all rich or whatever, but that doesn't change this simple fact. What astonishes me is the abject lying happening by folks such as the Heritage foundation. Check out this obviously false statement: "Double taxation occurs when the same income source is taxed twice by the same level of government." Huh?? What does the level of government have to do with anything? How about this gem: "Double taxation does not occur when your income is taxed at the state level to pay for state projects and again by the feds. Taxes at all levels of government should be lower, but this does not mean the federal government needs to subsidize state taxes and spending." Really?? It's astonishing to me how these people lie, then lie some more, then fabricate with straight faces. Check it out: https://www.heritage.org/taxes/commentary/5-myths-about-the-state-and-local-tax-deductions-cap https://www.heritage.org/taxes/commentary/5-myths-about-the-...
  - tacitusarc 5y ago
    It's not clear to me why the federal government should accommodate the state taxation structures. That is, uncapped deductions effectively mean that federal taxes are applied after state taxes. Couldn't states provide a deduction based on federal taxes if they think this is unfair to residents?
    - dragonwriter 5y ago
      > It's not clear to me why the federal government should accommodate the state taxation structures. There is potentially an argument for no SALT deduction, though I think a lot of factors (including federalism) weigh in favor of it, and that it is on-balance justified; its something on which there is reasonable disagreement. But that’s not the debate. The debate is between a limited SALT deduction designed to create federal pressure to force the more successful states to adopt tax and spending policies more like the least successful states, and an unlimited SALT deduction that lifts the federal governments thumb off state tax policy.
  - 5y ago
- dragonwriter 5y ago
  > This hypocrisy from the folks arguing to reinstate this deduction is staggering. The deduction still exists. The current limit on the deduction was adopted fairly openly as way for the federal government to artificially incentivize state tax cuts. The effort to eliminate that limit isn’t an effort to ”save the rich”, its an effort to save the state taxes that support the state services that are part of the recipe for economic success in states on which the federal government disproportionately relies for tax revenues. Limiting the SALT deduction wasn’t about raising taxes on the rich, it was about increasing federal extraction from certain successful states in the short term, strangling those state governments in the medium term, and—in easily forseeable effect if perhaps not actual intent—torpedoing the national economy and tax base in the long term.)
greysphere 5y ago
Let's say a group of people want to build a park. They get together, form a 501.3.c, decide how much money everyone's gonna contribute, everyone writes it off as a charitable contribution, and build the park. Let's say a group of people with a government wants to build a park. The get together, vote to decide how much money everyone's going to contribute, everyone ____, and they build the park. ____ is the SALT deduction. The only reason not to have this deduction is to discourage (non-federal) governments ability to do anything. Arguments of 'it's free money for the rich' are a misdirection - if you want the rich to pay more money, increase their taxes, don't limit state and local governments ability to collect revenue. The only hypocrisy is the folks arguing against it will turn around and holler 'States Rights!' when it's politically convenient for them.
- disgrunt 5y ago
  > don't limit state and local governments ability to collect revenue. The cap on SALT deductions does no such thing. All it does is cap how much state and local taxes someone can deduct from their federal taxes. State and local governments are still getting their tax revenues. 90% of tax payers were completely unaffected by this change, the remaining 10%, who make up the highest income brackets, paid more federal taxes as they could only deduct $10K of their state and local taxes from their federal taxes. > increase their taxes Capping deductions increases their taxes.
  - greysphere 5y ago
    Imagine these scenarios: People want to build a park Either 1) A local government increases taxes to build a park 2) The federal government increases taxes to build a park And Either A) A SALT deduction exists B) A SALT deduction doesn't exist And independent of this, the federal government collects tax on income to do whatever it currently does. 1A) people end up paying: (income - income.(park tax)).tax - income.(park tax) -for-> park + std_services 2A) people end up paying: (income).(tax + park tax) -for-> park + std_services 1B) people end up paying: (income).tax - income.park_tax -for-> park + std_services 2B) people end up paying: (income).(tax + park tax) -for-> park + std_services Note 1A, 2A and 2B are all equivalent. In 1B people pay more overall tax to get the same services. So under B, any reasonable person given the choice between 'should the local government build the park (1B), or should the federal government build the park (2B)', should logically choose 'federal (2B)'. IE the local government's ability to do build parks is weakened by the lack of a SALT exemption.
aksss 5y ago
Removing the SALT deduction cap affects people wealthy enough to still itemize after the standard deduction was doubled in the TCJA. Let that sink in. The number of people itemizing before the TCJA was about 46m, the number after the standard deduction was doubled is only about 16m. There are about 143m people filing returns in the US (taxpaying units). So about 10% of US taxpaying units still itemize meaning they're deducting more than $12k individually or 24k jointly. This issue disproportionately affects the wealthy. The top 10% of income earners are getting bitten by this, and the top 1% especially so. As the TK article illuminates, the US would lose $600 billion in revenue by repealing the SALT cap. That money comes disproportionately from the top 1% as illustrated by the graph from the Brookings Institute: https://cdn.substack.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F21b96481-5042-4ec2-998a-50ced6ec556f_1016x809.png https://cdn.substack.com/image/fetch/f_auto,q_auto:good,fl_p... The article quotes a guy saying the SALT cap was the only clearly progressive tax policy the Trump administration ever implemented. So yes, it's funny though not altogether surprising to see the Democrat senators and senior House members (all of whom seem to be in the affected income bracket themselves) pitching this deduction for the wealthy as a fight for 'working families'. It is impossible to even entertain the idea unless open to the idea that supply-side, trickle-down economic theory has merit, which is also a humorous dimension of the Democrat rhetoric.

49 points by disgrunt 5y ago

ageek123 5y ago

This hypocrisy from the folks arguing to reinstate this deduction is staggering.

dmitrygr 5y ago
They are looking out for their own skin. NY and CA are bleeding people with money. People who pay those state taxes but soon won't. I never thought I'd move for tax reasons. I am moving to TX this year.
- aksss 5y ago
  Hopefully not to show up and (in)directly vote for more taxes/bonds, and the politicians that promote them.
  - dmitrygr 5y ago
    not even remotely, worry not. I am a libertarian who was de-facto forced to be here for work. No longer forced -> no longer here
  - disgrunt 5y ago
    The irony there is I know a lot of native Texans fleeing the state as they see the Californication of Austin spreading and only getting worse.
- dragonwriter 5y ago
  > NY and CA are bleeding people with money. Every analysis I've seen is that (1) CA has small net domestic out-migration, but (2) the domestic out-migrants are significantly less well off the domestic in-migrants, and (3) at least before the last couple years (Trump immigration restrictions and then the pandemic probably changed this in the short term, but neither is likely to persist in current form and effect) the net domestic out-migration was more than balanced by international immigration. California isn’t bleeding “people with money”, its bleeding “Americans without money”. Which is in part a sign of real issues that should be addressed, but its also in large part a symptom of success and the rich outbidding the poor for limited real estate.
jaybrendansmith 5y ago
The SALT deduction was in place because people are being taxed TWICE. It's very simple. They are taxed on their income by the state, then taxed on that same income by the feds. It's unjust. You can argue all day long who the tax impacts, and how they're all rich or whatever, but that doesn't change this simple fact. What astonishes me is the abject lying happening by folks such as the Heritage foundation. Check out this obviously false statement: "Double taxation occurs when the same income source is taxed twice by the same level of government." Huh?? What does the level of government have to do with anything? How about this gem: "Double taxation does not occur when your income is taxed at the state level to pay for state projects and again by the feds. Taxes at all levels of government should be lower, but this does not mean the federal government needs to subsidize state taxes and spending." Really?? It's astonishing to me how these people lie, then lie some more, then fabricate with straight faces. Check it out: https://www.heritage.org/taxes/commentary/5-myths-about-the-state-and-local-tax-deductions-cap https://www.heritage.org/taxes/commentary/5-myths-about-the-...
- tacitusarc 5y ago
  It's not clear to me why the federal government should accommodate the state taxation structures. That is, uncapped deductions effectively mean that federal taxes are applied after state taxes. Couldn't states provide a deduction based on federal taxes if they think this is unfair to residents?
  - dragonwriter 5y ago
    > It's not clear to me why the federal government should accommodate the state taxation structures. There is potentially an argument for no SALT deduction, though I think a lot of factors (including federalism) weigh in favor of it, and that it is on-balance justified; its something on which there is reasonable disagreement. But that’s not the debate. The debate is between a limited SALT deduction designed to create federal pressure to force the more successful states to adopt tax and spending policies more like the least successful states, and an unlimited SALT deduction that lifts the federal governments thumb off state tax policy.
- 5y ago
dragonwriter 5y ago
> This hypocrisy from the folks arguing to reinstate this deduction is staggering. The deduction still exists. The current limit on the deduction was adopted fairly openly as way for the federal government to artificially incentivize state tax cuts. The effort to eliminate that limit isn’t an effort to ”save the rich”, its an effort to save the state taxes that support the state services that are part of the recipe for economic success in states on which the federal government disproportionately relies for tax revenues. Limiting the SALT deduction wasn’t about raising taxes on the rich, it was about increasing federal extraction from certain successful states in the short term, strangling those state governments in the medium term, and—in easily forseeable effect if perhaps not actual intent—torpedoing the national economy and tax base in the long term.)

greysphere 5y ago

Let's say a group of people want to build a park. They get together, form a 501.3.c, decide how much money everyone's gonna contribute, everyone writes it off as a charitable contribution, and build the park. Let's say a group of people with a government wants to build a park. The get together, vote to decide how much money everyone's going to contribute, everyone ____, and they build the park. ____ is the SALT deduction. The only reason not to have this deduction is to discourage (non-federal) governments ability to do anything. Arguments of 'it's free money for the rich' are a misdirection - if you want the rich to pay more money, increase their taxes, don't limit state and local governments ability to collect revenue. The only hypocrisy is the folks arguing against it will turn around and holler 'States Rights!' when it's politically convenient for them.

disgrunt 5y ago
> don't limit state and local governments ability to collect revenue. The cap on SALT deductions does no such thing. All it does is cap how much state and local taxes someone can deduct from their federal taxes. State and local governments are still getting their tax revenues. 90% of tax payers were completely unaffected by this change, the remaining 10%, who make up the highest income brackets, paid more federal taxes as they could only deduct $10K of their state and local taxes from their federal taxes. > increase their taxes Capping deductions increases their taxes.
- greysphere 5y ago
  Imagine these scenarios: People want to build a park Either 1) A local government increases taxes to build a park 2) The federal government increases taxes to build a park And Either A) A SALT deduction exists B) A SALT deduction doesn't exist And independent of this, the federal government collects tax on income to do whatever it currently does. 1A) people end up paying: (income - income.(park tax)).tax - income.(park tax) -for-> park + std_services 2A) people end up paying: (income).(tax + park tax) -for-> park + std_services 1B) people end up paying: (income).tax - income.park_tax -for-> park + std_services 2B) people end up paying: (income).(tax + park tax) -for-> park + std_services Note 1A, 2A and 2B are all equivalent. In 1B people pay more overall tax to get the same services. So under B, any reasonable person given the choice between 'should the local government build the park (1B), or should the federal government build the park (2B)', should logically choose 'federal (2B)'. IE the local government's ability to do build parks is weakened by the lack of a SALT exemption.

aksss 5y ago

Removing the SALT deduction cap affects people wealthy enough to still itemize after the standard deduction was doubled in the TCJA. Let that sink in. The number of people itemizing before the TCJA was about 46m, the number after the standard deduction was doubled is only about 16m. There are about 143m people filing returns in the US (taxpaying units). So about 10% of US taxpaying units still itemize meaning they're deducting more than $12k individually or 24k jointly. This issue disproportionately affects the wealthy. The top 10% of income earners are getting bitten by this, and the top 1% especially so. As the TK article illuminates, the US would lose $600 billion in revenue by repealing the SALT cap. That money comes disproportionately from the top 1% as illustrated by the graph from the Brookings Institute: https://cdn.substack.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F21b96481-5042-4ec2-998a-50ced6ec556f_1016x809.png https://cdn.substack.com/image/fetch/f_auto,q_auto:good,fl_p... The article quotes a guy saying the SALT cap was the only clearly progressive tax policy the Trump administration ever implemented. So yes, it's funny though not altogether surprising to see the Democrat senators and senior House members (all of whom seem to be in the affected income bracket themselves) pitching this deduction for the wealthy as a fight for 'working families'. It is impossible to even entertain the idea unless open to the idea that supply-side, trickle-down economic theory has merit, which is also a humorous dimension of the Democrat rhetoric.