
Among the Tax Bill’s Biggest Losers: High-Income, Blue State Taxpayers - gdubs
https://www.nytimes.com/interactive/2017/12/05/us/politics/tax-bill-salt.html
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mmanfrin
I'm a highish earning single homeowner in Alameda County (Bay Area) -- between
the Mortgage Interest deduction, the Property Tax deduction, and the State
Income Tax deduction being slated for removal, my taxable income is about to
go up something like $60k, which is a large chunk of my actual income. This
tax bill utterly fucks me, to the point I'm considering selling my house to
get ahead of the inevitable housing crash.

I cannot see this bill as anything short of theft. Why do I have to pay
double-digit percentage more on my taxes to give the ultra rich a tax cut? In
what fucking world does that make any economic sense.

~~~
vkou
> I cannot see this bill as anything short of theft. Why do I have to pay
> double-digit percentage more on my taxes to give the ultra rich a tax cut?
> In what fucking world does that make any economic sense.

My rent isn't tax deductible. Why is yours blessed with such a status (In the
form of a mortgage, and property tax deduction)?

All that mortgage tax deductions do, economically, is increase the overall
price of homes, and have non-homeowners subsidize home-owners.

~~~
AznHisoka
Ok, lets play this game. From now on its renters that have to pay 50% of the
property tax. No? But you get to deduct it! an extra deduction for you! whats
not to like?!

~~~
SmellTheGlove
> Ok, lets play this game. From now on its renters that have to pay 50% of the
> property tax. No? But you get to deduct it! an extra deduction for you!
> whats not to like?!

Renters already are paying a piece of the property tax. It's built into the
rent. They just can't deduct it.

~~~
AznHisoka
Ok that may be true but why should they be allowed to deduct it? They are not
a business owner (unlike the landlord). Its like allowing people to deduct 10%
of everything they buy from Amazon because they are paying a part of Amazon’s
warehousing costs.

~~~
SmellTheGlove
I'm not advocating for renters to be able to deduct a piece of the underlying
property tax. I don't think it makes sense to have property tax as a federal
deduction at all.

In general, I'm not sure how great it is that we favor home ownership over
renting in our tax policy. My bigger issue is being able to deduct mortgage
interest but not rent. Mortgage interest is essentially rent on money, so I've
always thought it'd be fair to make rent (or a percentage of it at least)
deductible as well. Or, even better, eliminate the mortgage interest deduction
entirely.

Full disclosure, I'm a homeowner. Fuller disclosure, my home is paid off, so
it's easy for me to say these deductions shouldn't exist. I would gladly give
up the property tax deduction if that additional revenue was used for
something other than cutting taxes for the wealthy, though.

~~~
AznHisoka
OK, I see your point with mortgage interest interested being deductible.

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nostromo
I don't see why state taxes should be federally deductible to begin with.

Two families both make $250,000 a year. One is in New York and one is in
Texas. The family in Texas is carrying more of the federal tax burden than the
family in New York. Why? Both are (in theory) receiving the same benefits from
the Federal Government and should pay the same in taxes.

If you're a progressive this should make even less sense: rich states are
currently keeping additional funds for themselves local, in their rich states,
via high taxes, that are then shielded from the federal government via
deductions.

~~~
vostok
Two questions:

\----

1\. What about the property tax deduction? Why are property taxes deductible,
but income taxes are not?

\----

2\. How do you feel about the mortgage interest deduction? A very similar
question could be asked.

Two families both make $250,000 a year. One took out a $750k mortgage and one
took out a $300k mortgage. Why should the second family carry more of federal
tax burden than the first?

I don't have the right answer, but it's something to consider.

~~~
ghouse
Two separate issues -- State and Local Taxes (SALT) are income, property and
other taxes collected at the non-federal level. They have been deductible
since the creation of the federal income tax. In part, because the federal
government recognizes that resources are more efficiently allocated locally.
And that is one reason why higher taxed states pay more into the federal
government's budget than they receive in benefits. [1]

The Mortgage Interest Deduction is simply a wealth transfer from people who
don't own homes to people who do own homes.

[1]
[https://www.theatlantic.com/business/archive/2014/05/which-s...](https://www.theatlantic.com/business/archive/2014/05/which-
states-are-givers-and-which-are-takers/361668/)

~~~
dv_dt
The mortgage interest deduction is a way for home owner/occupants to get cost
parity vs landlords who could own the exact same property at a lower cost
because the interest of a loan is a business expense.

Under the proposed tax cut, it could very well be cheaper for two neighbors to
own each others houses and charge one another rent (collected via pass-thru
corporations even) than it would be for them to own and live in their own
houses with the same mortgage terms.

~~~
dragonwriter
> Under the proposed tax cut, it could very well be cheaper for two neighbors
> to own each others houses and charge one another rent (collected via pass-
> thru corporations even) than it would be for them to own and live in their
> own houses with the same mortgage terms.

Morw to the point, normal homeowners who have trouble with the setup cost of
such an arrangement would pay higher taxes to subsidize the rich, who do not
have trouble with the cost of setting up such a tax avoidance scheme.

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freditup
First, this article would've been much better off using medians instead of
means. High earner outliers tend to skew stats like these.

Second, it's interesting to see people who were in favor of tax increases
suddenly change their mind when it hits them. While I agree that tax cuts for
the rich seem unnecessary, some tax hikes for the upper middle-class aren't
out of line compared with a Democrat led tax plan. I wonder how much our own
personal interests in our money affects how we view tax plans? Most people, no
matter how rich they are, seem to want those just richer than them to be taxed
more.

Finally, although the removal of the SALT deduction will cost me
significantly, I'm not sure I understand how the deduction makes sense. Why
should a state raising their taxes mean you have less of a federal obligation?
It only makes sense to me if states with higher taxes use less federal
resources.

~~~
SmellTheGlove
> Second, it's interesting to see people who were in favor of tax increases
> suddenly change their mind when it hits them.

I'm very much in favor of increasing taxes, if that tax increase went to
taking care of some societal problem (I don't care what it is, so for the sake
of argument, let's just stipulate that it's a problem we both agree needs
funding to solve). In this case, anyone paying more in taxes is just
subsidizing those who are seeing a cut. It's more of a shift, given that it's
projected to increase the federal debt by quite a bit. I'd be okay with that
if we were actually putting more spending money in the pockets of the lower
and middle classes, but I'm not sure that's the case. If this is really about
cutting taxes across the board, I'm okay with that too, but we need to cut
spending and I'd like us to take a look at the defense budget before going
after social programs.

> Finally, although the removal of the SALT deduction will cost me
> significantly, I'm not sure I understand how the deduction makes sense. Why
> should a state raising their taxes mean you have less of a federal
> obligation? It only makes sense to me if states with higher taxes use less
> federal resources.

Deducting SALT makes sense in order to avoid double taxation. To me, it makes
sense to pay the local govt first, then the state, then the fed, in that
order. In theory, they will provide services to us in that order.

Mortgage interest and property tax deductions don't make sense to me, though.
I don't really see why I should be able to deduct these, but my hypothetical
tenant can't deduct their rent. None of this should have been deductible in
the first place.

~~~
freditup
Thanks for the response - I think your thoughts on tax increases are quite
reasonable. I agree that it's much harder to swallow a tax increase when it
seems as if the money is going towards causes you disagree with, and I also
feel that way with this tax bill personally.

Not sure if I understand the double taxation argument though. Say
local/state/federal tax is 1%/5%/20%. Without the SALT deduction of any form,
you get taxed 26% on each dollar which seems intuitive and fair. I think this
model makes more sense than exempting certain amounts of money from each
subsequent tax-level, but discounting the actual economic implications, I
suppose which model seems more intuitive is somewhat subjective.

~~~
SmellTheGlove
> Not sure if I understand the double taxation argument though. Say
> local/state/federal tax is 1%/5%/20%. Without the SALT deduction of any
> form, you get taxed 26% on each dollar which seems intuitive and fair.

It does seem intuitive and fair, but I could (to myself at least) conclude
it's intuitive and fair to not tax the money I use to pay taxes to someone
else. To me, it's more that the taxes just keep coming - after those income
taxes, I'll pay sales tax, property tax, etc.

I will say that part of my argument is probably a little irrational, and that
stems from the fact that I don't agree with how my taxes get spent at the
federal level. For what my town takes in property taxes, I feel they do a
great job - the roads are in nice shape, the snow is cleared before my morning
commute, services are timely, etc. The state does a pretty good job, even if
we do pay one of the highest state income tax rates in the US and have a
ridiculously bad governor (Maine), and I agree with a lot of where it's going
even if we've needed the ballot box to do some of these things (like expand
Medicare). My disagreements at the state level to what we're _not_ spending
money on, but that's a slightly classier problem than not liking where the
money does go. The federal government, by contrast, seems to light a good
portion of our money on fire, and then borrows some more and lights that on
fire too.

------
lettergram
This doesn't really make sense to me. So it appears that the tax bill
generally is reducing the tax code and closing loop-holes (which typically is
considered "good" to the left, and the right).

In this case, it looks like the tax reductions are reduced in states that have
higher taxes. Well that makes sense, because the states with lower taxes have
less to write off (as they have 0% in some cases). Of course Texas would be
impacted less, because they have no state income tax. New York and California
have a state income tax, so the amount that loop holes help people in those
states is much higher. So they effectively will be paying higher taxes.
Complain to the state governments, who have crazy high taxes (part of the
reason I left California)!

This article honestly just seems to be trying to draw a correlation where
there really isn't one. They are simplifying the tax code, that means
reductions go away. Perhaps, we should lower taxes? I'd be in favor of that,
but I'm also in favor of making it simpler to do my taxes.

~~~
davexunit
This is possibly the worst interpretation of the tax bill I have seen yet,
maybe excluding Mitch McConnell's ludicrous statement that the bill is either
deficit neutral or reduces the deficit.

~~~
whitehouse3
Maybe elaborate? Disparagement without correction doesn’t help other readers.

~~~
davexunit
It's well-established that the bill gives a tax break to the very wealthiest
people and adds over 1 trillion to the deficit, not to mention that the bill
manages to squeeze in allowing for oil drilling in protected arctic areas and
anti-abortion legislation. After the the bill passes, the increase in the
deficit will be offset by cutting social services like Medicare.

This is a very, very, very bad bill, drafted in secret, and being rushed
through without hearings or debate. The people in support of this bill should
be ashamed of themselves.

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api
I have very mixed feelings about this part of the tax plan.

For years I've been concerned about the increasing _geographic_ gap between
rich and poor in America. All talent, capital, and entrepreneurship is
increasingly concentrated in coastal cities. This is impoverishing the
interior and at the same time driving real estate hyperinflation on the
coasts.

The middle class and the young get caught in a vice here. You either live
somewhere with affordable real estate but no career opportunities or you live
somewhere where you can advance your career but can never afford a decent home
and can never escape ever-increasing rent. Either way you are screwed. Rot in
a backwater or spend everything on real estate and never accumulate savings.

I'm tempted to support anything with the potential to reverse this horrible
trend.

At the same time I also see this as unfair. Coastal blue states already
collectively pay more in taxes than they receive from the Fed.

I'm a bit torn on this. I'm also torn on the corporate income tax cut.

The rest of the tax bill seems mostly bad, so on balance I am not supporting
it.

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jartelt
Overall this bill seems really, really bad and poorly implemented (and
costly). But as a renter in the bay area, I do like that increasing the
standard deduction and reducing some of the other popular deductions will
decrease the large tax break homeowners have been receiving. In my opinion we
have been treating renters unfairly by letting homeowners deduct so much
mortgage interest, property taxes, etc. We already incentivize home ownership
by offering government backed 30-year mortgages. We don't need to use the tax
code as well.

~~~
hcknwscommenter
If owning real estate becomes more expensive, there is a very high likelihood
that rents will increase rather than decrease.

~~~
koolba
Real estate prices would go down in response to increased costs associated
with ownership (namely inability to deduct interest and property taxes).

To illustrate the point, if the carrying cost (i.e. property tax) of real
estate was extreme, say 90%, nobody would want to own property and the price
would plummet. Losing the deductibility for interest and property taxes is
nowhere near that extreme but the direction of the effect is the same.

~~~
falcolas
Only if all of those property owners respond to the increased costs by selling
the property, and don't monetize it in another fashion (like renting it).

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sremani
If a person in TX or FL, where there in no income tax lives in a Mansion, they
also will have increase in Tax, are they worst hit? no but, they did not have
State tax deductions to begin with.

It could be argued, the rich people in blue states were paying less federal
tax because of the SALT discounts, and now they have to pay the feds whole
irrespective of the case at State.

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seibelj
Coastal liberals are very happy for tax increases except when they have to pay
it themselves! This makes the situation more fair - eliminate market warping
changes such as the property tax deduction and stop letting states get a free
ride when increasing taxes by reducing the federal burden. Seems fair to me.

~~~
ghouse
Two issues here: 1) I thought the GOP was in favor of strong local governance
and believed money is more efficiently allocated at the state level. This
action flies in the face of that. 2) _Generally_ the states who are penalized
by this change in tax policy already pay more in federal taxes than they
receive in benefits.[1]

[1]
[https://www.theatlantic.com/business/archive/2014/05/which-s...](https://www.theatlantic.com/business/archive/2014/05/which-
states-are-givers-and-which-are-takers/361668/)

------
sergiotapia
Florida here, I'm going be paying $4000 ish less in taxes. I hope the tax bill
lands and is put to practice quick!

People who make over $200k aren't getting as big a tax break? I don't feel bad
about that.

~~~
hcknwscommenter
"People who make over $200k aren't getting as big a tax break? I don't feel
bad about that."

According to the CBO, people who make less than $75k get a tax increase by
2027 (on average). People who make between 75K and 500K get a very small tax
deduction on average. Blue state residents get a tax increase almost across
the board at >200K<1M. Almost anyone who makes more than a million a year gets
a sizeable tax deduction.

~~~
creaghpatr
>According to the CBO, people who make less than $75k get a tax increase by
2027

Because that's when the cuts expire. Incredibly dishonest framing here.

~~~
jonheller
"By 2019, Americans earning less than $30,000 a year would be worse off under
the Senate bill, CBO found. By 2021, Americans earning $40,000 or less would
be net losers"

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cbhl
This seems win-win to me.

Techies and bankers pay more in taxes.

People in fly-over states get a small tax cut, and maybe can buy a few extra
weeks' groceries for their kids.

~~~
sergiotapia
It truly is a win-win. Take a good hard look at the kind of people complaining
or trying to paint this tax bill as "bad" or "dangerous". Consider the source!

~~~
hcknwscommenter
You are forgetting this is all paid for by a 1.5 trillion dollar increase in
the deficit.

~~~
akhilcacharya
Deficits only matter if the other party is in power, obviously.

I'm old enough to remember when we couldn't afford the stimulus and auto-
bailouts when we were in recession, even though the economy is currently
chugging along well at near full employment.

------
influx
So people making over 200K a year will pay more taxes, cry me a river.

~~~
irrational
That was my feeling too. I read it and kept looking for the downside, but
people making over 200k(!) having to pay more taxes doesn't seem to have a
downside.

~~~
deadmetheny
It doesn't, the tax bill is generally good for lower income people who take
the standard deduction. Everyone's screeching about it because of the people
in the top income brackets are saving the most, which is a total "no shit"
moment given how much more they pay in overall.

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relics443
Idk. I'm a high income tax payer in a blue state. According to my
calculations, I'll be paying less taxes next year.

In fact, according to my calculations, almost every one will be paying less,
except a miniscule population that will have their taxes raised by a couple of
hundred per year. And even that might get legislated away in the conference.

------
notconservative
This article is more descriptive, not mentioning why the bill is setup like
this. But, it's worth saying that this is working as intended from a GOP
perspective. This hits mostly democrats. And even if it didn't, high state
taxes are seen as propping up big (state) government.

------
refurb
I love how the articles make it look like Democrats are more likely to be hit
by higher taxes. Yes, those states where taxes are going up are majority
democrat, but the split isn't that far off from 50/50\. Plenty of wealthy
Republicans will be paying more tax too.

~~~
akhilcacharya
That's correct, and they're mad as hell too

[http://www.washingtonexaminer.com/gop-donors-in-new-york-
sou...](http://www.washingtonexaminer.com/gop-donors-in-new-york-sour-on-
partys-tax-plan/article/2642249)

------
jonathankoren
The tax bill has multiple ploys, most central of which is a giant corporate
tax reduction. (Note how that tax cut is permanent, while personal tax cuts
are temporary.), along with long standing GOP wish list items like elimination
of the estate tax and pass through income.

That said, there is also an animous towards the rich Democratic states, which
this disproportionately hurts. The short game is to stick it to the libs. The
long game is to try to eliminate state income taxes.

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pianom4n
Here's a visualization of the changes with some settings.

[https://jsfiddle.net/381rkrsq/](https://jsfiddle.net/381rkrsq/)

The AMT changes are a huge tax benefit, even to those in California.
Especially if you're married

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vladgur
Just to be clear, the article is talking about HOUSEHOLDS making more than
200k, not individuals.

With a National average salary for software developers of $109k(per
Glassdoor), a family of 2 tech professionals across the nation will see their
tax liabilities significantly increase

------
enraged_camel
Let's just hope this doesn't get flagged off the front page either. It needs
to be talked about, as it directly affects most people's livelihoods.

~~~
ghouse
And just like that... it's gone.

