Title : "Trump’s new tax plan would hit blue states hardest, by eliminating the federal deductibility of state income and property taxes."
link : "Trump’s new tax plan would hit blue states hardest, by eliminating the federal deductibility of state income and property taxes."
"Trump’s new tax plan would hit blue states hardest, by eliminating the federal deductibility of state income and property taxes."
"That’s going to make it harder for blue states to maintain the high tax rates they’ve traditionally levied," writes Glenn Reynolds, who likes the proposed change:States should be able to set their own levels of taxing and spending, but I see no reason why a Walmart cashier in Tennessee (which has no state income tax and low property taxes) should be subsidizing a hedge fund mogul in New York or a studio executive in Hollywood. It’s fine if blue states want to have higher state and local tax rates, as they do, but they shouldn’t be encouraged to do so by federal tax giveaways. And it’s the urban, coastal areas that have done best over the past 25 years, so it seems time for them to pay their fair share now.Of course, it's not just hedge fund mogul and studio executives. A lot of middle class people — myself included — itemize their deductions and get a pretty big number on the state and local taxes lines. And really rich people lose the value of that deduction because of the AMT.
The Trump tax proposal eliminates the AMT, by the way, but more importantly, the Trump plan raises the standard deduction. So a lot of us middle class people who are now itemizing state and local taxes will may better off than before because we will switch to the new standard deduction:
The existing standard deduction Americans can claim is $6,300 for individuals and $12,600 for married couples filing jointly. The precise level of Trump’s new proposal could not be ascertained, but it was significantly higher, the two people said, who spoke on the condition of anonymity because the plan has not yet been made public.The big change — as I understand it — is that the people in states like Tennessee who did not have a big number to itemize will now be just as well off as many of the people who currently have a large deduction. The WalMart cashier — who makes $31,200 a year — will get a new, much higher standard deduction, and people in high taxing states who've been itemizing largely because of that state and local tax deduction will be left with deductions that that are no longer worth itemizing. If the new standard deduction is more than their old set of deductions, they are better off.
During the campaign, Trump proposed raising the standard deduction to $15,000 for individuals and $30,000 for families.
Anyway, I just wanted to clarify that. I do agree with Glenn that the politics of the high-taxing states have been skewed by this ability to shift the impact of their taxes onto people in states that are sparing their citizens high taxes. That is a glaring political dysfunction that should be corrected.
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