STUMP » Articles » Taxing Tuesday: SALT cap zero! Great new taste! » 2 July 2019, 11:31

Where Stu & MP spout off about everything.

Taxing Tuesday: SALT cap zero! Great new taste!  

by

2 July 2019, 11:31

Okay, it’s me arguing for SALT cap zero. I haven’t seen others promoting the idea, but it’s probably they’re like me: somebody who can be pure on tax ideology because nobody is paying me for this one way or another.

Also, I don’t have to try to get elected or help people get elected.

So it’s easy for me.

While I have you here, I’ve also got some ideas for public pensions…..

Okay, that’s for another time.

TESTIMONY FROM THE TAX FOUNDATION

I got an email from the Tax Foundation, one of my favorite sources for tax stats.

They linked to the Testimony before the House Ways and Means Select Revenue Measures Subcommittee, but that’s quite long and they had a nice summary in their mass email. So let me quote the email:

Here’s a few highlights from her testimony:

1. Most Americans got a tax cut as a result of the Tax Cuts and Jobs Act (TCJA). The law lowered tax rates, expanded the standard deduction and child tax credit, and limited the AMT and several notable deductions, including the SALT deduction.

2. The SALT cap mainly impacts high-income individuals. Limiting the SALT deduction helped finance broad tax reform and maintain progressivity within the tax code. Prior to tax reform, more than 90 percent of the benefits of the SALT deduction accrued to those with income above $100,000.

3. Even those impacted by the SALT cap often saw a net tax decrease:

  • They often were previously impacted by implicit SALT limitations, such as the AMT and the Pease limitation, which were repealed by the TCJA.
  • Some quit itemizing their deductions, switching to the expanded standard deduction.
  • Many also benefit from lower rates and the expanded child tax credit

I have gotten hit by the AMT before. It’s not fun.

My income is well over $100K. Yes, my SALT went well over $10K. I was able to go over that on property taxes alone.

Because I had other income changes, it’s tough for me to compare year over year but my effective tax rate did go down.

Back to the testimony:

5. The impact of the SALT deduction cap on state budgets is overstated. States saw an increase in revenue from tax reform, due to their conformity to the federal tax code. State and local governments have also explored and passed tax increases since the passage of the new SALT cap.

I asked some other people about that, and they reminded there was a change in the definition in taxable income on the federal level, and since states often take that as a starting point, at the least, they saw taxes revenue increase.

Here is a chart showing how much the SALT deductions were in 2017 vs 2018… and who got those deductions:

Anyway, SALT cap zero! All the way!

TESTIMONY FROM THE OPPOSITION

Rep. Sherrill Urges Passage of Her Bipartisan SALT Bill at Ways & Means Committee Hearing

PARSIPPANY — Representative Mikie Sherrill (NJ-11) appeared in front of the Committee on Ways and Means’ Subcommittee on Select Revenue to urge passage of her bipartisan SALT Relief and Marriage Penalty Elimination Act, H.R. 2624. Representative Sherrill’s bill is co-sponsored by Representatives Elise Stefanik (R-NY), Peter King (R-NY), and Gil Cisneros (D-CA), and endorsed by the American Federation of Teachers and National Association of Realtors.

Full text below:
Thank you, Chairman Thompson, Ranking Member Smith, and Members of the Committee for the opportunity to testify today.

…..
I understand why my constituents do not feel Washington is working for them. The SALT cap is simply taking money out of the pockets of New Jerseyans and rewarding mostly-wealthy residents in states that don’t share our commitment to invest in quality schools and public services.

What’s more, the SALT tax cap is an active threat to penalize any state or local government that decides to invest in its future. That is why New Jersey and three other states are challenging it in federal court.<

This administration, unfortunately, is arguing that the SALT cap is not a “gun to the head” of states. That may be true. But, as a federal judge pointed out in a hearing just last week,” …it’s a rope to the neck with a gradual squeezing over time.”

Sounds great to me. It’s not the federal government’s fault that New Jersey is a profligate. (No, it’s not an “investment”. It’s expenditures)

It’s not other states’ issue that New Jersey, New York, et. al. want to be high tax paradises. Why should they have to make up for the other states? Tax what you want in New Jersey… but don’t drag the federal government into it.

SALT cap zero!

I want to highlight that the American Federation of Teachers that is endorsing this. We all understand why the Realtors would — they don’t want to have real estate sales slashed due to the property taxes. When there was no SALT cap, people knew property tax would get recognized in determining taxable income for federal income taxes.

But why the teachers? Let’s check that out below.

INTERLUDE: A LICENSE PLATE

Thanks to a friend for sharing that. (not his plate)

TEACHERS AND TAXES

Are You Curious Why New Jersey’s Taxes Are So High?

Not really, but I live in New York.

Okay, let’s see what they have to say:

For the last six weeks, the Sunlight Policy Center of New Jersey has been releasing a series of thoroughly researched and well-sourced reports chronicling the profound impact the NJEA [New Jersey public school teachers’ union] has had on New Jersey’s political system and the long-term consequences for the state and its citizens. While we have presented many salient facts, we think this quote from Executive Director Richardson is very revealing.

…..
FACT #1 – New Jersey is already a very high tax state. According to the Tax Foundation, New Jersey has the worst overall tax climate in the nation – for the fifth straight year. Likewise, Wallethub found that New Jersey citizens have the highest property taxes and total tax burden in America ($11,119).

FACT #2 – Since 1992, the cumulative toll of tax hikes on New Jersey citizens have been massive. Total property, income, and sales taxes have increased from $12.97 billion to $37.48 billion, or 288 percent.

FACT # 3 – The NJEA has used its unmatched political clout to push for more state taxes. It was a driving force behind the introduction of the first state sales tax in 1966 and the first state income tax in 1976, as well as every major tax increase since then. Today, our governor appears in NJEA-funded ads calling for an expanded “millionaires’ tax.”

The facts also show that the NJEA helped structure a system that inexorably drove up local property taxes, and when property taxpayers revolted, it turned to state taxes to alleviate the burden. Yet the state budget is in perennial, structural deficit. Competing demands – such as underfunded pensions and exceptionally generous retiree health benefits, (both of which the NJEA helped to bring about), among others – squeeze the budget. The NJEA’s solution over the decades: raising state taxes.

When New Jersey’s most powerful political force pushes for higher taxes for decades, New Jersey predictably becomes one of the highest-tax states in America.

…Oh and by the way, the reason the NJEA has not been refuting our reports, and will not refute this one, is that they are based on actual facts, all sourced and footnoted. It’s hard to deny the truth.

Also, since they do explicitly argue for higher taxes. I don’t see why they would contradict that. They want more money in salaries, and they want to make sure their pensions get paid.

The full report is here.

What’s interesting, though, for all that New Jersey is such a high-tax state, it has one of the worst-funded teachers pension fund in the country.

I don’t know why the NJEA think the pensions will actually get fully paid. The law can’t make money that was pissed away on current salaries to appear decades later for the pensions. Perhaps a percentage of that money should have been salted away, eh?

But that’s for another time.

TAX STORIES

*Daily Caller: Bernie Sanders Says Middle Class Will Pay More In Taxes

I’m not going to quote the last one, but here’s the gist: high-income folks like me didn’t get much of a refund due to where we live, and fewer of us got hit with the Alternative Minimum Tax. Fewer itemized deductions.

In short, what was expected.

TAX TWEETS






(SALT cap zero!)







Related Posts
More on High-Tax States Trying to be Clever in Helping Rich People Avoid Federal Taxes
Weekend Videos: Is COVID Saving Lives, Pennsylvania Schools Employees, SALT Cap
Taxing Tuesday: How Can You Tax Your Pudding, if You Don't Tax Your Meat?
| Main |