STUMP » Articles » Taxing Tuesday: Pity the Poor High-Income Highly-Taxed Chicagoans » 30 October 2018, 07:45

Where Stu & MP spout off about everything.

Taxing Tuesday: Pity the Poor High-Income Highly-Taxed Chicagoans  

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30 October 2018, 07:45

I understand this is intended to sway an election, but whatever.

A “study” (which turns out to be 4 pages of actual content, less than half of a 9-page document) on who gets to fully deduct property taxes has been put out for the benefit of Democratic politicians in the Chicago area. It turns out, some fairly rich people with high property tax bills (and probably high state income tax bills) are going to hit the SALT cap.

Which they already knew.

But hey, here’s a quantification!

Here’s the Crain’s article on this: A half-million Chicago-area homeowners lose under new tax law, report claims

More than half a million Chicago-area homeowners will lose at least part of their federal deduction for state and local taxes under terms of the new U.S. tax bill pushed through by President Donald Trump and congressional Republicans.

That’s the charge from Democratic members of the metro area’s congressional delegation in a new report being issued today. The study is drawing critics, but was largely researched by a Washington, D.C.-based think tank that has a reputation of being somewhat to the political left but also knows how to count.

The report (below), which lands less than two weeks before the Nov. 6 election, concludes that an estimated 507,000 local homeowners who have been able to fully deduct state and local taxes—SALT, in Washington jargon—will not be able to do so on 2018 returns because the new law caps the SALT deduction at a maximum of $10,000 a year.

Note that it doesn’t say how much their final tax bill would change.

The Republican politician response:

“With the removal of the Alternative Minimum Tax, the lower tax rates for every income range, the doubling of the child tax credit and the near tripling of the qualifying income limit for the child tax credit, itemizers will see an overall savings in their taxes—even with the $10,000 cap on SALT,” his [Rep. Peter Roksam] spokeswoman said. Using an online calculator published by a more conservative group, the Tax Foundation, “a married couple making $395,374.55, claiming $13,887.50 in property taxes and $19,571.04 in income taxes, is claiming $33,458.54 in SALT deductions in aggregate (not accounting for the tax benefits of children or potential small business and pass-through income) and will receive a tax cut of $16,709.22.”

If you forgot the online tax calculator, here it is:

Anyway, of the 11 Chicago area congressional districts, one is currently represented by a Republican (Roksam) — that cannot stand!

Anyway, should the Democrats take over the House and then the Presidency in 2020, and inflict the tax rates they want to (higher than prior ones, forget about the ones passed by current Congress & signed by Trump), I am going to love hearing the argument: “Why are you bitching that you’re paying more in federal income taxes?! We let you deduct $10,000 for your property tax and $10,000 for your state income tax! We let you deduct it all! That’s what you wanted, right — that you could deduct it?”

I know I’m going to hit the SALT cap. But I’m probably going to pay about 2% less in total federal income taxes. Maybe 1%. Well, it’s kind of tough for me to say because I have rather large variable components to my income. But, in short, I’m, probably not going to be hit with super-higher federal income taxes.

As I’ve found out in my own explorations, you have to be in a weird situation to actually pay more in federal taxes under the TCJA, all else holding equal.

Basically, you have to be very high income, and paying more in SALT than to federal income tax. Now, some Chicagoans are in that boat, surely. But it’s not going to be a half million people. And they may already be voting for Democrats.

Even there, one obvious fix is for Chicago to not be such a high tax place… but of course, Chicago can’t do that. They have so much debt to cover. Related: a study on how Chicago’s budget has changed from 2012 to 2019, under Rahm Emanuel.

SPEAKING OF CHICAGO’S LOVE OF TAXES

Tax on high-end real estate could help people at other end have a place to live

Chicago voters could soon be asked to more than double the tax on sales of million-dollar-plus real estate to pay for an ambitious new effort to reduce homelessness.

A proposal backed by the Chicago Coalition for the Homeless, community groups and other advocates anticipates generating $150 million a year that would be dedicated to providing affordable housing and services for homeless individuals.

An ordinance seeking to place a referendum on the Feb. 26 election ballot is expected to be introduced at next week’s City Council meeting.

The referendum would ask voters to increase the city’s real estate transfer tax by 160 percent on properties that sell for more than $1 million; that would make the tax $9.75 per $500 of sales price, up from the current $3.75 per $500.

You know it’s bad when they mention the percentage increase versus “It’s only going from to 0.75% to 1.95% tax!” Because that would have been the way to quote the change to make it sound small.

Instead of arguing self-interest, however, the Chicago Association of Realtors will oppose the tax hike on the basis that wide fluctuations in annual transfer tax collections make it an unpredictable — and therefore unreliable — funding source for homeless services, said Brian Bernardoni, the group’s senior director of government affairs.

I agree with that, too. This is what happens when you have a “tax the rich” approach — either you have to define “rich” so broadly so that the revenue stream is stable, or you’re going to end up super-dependent on a very few people or transactions.

And those people will not do those transactions as often.

Obviously, realtors are not going to be happy with transfer taxes, because it makes it less likely for folks to be interested in buying/selling these properties.

TAXING THE RICH: LONDON EDITION

I enjoy beating up on Chicago (mainly because I don’t live there), but hey, London also has insane taxes.

Chargers’ trip to London will be taxing — physically and financially

Yes, they already are experiencing how playing an NFL game in London can be taxing.

“I am worried,” Virgil Green said. “I’m trying to figure out how my accountant is going to handle this.”

The veteran tight end was talking about actual taxes, you know, the kind the Beatles once sang about?

These overseas ventures can be demanding, physically and financially.

“I’m thinking in terms of tax purposes how this is going to hit me,” Green said. “I’m already getting taxed enough in the state of California, and I’m a California guy.”

I hear ya. I am a New Yorker, and Connecticut taxes me out the wazoo.

Here’s an older bit on how England’s taxes hits football (the American kind)

As former New England Patriot Tedy Bruschi stated this week on Football Today, “the taxes are higher in the United Kingdom. So you want to talk about money, that’s something players will look into.” Bruschi further expounded upon the high tax burden for players that could be face relocation saying, “what’s the difference going to be for players in terms of playing in the United States versus the United Kingdom? It’s going to be up there in 50 percent. Something players will frown upon.” The former three time Super Bowl champion even had his accountant examine what a move to London would do to his tax liability, and found it to be too oppressive.
…
While playing an individual game in a different country each season doesn’t appear to pose a tax threat to players around the league, permanent foreign expansion would levy high income tax rates on players who might not necessarily have a say in what team they play for via the draft and trades. A move outside the U.S. could also see an expansion of the “jock tax” levied by foreign nations. Rather than seeking permanent international expansion, the NFL should aim to introduce a team to new markets in the United States where state income tax rates are more favorable to those who make the game memorable.

There is a reason a lot of British actors ultimately become Americans – and it’s not because they love the country so much… they love the much lower taxes, even in California.

Report: Khan exploring tax implications of playing in London, basing team in Jacksonville

As Jaguars owner Shad Khan works to complete the purchase of Wembley Stadium, the British media continue to report that he has aims to have his American football team play there, and not just once a year.

The Daily Mail reports that Khan’s staff is examining how to limit the taxes he will pay in the United Kingdom when bringing the Jaguars to Wembley.

According to the report, Khan is looking at basing the Jaguars in Jacksonville while playing their home games in London. Khan would need to make sure he can do that while keeping his own tax bill in check, as well as keeping in mind that free agents aren’t going to want to play for the Jaguars if they’re subject to the UK’s higher taxes on high incomes.

Tax regimes are definitely a part of very important business decisions, even in sports.

It is tough to tax the rich if somebody is offering a cheaper place to live. Some of the rich people will sit still if they like the location enough, but it will keep new rich people from moving there.

OTHER TAX STORIES

TAX TWEETS












So yes, tax twitter is mainly full of people talking about UK tax policy right now… part of this is from me checking twitter early in the morning on the East Coast, while it’s mid-day in London.

A final thought:



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Taxing Tuesday: A Local Discussion on the SALT Cap, and Other State Options
Connecticut Finances: Running Out of Other People's Money, Looking for Cuts
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