The New York Times has this one right. https://www.nytimes.com/2021/04/25/opinion/salt-deduction-democrats.html
As they report more than half of the benefit of repealing the limit on SALT (the State and Local Tax) deduction would go to the top 1%. The fact that there is even a debate about this giveaway should embarrass everyone in the Democratic Party.
The “Democrats” behind this have threatened to torpedo the entire Biden infrastructure bill unless their wealthy overwhelmingly white contributors get special treatment. It makes you sick.
Please share widely!
It doesn’t make me sick.
The discussion will be advanced if we use accurate language. “Wealthy” means someone (or a household) that has great wealth. That is not synonymous with “high income”, and that difference is the issue I have with your argument. The “top 1%” of wage-earners is VERY different from the top 1% of wealth. A household with income of $10K/month in income and $12K/month in expenses is NOT wealthy.
The New York Times has been perpetuating this incorrect conflation of wealth and income for decades, in no small part because the result benefits the ultra-wealthy Sulzberger family. The primary effect of increasing income tax rates is to make it more difficult for households to make the transition from wage-earner to wealthy. The top income tax bracket could be 99%, with SALT still in place, and it would not change the financial situation of the Sulzberger family even a tiny bit. That is not the case for a huge number of homeowners in MA, New York, CT, and other states.
By the way, the definition of “wealthy”, in this context, is straight forward — a household whose passive income exceeds its costs is wealthy. Once that clearly-defined threshold is passed, ANY income from wages only increases the portfolio. It is also very hard to increase consumption above a relatively fixed level. As attempts to consume exceed that level, they end up merely converting assets from one category to another — yachts, vacation homes, jets, and so on exemplify this.
The maximum schedule A deduction is already capped, and there is already an alternative minimum tax.
It makes far more sense to remove the SALT limitations, keep the existing schedule A ceilings, and dramatically increase the top brackets of the capital gains and gift/estate taxes.
I invite you to offer a cite to show that repealing the SALT limitation has any effect at all on the top 1% by wealth. Or, for that matter, on the top 0.1% or the top 0.01% by wealth.
To mix metaphors, this dog won’t hunt because it is barking up the wrong tree.
Well, there’s this: T18-0140 – Repeal $10,000 Limit on Deductible State and Local Taxes; Baseline: Current Law; Distribution of Federal Tax Change by Expanded Cash Income Percentile, 2018 | Tax Policy Center
Tom, I really think you are grasping at straws. “Wealthy” and “High Income” are not exact synonyms, but they are pretty close. The whole idea of the graduated income tax is based on that fact.
Not only that, but even if there were some real difference between wealthy people and high income people (which there isn’t) we are talking about a group of people which is overwhelmingly white. Repealing the SALT limitation would be a huge giveaway to white people and would increase the disparity of income (and wealth) between white and non-white Americans.
Your cite repeats the truism that decreasing the marginal rate of the top quintile benefits the top quintile by income.
“Income” is a change in wealth, just as speed is a change in position. Surely you’ll admit that there is a difference between driving at 110 mph and walking past the “110” mile-marker.
I agree with you that the whole idea of the graduated income tax is based on this misconception. The fact that the misconception is shared by a great many people does not make it more correct. More than seventy million Americans apparently believe that the 2020 election results were fraudulent. That widespread belief does not increase the correctness of the claim.
State and local taxes are very high in the affected states largely because those higher income taxes fund the significantly higher spending those same states direct towards non-white populations. Limiting the deductibility of those taxes raises the pressure on state and local governments to slash state spending. That hurts, not helps, the non-white population of the targeted states.
The primary motivation for the 2018 SALT limitations was to punish Democrats for being Democrats in the affected states. Restoring stolen funds is not a “giveaway”.
The most effective way to decrease the disparity in wealth between white and non-white Americans is to tax the wealth of the wealthy and invest the resulting public funds in the non-wealthy.
There is something weirdly appropriate about this argument. Here we are as BMG is preparing to ride off into the sunset and one of the main commenters is seriously making an argument that the graduated income tax is evil.
So taxes are “stolen funds” which must be “restored” to their rightful high income owners. Because, as Grover Norquist of Somerville puts it that way the high income earners will not put as much “pressure” on state and local governments to cut spending. Not that high income people just don’t like paying taxes–they just want not to feel the compulsion to sabotage the state and local governments efforts to help the “non wealthy”.
Jeez, Tom, what a load of crap you are pushing! I was a little remorseful about mentioning the race of the people who benefit from the SALT deduction, because I thought it was close to virtue signaling. But now I know. Never get into a virtue signaling battle with Tom. He has endless resources.
Give us rich white people the special tax break that we are entitled to. So we can help the non-wealthy by not taking our “stolen funds” back from the states. We’re not asking this for ourselves, we’re only asking because we care more about the non-wealthy than you do.
Whew!
I can’t compete with that.
Did I miss something? I did not see where Tom said a graduated income tax was evil.
Nowhere did I say or imply that the graduated income tax was “evil”.
Once again you direct your flame-thrower at a strawman.
Hear him, hear him! Yes indeed it’s all part of the smoke and mirrors we call the Tax Code where Republicans recently pushed through a massive tax cut for corporations on the grounds that the USA had one of the highest corporate tax rates in the world, while at the same time, many corporations were paying zero or even receiving tax credits. In the same universe Jeff Bezos is happy to support raising the tax rate because that will only hurt his competitors who cannot afford an army of tax accountants, tax attorneys, and lobbyists to carve out even bigger loopholes for Amazon.
Better yet, implement a tax code that makes being a billionaire virtually impossible. Push for a lower exemption on the Estate Tax, eliminate the Angel of Death tax loophole. Tax Stock Returns and Dividends of publicly traded companies so that even Amazon’s return could be done on a simple Excel Sheet.
Hey out there, anyone out there on this so-called progressive blog willing to endorse a graduated income tax?
I’m pretty sure we all favor income taxes to be graduated rather than a flat percentage for everyone.
All of the participants on this thread besides you already have.
Okay, so if we all agree that taxes should be graduated, tell me again what your objection is to a repeal of the SALT deduction. Remember, the State and Local Taxes are partly income taxes, but also partly property taxes. And the property tax is a tax on wealth, not income. So compensating people who pay more than $10K in SALT means benefitting people with very high incomes or people who are wealthy enough to own a lot of property, or both.
Putting in tax breaks for people who have high incomes and own a lot of property is a bad idea. And the people in Congress who are threatening to defeat the entire Biden infrastructure bill unless their wealthiest, highest earning constituents get a multi-billion dollar tax break are sickening.
Most of the households hit by SALT are middle-class families struggling to keep their heads above water in states with skyrocketing property values and state and local taxes.
Surely you know that the property tax is among the most regressive of taxes, because the wealth it targets is illiquid. One of the strongest drivers of the destruction of open space and farmland in eastern MA was the impact of increasing property taxes on land-poor residents of inherited farms. Farms in Billerica in the early 1980s that had been passed from generation to generation within a family were being sold because the owners were not able to pay the skyrocketing property taxes of the early 1980s. Those owners were forced to sell property, in part or in total, in order to generate the funds necessary to pay the increased property taxes. Single-family lots and commercial parcels are MUCH more valuable than open space, and so the land that was sold was turned from open space into contractor colonials, strip malls, or enormous glass boxes.
Renters in particular feel the brunt of these SALT limitations, because property owners who don’t have the income needed to pay the increased property taxes are forced to pass the increase to their tenants.
As I’ve already said, this dog won’t hunt.
“Most of the households hit by SALT are middle-class families struggling to keep their heads above water in states with skyrocketing property values and state and local taxes.”
Show me. Find a study.
I agree that the impact of the SALT limitations were primarily felt by households with incomes over $100,000, and I agree that those are the households that will receive the most benefit from repealing the SALT limitations.
Our disagreement is apparently then focused on the question of whether or not a household with income of $100K in, for example, Westchester County NY is “middle-class”. I suppose it comes down to how we define middle class.
So now you’re using income to measure wealth? I thought you said that was a misconception.
“middle-class” is not a statement about wealth. I am not using income to measure wealth. A household earning $100K in Westchester County, NY has a different standard of living than a household earning the same amount in Aroostook County, ME.
It appears that you’re once again more focused on arguing than on finding any sort of common ground or exchange of ideas.
“Renters in particular feel the brunt of these SALT limitations, because property owners who don’t have the income needed to pay the increased property taxes are forced to pass the increase to their tenants.”
Show me, Tom. Find a study which finds a co-relation between the SALT deduction and lower rents. Ever.
See https://mitcre.mit.edu/news/blog/can-landlords-really-pass-higher-property-taxes-tenants
When property taxes increase, rents increase, to the tune of 80-90%.
Studies that explicitly link the SALT limitations (and therefore increased property taxes to property owners in high-tax areas) to rents haven’t been done yet because the SALT limitations are still recent.
Delighted that you plan to pass on to your tenants the money you will save if the SALT deduction is increased. Have you told them yet or are you going to surprise them?
The SALT limitation does not apply to me.
Are you saying that you own multifamily property in Somerville, and that the total of your property taxes and your state income taxes is less than $10,000? And that people who own more than you and pay more state and local taxes are “struggling”?
I would assert that the people who would benefit the most from eliminating the cap on SALT taxes are not struggling by any definition. Someone who is paying $20,000 or $30,000 in state and local taxes is not just trying to keep their head above water.
Do the math, Tom. Some middle class taxpayer in Westchester making $100,000 would have to be paying a lot more than $10,000 in state and local taxes to benefit from this deduction.
The people behind the members of Congress who are pushing unlimited deductions are the really wealthy, not the middle class. Check the study that I cited before.
I’m saying that our household’s schedule A deduction was not affected by the recent SALT limitations. The reasons for that are private and have nothing to do with anything you’ve written here.
There you go again. Funny how you double the $10,000 ceiling to suit your argument.
Repetition does not strengthen your argument. Income is not wealth. “High-income” is not a synonym for “wealthy”.
The median housing price in Westchester County, NY is about $500K. The median property tax in that same county is about $9K per year. That family is likely to have a $400K mortgage on that property, and at a 4% annual rate is paying $16K in mortgage interest. The medium income for Westchester County is $45K.
According to sites like https://smartasset.com/taxes/new-york-tax-calculator#mEEiWU5Ory, the state and local income taxes for a median-income household will be $1,992K.
That family that has somehow acquired a median-valued home is paying $11K in state and local taxes and will be forced to give up $1K in annual deductions because of the limits.
That household has a net income of about $3.8K/month. It has a monthly property tax bill of about $0.75K and a monthly mortgage of about $1.3K. So that household has about $1..75K for everything else. Its first ratio is 53% — about twice the value generally accepted as sustainable.
That median household in Westchester County, NY is hit by the SALT limitation. That family is not wealthy.
For someone who has $11,000 in SALT the $10,000 limit on deductions will cost them about $200-$300 on their federal taxes.
These are not the people who are behind the push to eliminate the SALT limitation.
Rather, the elimination of the SALT limitation is a windfall to very high income, very wealthy people. The study I cited shows this conclusively.
The top 1% of income earners are wealthy, not middle class. That’s a fact
I don’t buy your theory that the Sulzbergers are hoodwinking the American public for their own financial gain.
And I don’t buy your theory that cutting rich people’s taxes will allow benefits to trickle down to their tenants. As Joe Biden said last week, trickle down economics has never worked.
Whatever
You don’t walk into a pick-up basketball game in your Chuck Taylors if everyone else is wearing Airs. What is somebody who has an income of 45k doing in a 500k house with a 400k mortgage? They (to quote you) “somehow acquired” it? They should cash out.
It’s better to be rich in a poorer neighborhood than poor in a richer one.
The study you cited has little or nothing to do with the question we are discussing.
In other words, you don’t like being shown that you’re claims are incorrect.
If I’m understanding correctly what this does, I would favor the write-off so we aren’t taxed twice on the same pot of money.
Have always referred to this as Middle Class Welfare, esp as I benefited from it. No question it cuts across whatever progressivity there may be in the tax codes (muni, state, federal).
That said, I think of it as sausage factory stuff, and pretty small potatoes (to mix the food metaphors). If MCW is a necessary ingredient to achieve a net positive tax reform, I don’t find it so hard to digest.
Bon apetite.
Not such small potatoes,
https://www.cbpp.org/research/federal-tax/repealing-salt-cap-would-be-regressive-and-proposed-offset-would-use-up-needed
“Repealing the cap would be regressive and costly. The top 1 percent of households would receive 56 percent of the benefit of repeal, and the top 5 percent of households would receive over 80 percent of the benefit, while the bottom 80 percent of households would receive just 4 percent, according to the Tax Policy Center (TPC).[3] The cost of just the SALT provisions over ten years would be roughly $185 billion, according to Joint Committee on Taxation (JCT) estimates.[4] If repeal were later extended through 2025 (the last year the cap is in effect under current law), we estimate that the total cost would grow to nearly $600 billion.[5]”
I dunno, Bob. Those scary 10-year numbers—well we can call it $18B a year (though it is actually less because of discounting etc)—that’s not nothing, but compared to the real enormities in the budget and the tax code, it is not indigestible.
Everett Dirkson (apocryphal, btw) was 60 years ago.
So I agree that is more junk food in our diet than is good for us. I am not a fan, either. But if it’s an ingredient in a better tax code, I say, pass the SALT.
That’s one way of looking at it, but the people pushing this are willing to blackmail the country over these figures. Why a $10,000 Tax Deduction Could Hold Up Trillions in Stimulus Funds – The New York Times (nytimes.com)
When the issue was raising the minimum wage, people were warned not to rock the boat. Don’t be a holier-than-thou purist! Don’t be mean to Joe Biden! If you don’t make enough money, go back and get retrained!
Well, now the shoe’s on the other foot. There are members of Congress of Congress willing to blackmail Joe Biden over this. Where are the people who posed for pictures with Joe? It seems like they couldn’t care less. If there are people in Westchester County struggling to get by on $100,000 why is nobody proposing that they learn some new skills and maybe become more productive commodity traders?
Maybe the DNC could demonstrate that they are loyal to Joe Biden by announcing that they will fund challengers to these renegades. As long as we’re making sausage. If that’s too much for the DNC, maybe we could find a progressive blog site where people are outraged at this giveaway.
Cute.