Well to me this seems fair... I mean why should people living in high tax states pay less in Federal taxes? And it seems to me that raising the standard deduction and eliminating this "loop hole" would help many of the working class folks. Thoughts?
CNN Money State and Local Tax Deduction
CNN Money State and Local Tax Deduction
41 comments:
The problem is that by doubling the standard deduction while eliminating the personal exemption plus raising the rate on the lowest bracket is actually a tax increase on many low- to middle-income taxpayers. (Of course, that's considered a feature to the GOP.)
States have the choice of imposing income taxes and receiving the tax advantages. Why should Minnesotans pay more in taxes because other states choose not to avail themselves of this tax break? There is nothing stopping states like Florida or Texas, both of which are very quick to tell folks about their low taxes, from arranging their affairs to take advantage of the tax break. I just don't see how it's unfair for them not to receive a benefit they voluntarily refused. Presumably they were compensated in other ways.
--Hiram
Sean,
I think we will have to see the final plan before we can prove that one way or another.
Hiram,
The answer to this question is pretty simple... "Why should Minnesotans pay more in taxes"?
Well because Liberal Minnesotans keep voting for people who raise our taxes.... :-)
Now the big question again is if we are okay paying big taxes, why do we think we should be allowed to pay less at the Federal level?
Since I pay quite a bit in MN income, property, etc taxes, this will likely cost me money.
But after hearing the Liberals bragging about how the high paid states pay more to the Fed and get less than the low taxed states, I would find the high taxed states losing this cushy loop hole somewhat amusing.
if we are okay paying big taxes, why do we think we should be allowed to pay less at the Federal level?
I am not ok with paying big taxes. That's why I arrange my affairs to legally minimize the taxes I pay. I take advantage of the taxes that are available. I don't see why I should not do that simply because others choose not to take advantage of those breaks.
--Hiram
States like Florida or Texas can make the state tax deduction available to their taxpayers. Instead of complaining about the unfairness of that tax break, why don't they take advantage of it?
It's like the old Communist joke. A farmer complains to God that his neighbor has a goat and he doesn't. God says, "What do you want me to do about it?". The farmer replies, "I want you to Kill my neighbor's goat."
--Hiram
Well in this case you apparently want your neighbors to raise their State taxes...
And then make them deductible, so the State gets more and the Feds get less...
I think just making them all non-deductible would work just as well. And no goats would need to be killed.
And the folks who pay the most in local and state income taxes would just pay some more... Isn't that what Liberals usually want? (ie higher the income , higher the tax rate)
I thought conservatives believed the same income was only supposed to be taxed once.
Well in this case you apparently want your neighbors to raise their State taxes...
Setting my neighbor's tax policy isn't up to me. I don't ask him if he takes all his deductions. Do you think I should?
My guess is states like Texas and Florida follow the tax policy they do for reasons applicable to them. Does anyone care to speculate as to what those reasons might be?
I think just making them all non-deductible would work just as well. And no goats would need to be killed.
The effect would be that Minnesotans would pay more in taxes. That's the goat that gets slain.
Isn't that what Liberals usually want? (ie higher the income , higher the tax rate)
If I wanted to pay more in taxes, why would I take tax deductions. Does that make any sense at all?
==Hiram
Sean.
That is an excellent thought... Maybe we should eliminate the MN State Income tax.
Hiram,
The idea of a liberal like yourself being concerned about Minnesotans paying more in taxes makes me smile...
It does seem true that simplifying the tax code will be very difficult.
Everyone seems out to defend their little piece of pork.
NPR The $4000 Raise?
You don't have to do complicated math to know that the $4,000 number is BS. The cost of the corporate tax cut is about $200B per year. $4,000 multiplied by ~125 million American households is $500B per year.
Given the complete disconnection between productivity and wages over the last 40 years, the fact that historically high corporate profits haven't led to growing wages, and history in other countries (The UK sliced corporate tax rates a decade ago from 30% to 19% and wages have been stagnant), and the long history of tax cuts not paying for themselves, anyone who thinks that $200B in tax cuts are going to generate $500B in higher wage income is crazy.
The idea of a liberal like yourself being concerned about Minnesotans paying more in taxes makes me smile...
The idea that Republicans like Erik Paulsen want to take tax breaks from Minnesotans, really baffle me. The "tax reform" he advocates would take tax dollars that benefit Minnesota and send them elsewhere, places that have a much better voting record for Republicans than we do. Why the third district sends a guy to Congress who does a much better job representing the interests of Florida than Minnesota is certainly strange.
--Hiram
Hiram, As I said
"Everyone seems out to defend their little piece of pork."
I don't know why we have a congressman who seems to be working for the benefit of Republicans in Florida. Why is he fighting for their pork?
Has anyone offered an explanation as to why states like Florida and Texas have not chosen to take advantage of the tax benefit offered by the deductibility of state and local taxes? Is it a sacrifice they are making in support of a fairer tax policy?
--Hiram
The challenge I have with all of this is that it smacks of...
"A democracy cannot exist as a permanent form of government. It can only exist until the people discover they can vote themselves largess out of the public treasury. From that moment on, the majority always votes for the candidate promising the most benefits from the public treasury, with the result that democracy always collapses over a loose fiscal policy--to be followed by a dictatorship.” Alexander Fraser Tytler
“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
― Winston S. Churchill
"“When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.” Frédéric Bastiat
GR Tax Quotes
Personally I think Erik is working for the betterment of our country. Which course will help all of us citizens.
Beside given all the Baby Boomers who relocate their residency to TX and FL, he may be representing his constituents in more than one way.
As for FL and TX, I am guessing they want to attract hard working successful Americans, and they are okay if the other folks move on to more socialistic states like MN.
I am a big fan of paying taxes for defense, law/order, infrastructure, education and caring for the truly disabled. I am not a big fan paying taxes to enable a huge government bureaucracy that uses tax dollars to encourage people to stay dependent and entitled.
Who is the Erik Paulsen you speak of? Has he ever been seen in the wild?
I saw him and Terri Bonnoff at the Plymouth parade a year ago.
It does seem that he is very elusive after elections though.
This is interesting... Erik is on Facebook and people are commenting.
A democracy cannot exist as a permanent form of government.
The election of Trump has caused me to think along similar lines. Our democracy is simply wearing out.
--Hiram
I am guessing they want to attract hard working successful Americans, and they are okay if the other folks move on to more socialistic states like MN.
Making citizens pay more in taxes is an interesting way to do that.
--Hiram
Hiram,
Please remember that this is a tax deduction, not a credit.
In other words us MN tax payers need to pay thousands of dollars in State taxes to save hundreds of dollars on Fed taxes.
In FL and TX they likely pay less in both categories since they likely control their governmental spending / wealth transfer more aggressively than we do in MN.
The state tax deduction, along with the mortgage interest deduction tend to benefit the middle class taxpayer. These two deductions are really the two major tax benefits the income dependent earner receives.
States without income taxes are generally poorer with legislatures dominated by wealthy special interests who prefer no taxation at all to the deduction of state taxes. Rich people try to find ways of wealth appreciation that aren't dependent on income tax. It's the basis of effective tax planning.
--Hiram
I am pretty sure the GOP will not be able to close the State / Local tax write off loop hole.
Just like they will find it hard to change much of anything regarding our loop holes... Too many people like their "special little gifts" in the current tax code.
As the quote above noted... "It can only exist until the people discover they can vote themselves largess out of the public treasury."
Brit Hume argues that tax cuts don't have to be paid for, because it's our money. Following that logic, it doesn't make sense to end various loopholes in order to facilitate tax cuts. My guess is that in the end, a lot of Republicans will be persuaded by this logic, Republicans being such big logic fans, and will enact their tax cuts without any change in tax benefits. If only all life's problems were so amenable to logic.
--Hiram
I am also seeing stories about limitation of 401k programs, another one of the few tax breaks available to the middle class. Trump is against them, but has also indicated a willingness to negotiate.
==Hiram
So, how do you all feel about double taxation of your income? That is what the deduction prevents.
And the reason we have all these "loopholes" is because some wizard in government thought he could make the tax code "fair" by treating every dollar differently according to who earned it, how and where, complicating the bejeebers out of the thing. A simple one-rate tax with a personal deduction eliminates all the complication and is perfectly fair to everybody. KISS.
So, how do you all feel about double taxation of your income? That is what the deduction prevents.
Income is taxed by both the federal and state governments in Minnesota. You file forms for both.
There are all sorts of reasons we have tax loopholes, some of which are lost to history or are no longer relevant. The reason why they are so hard to get rid of is that they have strong political support behind them. Raising taxes is just very hard to do, and hard things don't get done in our politics.
I think of it as the as the law of thermodynamics of tax law which is, Since complications reduce taxes, and since politicians like to reduce taxes, it follows (logically, for you logic fans out there) that the tax code has a tendency to get more rather than less complicated.
When people talk about complications in tax policy, they are rarely very specific. The issue most frequently brought up is the multiple tax rates. Nobody ever seems to note how odd this is, and I find that very strange. After all, this supposed complication is one that you never notice. If you do your taxes manually, you just look up your taxes on the table and it tells you what you owe. The math is done for you, in a way you don't notice. If you use a computer program, it's even simpler. And in practical terms, the multiple rates are irrelevant to any decisions you make. Nobody turns down a raise because it puts them in a higher tax bracket. Nobody even thinks about that when they get a raise.
--Hiram
Income is taxed by both, but right now you deduct state taxes on your federal return, so you pay only once.
The complications reduce taxes for some, which, according to those who want them raised creates "winners and losers" and therefore more complications must be added to compensate. Everybody thinks these are "loopholes" when somebody else uses them, but "benefits" when they use them. The only solution is to scrap this stupid tax code, which costs us 100s of billions of dollars each year in compliance. Imagine if that went into something useful?
The complications reduce taxes for some, which, according to those who want them raised creates "winners and losers" and therefore more complications must be added to compensate.
Generally speaking if the complications don't reduce your taxes, don't take them. There is no law that says you have to claim deductions, no law that says you have to have a 401k plan.
Scrapping the tax codes sounds nice, but what would replace it? But this view speaks to the nihilistic impulse that both animates Trump supporters and is largely responsible for the decline of our nation. A portion of our country, not a majority, but enough to elect a president, want to destroy it and start over. I have to admit, there are times when I feel that way myself, and sometimes walking away from problems is the solution. Our president has done that in his multiple bankruptcies, and his briefly held position that for example, Puerto Rico's debt should simply be wiped out is not entirely unworthy of a consideration. But I am old and crotchety, and not really up to handling the years and decades of turmoil, formally calling an end to our country my entail. That's an alternative I will leave to the youngsters, hopefully for them to pursue when I am safely gone.
==Hiram
Nobody is calling for all taxes to be eliminated. But to replace the tax code that costs us hundreds of billions of dollars to comply with, every year, and yet is seen by NOBODY as "fair," seems essential to the health of the nation. A simple Flat or FAIR tax would be vastly preferable, and if there were a transition built in, as there is with the FAIR tax, we could maximize the "approval" of the tax system, greatly increase compliance and, most likely, increase government revenue.
It is good that you have a personal dream.
However no one is even proposing the flat tax at this time.
But to replace the tax code that costs us hundreds of billions of dollars to comply with, every year,
How many hundreds of billions of dollars would the postcard tax return cost?
Taxes aren't fair. They can't be because nobody can agree on what's fair.
Concerning a flat tax. Well, it depends on what you mean by flat. Wealthy people have the capability of arranging their affairs in ways that avoid generating income. Warren Buffett pays himself about a hundred thousand dollars a year. Under a flat tax, he would pay virtually nothing. A fair tax, a univesal sales tax would presumably shift the burden of the tax on the poor. These results aren't particularly fair, nor for that matter are they particularly simple.
--Hiram
Latest estimates for a postcard tax-- flat tax-- would be a reduction of about $406 billion over current compliance costs. People would still have to track, categorize and report "income." A FAIR tax would save even more, by eliminating the "postcard" and at least 95% of the IRS.
Taxes cannot possibly be fair so long as every dollar is treated differently, depending on who earned it, where and how, and then where and how it was subsequently spent. A simple flat tax based on disposable income, with everyone paying a single rate, would be SEEN as fair, but the "rich" would lose all their "loopholes." Of course, they could fire all their "loophole-finders." The FAIR tax would be even better, because it would tax consumption rather than income. The neighbor who has 3 times your income but plows 2/3 of it back into his business would pay the same tax (on lifestyle) that you do, but the guy that spends like a lottery winner-- that we call "rich"-- would pay a lot more. So simple you wouldn't even file a return.
John, the FAIR tax bill is still awaiting a hearing, and has a large number of cosponsors. I am not aware of a flat tax bill "in the hopper," but it wouldn't be hard to draft one. It would be FAR simpler than the current 70,000+ pages.
Looking back at the original post, I observe that simply doubling the standard deduction would eliminate a LOT of the "social engineering" that goes into the tax code for ordinary individuals. Those who can afford to invest in cattle ranches, for example, would still have their huge "loopholes" intact.
Taxes cannot possibly be fair so long as every dollar is treated differently, depending on who earned it, where and how, and then where and how it was subsequently spent.
but then, there is nothing particularly fair about treating every dollar the same. I, for one, have never seen the logic of treating money earned from making a couple of calls to a broker more favorably than money earned from digging a ditch. Investment earnings, in fairness it seems to me should not be given preferable treatment over earned income. But they are. And that's the problem. The guy who digs ditches doesn't have lobbyists. He doesn't make contributions to political campaigns. He works too hard to have the energy to campaign for some local congressman. So he is the one who gets hurt tax wise.
--Hiram
"there is nothing fair about treating every dollar the same." That would be true so long as the alternative were god-like legislators so wise as to determine exactly what the tax on every single bit of human endeavor should be, spell that out in excruciating detail, and not have those taxes influence the behavior of individual taxpayers in the least.
I still insist that the FAIR tax, whose only burden falls on people who spend their /disposable/ income on "stuff" and pay a single, flat rate on that consumption (making it perfectly progressive in both rate and dollars paid, very much unlike the current system), would be seen as fair by everyone and would be a boon to the economy.
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