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Democrats want to give a tax cut to the top%, 6x bigger than any other bracket

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Re: Democrats want to give a tax cut to the top%, 6x bigger than any other bracket

#31

Post by bko »

bink wrote: post #23
bko wrote: post #10

Is there any reason there shouldn't be a cap on state and local tax deductions (SALT) from the federal tax, apart from it affect people more in blue (high cost) states? Why should the federal government subsidize high state and local taxes? It obviously most benefits the wealthy who are well above the current SALT cap. The standard deduction is already pretty high, ~25k for married couple. And if you're paying that m…

$25k in California is very different from $25k in Oklahoma. For this to be fair it would need to be adjusted for the COL in each region. Regions with higher taxes also tend to have higher populations and more dense populations and provide more social services. And regions with more dense populations also tend to vote for one party over the other. It was pretty clear to most that this was aimed solely at punishing one…

> $25k in California is very different from $25k in Oklahoma. For this to be fair it would need to be adjusted for the COL in each region.

So someone in Oklahoma should pay more federal taxes that someone in California ... why? California sets its own policies, whether its housing or the social services they provide, as does Oklahoma. Someone from OK does not benefit from CA policies that provide more social services, so why should they subsidize them?

> do we support double taxation or not?

I'm taxed on my income and I'm taxed again on sales tax and if i transfer above a certain amount I'm taxed again as a transfer or gift tax, and if I leave an estate I'm taxed again, and if I use it to buy a home, I'm taxed again...

If you're actually against double taxation, you should be against all of these taxes because you're being taxed on top of already taxed income.

Re: Democrats want to give a tax cut to the top%, 6x bigger than any other bracket

#32

Post by prirun »

eganist wrote: post #24
ozzythecat wrote: post #19

Earlier quoted context omitted.

I don’t want to get into politics on HN, but I’ll say it’s a bad idea because many people don’t want to pay another penny in taxes. And this isn’t about my personal politics. If you want a tax because society will benefit, great - many of us are for it. But that’s not the debate. If the government was efficient or effective at spending, then it’s just a question of, “well, do we agree spending on X benefits our commu…

Having spent time in the public sector... ...it's amazing how much of this is caused by local and state governments being unable to afford: 1. Qualified talent 2. Equipment 3. Effective professional services "The beatings will continue until morale improves" or, perhaps more aptly, "funding will trickle until programs improve." a.k.a putting the cart before the horse. I get that this isn't uniform across the board, b…

Having a relative who is a CPA and worked for local governments...

1. They hire their friends instead of qualified talent, and pay their unqualified friends ridiculous amounts

2. Local officials have businesses on the side and arrange to have their business get local government contracts

3. They don't want anyone qualified looking at their finances, because all the corruption and fraud will be obvious.

We've had local elected officials steal money and yet they can't be removed from office because they were elected. The whole local government situation is shit, starting with the fact that the people elected may be "popular" in some sense (they won the election, yipee!), but that doesn't mean they are qualified to run a city or county or manage a large budget.

Re: Democrats want to give a tax cut to the top%, 6x bigger than any other bracket

#33

Post by pdog »

mint2 wrote: post #2

Isn’t SALT preventing double taxation? And isn’t this just returning it to the state prior to the trump tax bill?

By this logic, with no SALT deduction cap, a state could simply implement the federal income tax brackets for its own taxes and permanently deprive the federal government of any income tax revenue by allowing it all to be deducted.

Re: Democrats want to give a tax cut to the top%, 6x bigger than any other bracket

#34

Post by toast0 »

VictorPath wrote: post #22

The title is clickbaity. Wealthy people are not getting a tax cut with SALT - any federal cut with this would wind up being taxed locally.

If SALT goes back to being uncapped (or more precisely, capped by AMT), this is a tax cut for people it applies to. While some states toyed with workarounds to the cap that came with the Trump tax changes, I don't think it happened for the most part and states didn't reduce their taxes to compensate for the increased taxes on their residents.

I wouldn't expect to see taxes being raised in the near term to compensate for reduced taxes on residents either.

Re: Democrats want to give a tax cut to the top%, 6x bigger than any other bracket

#35

Post by stopping »

pdog wrote: post #33
mint2 wrote: post #2

Isn’t SALT preventing double taxation? And isn’t this just returning it to the state prior to the trump tax bill?

By this logic, with no SALT deduction cap, a state could simply implement the federal income tax brackets for its own taxes and permanently deprive the federal government of any income tax revenue by allowing it all to be deducted.

Not exactly. The only way a state government could deprive the federal government of federal tax income is to tax their residents at a rate of 100%. Even with an uncapped SALT deduction, the federal government is entitled to tax whatever income you have leftover after paying state/local taxes.

Re: Democrats want to give a tax cut to the top%, 6x bigger than any other bracket

#36

Post by toast0 »

prirun wrote: post #25
mister_tee wrote: post #17

Earlier quoted context omitted.

There's a more general proposal to tax unrealized capital gains, for the wealthy. It came up in funding negotiations for this bill but wasn't ever in a draft IIRC.

I've posted several times that this is a dumb idea, because if they tax unrealized capital gains every year, they're also going to have to issue tax credits for capital losses every year. Which works out to being the same thing as taxing capital gains when the asset is sold. I have no problem with them eliminating the stepped-up basis on inheritance of investments. IMO, the only reason they do this is because if you…

Brokers have only been required to properly track basis for shares for about ten years at this point. So there's still a lot of non-covered shares with not necessarily well kept basis.

There's also things like houses and land that records are likely to be iffy for. Especially because some improvements add to the basis, and who knows where grandma kept her files for improvements or if there's enough detail in there to say for sure.

It's definitely a loophole though, same with donating apprechiated capital property.

Re: Democrats want to give a tax cut to the top%, 6x bigger than any other bracket

#37

Post by nanis »

mint2 wrote: post #2

Isn’t SALT preventing double taxation? And isn’t this just returning it to the state prior to the trump tax bill?

> Isn’t SALT preventing double taxation?

Alternatively, enabling high-tax states to increase the burden of taxation while depriving federal government of tax revenue.

Re: Democrats want to give a tax cut to the top%, 6x bigger than any other bracket

#38

Post by rsj_hn »

stopping wrote: post #14
mcherm wrote: post #5

Earlier quoted context omitted.

Whether or not a state and local tax deduction counts as "double taxation" depends entirely on what you mean by "double taxation". For example, one could say that sales tax is a form of "double taxation" because you were already charged tax on your income and now you are being charged tax again when you try to spend it. Or, one could say that income tax and sales tax are two unrelated taxes, and they should not be co…

Sales tax is indeed double taxation. That's why you're allowed to deduct it on your federal taxes under the SALT rules.

> Sales tax is indeed double taxation.

Yes!

> That's why you're allowed to deduct it

It's complicated.

First, Sales taxes cannot be deducted from SALT if you deduct state income tax. You have to pick which one you deduct. But if the intention was to avoid double taxation, they would have allowed you to deduct both.

Second, SALT exists from the era when top marginal rates were 90 percent, so you could end up in situation where you paid more than your income in taxes. Actually this is true even with the SALT deduction, but the deduction was basically a tax break to top earners in order to compensate for very high federal rates. The rationale for it doesn't exist today.

Third, double taxation does not refer to the amount of tax paid but to the fact that the same income is taxed twice. Deducting the sales tax (or the income tax) would not eliminate double taxation, it would only reduce it by a small amount.

E.g. if you earn $1 in income and spend half of it, and if the sales tax is 10% and state income tax is 10% and the Fed tax is 30%, then:

* Without SALT, your liability is 45 cents (thank God you only spent half!) and you have triple taxation on $.50 (sales, state, federal) and double taxation on $.50 (state, federal)

* With SALT, your liability is 42 cents and there is triple taxation on $.50 (sales, state, federal) and double taxation on $.40 (state, federal). Thus the SALT deduction saves you 3 cents by reducing your federal liability from 30 cents to 27 cents. But you paid 15 cents to the state. This is because the SALT deduction is not a tax credit, it's a tax deduction that just reduces your taxable income a bit.

Re: Democrats want to give a tax cut to the top%, 6x bigger than any other bracket

#39

Post by notreallyserio »

bko wrote: post #31
bink wrote: post #23

Earlier quoted context omitted.

$25k in California is very different from $25k in Oklahoma. For this to be fair it would need to be adjusted for the COL in each region. Regions with higher taxes also tend to have higher populations and more dense populations and provide more social services. And regions with more dense populations also tend to vote for one party over the other. It was pretty clear to most that this was aimed solely at punishing one…

> $25k in California is very different from $25k in Oklahoma. For this to be fair it would need to be adjusted for the COL in each region. So someone in Oklahoma should pay more federal taxes that someone in California ... why? California sets its own policies, whether its housing or the social services they provide, as does Oklahoma. Someone from OK does not benefit from CA policies that provide more social services…

If OK doesn't provide the same level of services to its residents as does CA, and if the federal government has to step in instead (because people still need services), then yeah it stands to reason that OK residents ought to be willing to pay more to the feds.

Re: Democrats want to give a tax cut to the top%, 6x bigger than any other bracket

#40

Post by dnautics »

slickrick216 wrote: post #30
eganist wrote: post #18

Earlier quoted context omitted.

> Think about that for a moment, why might that be a bad idea? This isn't obvious to me. Can you help me understand?

If you get into financial difficulty and need to remortgage your house technically you would have to pay capital gains on it with this rule. Which punishes poor people for being poor.

Mostly middle and lower-middle class people really, though imagine it applying to pawn shop collateralized loans. It would probably be deployed in that fashion in some misguided fashion 'to discourage usury', at which point it will really fuck over the poor.

When you take out a collateralized loan, you still have to pay it back.

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