Nancy Pelosi’s claims on middle-income taxpayers and state and local tax deductions

Nancy Pelosi’s claims on middle-income taxpayers and state and local tax deductions

"This is a good example of how tax data can be manipulated. Pelosi is usually eager to point out that wealthy Americans will mostly benefit from broad-based tax cuts. In this case, wealthier Americans would mainly feel the effects of a broad-based elimination of a tax break"

"But in this case, Pelosi chooses to ignore the distributional tables and instead focus on the absolute number of people affected, even if the impact is mostly felt by the rich. She earns two Pinocchios."

That’s Salt

Congress most likely is doing away with the SALT deduction, also known as the State and Local Tax deduction, which upper middle class and wealthy filers who itemize their taxes take advantage of to reduce their total tax liability to the federal government. Doing away with the SALT deduction in words of many state politicians is a “direct affront to middle class taxpayers”. But it’s not that simple.

First off, the SALT deduction only applies to a fairly narrow class of people to who pay income tax. To recieve the SALT deduction, you have to intemize your taxes. Many middle class families and most working class families do not intemize their taxes. If you don’t itemize taxes, you don’t currently recieve any benefit from the SALT deduction. Indeed, you would come out ahead under Congress’ plan to increase the standard deduction.

At the same time, the SALT deduction is limited by the Alternative Minimum Tax (AMT). If you are upper middle class or wealthy and make enough to be subject to the AMT, you are subject to AMT and can not take the SALT deduction. Indeed, at one time — prior to 1982 tax reforms — you could deduct SALT from AMT. But that hasn’t been the case in 35 years. The SALT deduction is great, but relatively few people actually get it — working people, the lower middle class, the upper reaches of middle class and wealthy generally don’t get to use it because they either don’t itemize their taxes or they have to pay the Alternative Minimum Tax.

Why do state politicians care about the SALT deduction so much — and regularly call it an attack on the middle class? Politics, plain and simple. If the SALT deduction goes away, the most frequent to turn out and vocal voters — upper middle class voters who own nice houses in the suburbs — will be hit the hardest with higher federal tax bills. While these families probably have enough fat in their budget to sustain paying a little extra in their federal tax bills, it will be an extremely unpleasant experience for these prime voters, who often are very politically involved. They might take out their rage on incumbents, both by contributing less and by voting for challengers. Many in the upper middle class have expensive homes, schools, and automobiles to pay for. Paying for increased taxes will hurt their budgets hard. As such, the prime voters are likely to demand that their state taxes be cut to make up for the increase in federal taxes. Indeed, that’s not an unreasonable proposition, but recongize revenue must come from somewhere — probably taxes on the wealthy.

Assuming that the SALT deduction goes away and the standard deduction expands as an alternative, a lot of lower middle class families will benefit greatly, especially those who rent rather then own. But to make up for the higher taxes on the politically involved upper middle class, we should look at taxing the truly rich even more. People say if you tax very rich people more, they will leave the state. But that hasn’t happened that much in the past, in part because New York State is already an mecca — the cultural and financial metropolis of the world — and most wealthy people live here despite the taxes. Charles Koch, if he was truly concerned about his personal tax bill, would have long left New York. Nothing holds him here except his desire to be the world’s greatest city. New York could certainly make our tax system more progressive, so the rich and upper middle class pay their fair share — when so  many at lower end have so little.

I am not that worried about the SALT deduction going away. I’m actually kind of glad that my personal taxes will be going down with the standard deduction and that there will be less pressure to itemize my taxes, especially when I own a home. I’d rather have simplier taxes to file, and I’d rather working people have it easy as possible to get maximum tax relief they deserve. I don’t like Trump’s plan to give the rich a big fat tax break, but doing away with the subsidy to big state and local spending for the upper middle class will ultimately be good for our state and our country.

October 28, 2017 8 AM Update

Good morning! Happy Saturday. Finally the weekend! Next Saturday is Beaver Moon. Clear and 43 degrees in Delmar, NY. There is a south-southeast breeze at 5 mph. Sunny this morning but clouds are expected to prevail by afternoon.

Today I’m heading over to the Renewable Energy and Green Living Fair and will be one of the people maning the Save the Pine Bush booth. It will be a nice day for outside activities although by afternoon it’s going to cloud up. Heavy rain and wind tomorrow as the Nor’easter rolls in. I plan to wash my truck and go grocery shopping after the fair, although I despite the storm I will probably go out to the folks house for Sunday dinner tomorrow. It’s not that far and I can go slowly if it really pours.

Today will have increasing clouds, with a high of 67 degrees at 3pm. 12 degrees above normal. Maximum dew point of 48 at 6pm. South wind 5 to 15 mph. A year ago, we had mostly cloudy skies. The high last year was 47 degrees. The record high of 78 was set in 1971. 2 inches of snow fell back in 1952.

The sun will set at 5:52 pm with dusk around 6:21 pm, which is one minute and 23 seconds earlier than yesterday. At sunset, look for partly cloudy conditions and 66 degrees. The dew point will be 47 degrees. There will be a south breeze at 11 mph. Today will have 10 hours and 27 minutes of daytime, a decrease of 2 minutes and 38 seconds over yesterday.

Tonight will have showers likely, mainly after 3am. Mostly cloudy, with a low of 54 degrees at 6am. 18 degrees above normal. Maximum dew point of 54 at 5am. South wind 7 to 9 mph. Chance of precipitation is 60%. New precipitation amounts of less than a tenth of an inch possible. In 2016, we had cloudy skies with some clearing in the early hours of the next day. It got down to 37 degrees. The record low of 19 occurred back in 1969.

In 1956, Elvis Presley receives a polio vaccination on national TV. This single event is credited with raising immunization levels in the United States from 0.6% to over 80% in just six months.

As previously noted, next Saturday is Beaver Moon when the sun will be setting at 5:43 pm with dusk at 6:13 pm. On that day in 2016, we had mostly sunny skies and temperatures between 53 and 31 degrees. Typically, the high temperature is 53 degrees. We hit a record high of 76 back in 1994.