The deduction for state and local taxes (or SALT as they call it in DC) is the subject of some of the most outrageous lies in the ongoing debate about the GOP plan to reform federal taxes. Democrats and their allies in the media and in supposedly "non-partisan" think tanks are screaming how ending this deduction will cause higher taxes for the middle class to pay for tax cuts for the wealthy. That's just a blatant lie.
Let's consider this example. The median household income in the USA is $59,000 at the moment. A couple with income of that amount is right in the middle of all Americans, so they are obviously the heart of the middle class. If they live in a state with a 7% income tax (which is high), they pay at most $4000 in state tax which they can deduct. If they own their own home and pay $5000 in property taxes, they can deduct those too. Most likely, these amounts would be less, but we are talking about a deduction of $9000. Under the Senate plan, the $9000 deduction would go away, but the standard deduction would rise by $12,000, so these folks would be better off. Under the House plan, the 5K in property taxes would still be deductible, but the 12K rise in the standard deduction would be there again as an alternative. Under either plan, the couple would see a substantial tax REDUCTION. This is especially true since the tax rate would be reduced as well.
Now let's consider this example: a wealthy Hollywood agent and spouse earn $1,500,000 for the year. They pay California income tax of $180,000, a deduction that they will lose. They also pay $40,000 in taxes on their multi-million dollar home, and they get to keep $10,000 of that deduction. Their tax rates actually go up slightly under the GOP plan as well. The net effect on their taxes is an increase of roughly $60,000 per year.
These are not one-offs. Nearly all the middle class will get large tax reductions under the GOP plan. Nearly all the super wealthy will get no tax cut at all with many seeing increases.
The point is that the cuts for business and the middle class will increase economic growth by 1-2% per year for a few years. That will be a major benefit and job producer for everyone. The Democrats are just telling lies when they claim that the GOP plan will raise taxes on the middle class. For what it's worth, the Washington Post fact checker gave four Pinocchio's to claims by Democrats that middle class taxes would increase under the GOP plan. If the Dems can't even get the WaPo to go along with their lies on the tax plans, you know those lies are truly blatant.
Let's consider this example. The median household income in the USA is $59,000 at the moment. A couple with income of that amount is right in the middle of all Americans, so they are obviously the heart of the middle class. If they live in a state with a 7% income tax (which is high), they pay at most $4000 in state tax which they can deduct. If they own their own home and pay $5000 in property taxes, they can deduct those too. Most likely, these amounts would be less, but we are talking about a deduction of $9000. Under the Senate plan, the $9000 deduction would go away, but the standard deduction would rise by $12,000, so these folks would be better off. Under the House plan, the 5K in property taxes would still be deductible, but the 12K rise in the standard deduction would be there again as an alternative. Under either plan, the couple would see a substantial tax REDUCTION. This is especially true since the tax rate would be reduced as well.
Now let's consider this example: a wealthy Hollywood agent and spouse earn $1,500,000 for the year. They pay California income tax of $180,000, a deduction that they will lose. They also pay $40,000 in taxes on their multi-million dollar home, and they get to keep $10,000 of that deduction. Their tax rates actually go up slightly under the GOP plan as well. The net effect on their taxes is an increase of roughly $60,000 per year.
These are not one-offs. Nearly all the middle class will get large tax reductions under the GOP plan. Nearly all the super wealthy will get no tax cut at all with many seeing increases.
The point is that the cuts for business and the middle class will increase economic growth by 1-2% per year for a few years. That will be a major benefit and job producer for everyone. The Democrats are just telling lies when they claim that the GOP plan will raise taxes on the middle class. For what it's worth, the Washington Post fact checker gave four Pinocchio's to claims by Democrats that middle class taxes would increase under the GOP plan. If the Dems can't even get the WaPo to go along with their lies on the tax plans, you know those lies are truly blatant.
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