Saturday, July 22, 2017

Early Look At The Republican Tax Plan

Talking Points Memo
Republicans Embrace Tax Hikes Targeting Democratic States
"WASHINGTON (AP) — Republicans aren’t usually big on raising taxes, but they’re really eager to eliminate the federal deduction for state and local taxes. Why? A look at the states that benefit the most from the tax break helps explain it – they are all Democratic strongholds. New York, Connecticut, New Jersey and California top the list of states where taxpayers get the biggest deductions. Not a single Republican-leaning state ranks in the top 10."

We're hearing the bullshit argument about 'tax & spend' Democrats. Truth be told all members in congress love to tax and spend. One side favors spending on the military The other on social programs. One thing is for sure no matter who we put in office we all should be picking up a jar of Vasoline on the way home from the voting booth.

Let's Review An Example How This Would Play Out In Allentown, Pennsylvania
Currently Pennsylvania personal income tax is 3.07%. Allentown's EIT is 1.35%. Both state and local EIT combined are 4.42% alone. To list a few of the others which could be impacted. Pennsylvania Inheritance tax is 12% for siblings. 15% to other heirs. Motor Vehicle Lease Tax 3% of the total lease price. All of which would no longer be deductible.

Although the current plan still would allow mortgage interest deductions IT WOULD NO LONGER ALLOW deductions for property taxes. Instead the proposal doubles the standard deduction for a married couple to $24,000.

Doing The Math
Suppose a married couple were earning a combined income of $70,000 a year. Eliminating the 4.42% EIT deduction would raise taxable earnings by $3,094. Assuming the same couple was paying $6,000 a year in property taxes, this would then raise their income by $9,094. Previously their tax rate would have been 13.56% when deductions were allowed. Being the proposed standard deduction would be raised by $12,000 this would lower their gross to $58,000. The IRS rate on that income is 13.17%. In other words only a .39% reduction. Nearly back to where they were but no longer being allowed to deduct those prior expenses I mentioned and others

Baiting The Trap
Think about this. There's no way in hell state and local taxes aren't going up. The Republican plan locks up the $12,000 increased deduction without accounting for future state and local tax increases. In other words in a year or two this couple will be paying more then they would have before. Yeah we'll give ya an extra $12,000 gross deduction but it won't mean diddly sqat in a year or two if one can't take greater deductions as their state and local taxes increase or if someone's income changes one year due some unforeseen windfall the state already hammered the taxpayer with.

This is nothing more then a backdoor tax increase over the next few years

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