Republicans Embrace Tax Hikes Targeting Democratic States
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.