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Yeah, I mean political rhetoric about taxes is always deceptive and gross. But I don’t know how you’d construct “honest” rhetoric without starting with a massive education campaign about how taxes work. They’re complicated, and people don’t understand them (I’d mostly include myself in that description, although I bet I’m ahead of the curve).
Example: one of the most common arguments I hear in favor of lowering taxes is from people who are just looking at their paycheck and seeing the difference between their gross pay and take-home pay. I’ve had friends come to me with this argument: “They’re talking like 40% of my income, this is ridiculous!” Explaining to that person that none of that 40% is actually, strictly speaking, taxes is already a big lift. My head goes fuzzy trying to understand a lot of the finer points of deductions vs credits and when something has to be deducted over multiple years and all the other arcane stuff, and I think I’m a smart enough guy with a STEM background making an earnest effort to understand all this math.
This is maybe a little tinfoil hat, but the standard deduction feels almost custom-designed to help ensure the vast majority of voters don’t understand how taxes work. It makes sure that while rich people can make all kinds of money learning weird questionably-legal tricks to document their finances differently and pay less in taxes, poor people’s taxes are guaranteed to have zero contingency on how much effort they put in. Even that has complications and loopholes (I think you can still get tax credits even if you take the standard deduction?) but the general idea of “let’s make sure most people don’t get any benefit from understanding how taxes work” seems awfully convenient.
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On May 08 2021 01:55 ChristianS wrote:
Yeah, I mean political rhetoric about taxes is always deceptive and gross. But I don’t know how you’d construct “honest” rhetoric without starting with a massive education campaign about how taxes work. They’re complicated, and people don’t understand them (I’d mostly include myself in that description, although I bet I’m ahead of the curve).
Example: one of the most common arguments I hear in favor of lowering taxes is from people who are just looking at their paycheck and seeing the difference between their gross pay and take-home pay. I’ve had friends come to me with this argument: “They’re talking like 40% of my income, this is ridiculous!” Explaining to that person that none of that 40% is actually, strictly speaking, taxes is already a big lift. My head goes fuzzy trying to understand a lot of the finer points of deductions vs credits and when something has to be deducted over multiple years and all the other arcane stuff, and I think I’m a smart enough guy with a STEM background making an earnest effort to understand all this math.
This is maybe a little tinfoil hat, but the standard deduction feels almost custom-designed to help ensure the vast majority of voters don’t understand how taxes work. It makes sure that while rich people can make all kinds of money learning weird questionably-legal tricks to document their finances differently and pay less in taxes, poor people’s taxes are guaranteed to have zero contingency on how much effort they put in. Even that has complications and loopholes (I think you can still get tax credits even if you take the standard deduction?) but the general idea of “let’s make sure most people don’t get any benefit from understanding how taxes work” seems awfully convenient.
Thinking the standard deduction is some rich person conspiracy is the problem though. It isn't. It is meant to reduce paperwork and make filing taxes easy. The vast majority of Americans should be taking the standard deduction because that is the point of the standard deduction. Reread Kwark's post because he already explained this and is a lot more knowledgeable about taxes in general.
I think the premise that taxes are complicated is just a non-starter in general. Your average American with a W2, no investments, and maybe a 1099-INT from bank interest who is taking a standard deduction should be able to put an hour into doing their taxes and be done. The tax prep industry is selling you a service that makes you believe they're complicated when they aren't.
The most logical shift should be that the government does your taxes and tells you the difference and you either agree or itemize where their math was wrong like the rest of the world. The standard deduction would still exist in that system though.
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Regarding the jobs figure released today:
It seems to me that if you think giving people $300 a week in unemployment benefits is why people aren't going to work and thus your response is to say we should do away with them, as the CBO said, then I have to vehemently disagree. Raising the minimum wage to the point where you'd make more money working is the best solution. We shouldn't be having people suffer in horrible jobs for awful wages and having businesses not exploit the labor of its employees to anywhere near the degree they are. Honestly? I want to see not only a significantly higher minimum wage, but a minimum wage that is pegged to the annual inflation rate so that we don't have people stuck with the same minimum wage for the 12 years it's been at now
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United States43627 Posts
On May 08 2021 01:35 Blitzkrieg0 wrote:Show nested quote +On May 07 2021 23:21 ChristianS wrote:
Here’s one I’d probably prioritize more than either of the other two: make rent payments (at least partially) deductible the way mortgage payments are (at least partially) deductible. I’ve never understood why owners have this advantage over renters, and I think it’d make a huge difference in a lot of people’s lives. Why was interest paid on a mortgage ever deductible? The double taxation talking point doesn't make sense to me in general considering I pay income taxes and then sales tax or property tax. Every dollar you see is taxed a lot more than once. People should be focused on why we have all these special carve outs instead of a simple tax code. Show nested quote +On May 08 2021 00:39 KwarK wrote:
The discussion should be on the restoration of exemptions and the lowering of the standard deduction, not on SALT. The discussion should be around a simple tax code that is easy to understand and enforce instead of carving out exemptions for special interests, but reality is that will never happen. Tax code is written by the wealthy and powerful to maintain and prosper.
I don’t think you understood what I meant by exemptions. There’s a literal thing that existed before TCJA called exemptions.
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On May 08 2021 02:45 Blitzkrieg0 wrote:Show nested quote +On May 08 2021 01:55 ChristianS wrote:
Yeah, I mean political rhetoric about taxes is always deceptive and gross. But I don’t know how you’d construct “honest” rhetoric without starting with a massive education campaign about how taxes work. They’re complicated, and people don’t understand them (I’d mostly include myself in that description, although I bet I’m ahead of the curve).
Example: one of the most common arguments I hear in favor of lowering taxes is from people who are just looking at their paycheck and seeing the difference between their gross pay and take-home pay. I’ve had friends come to me with this argument: “They’re talking like 40% of my income, this is ridiculous!” Explaining to that person that none of that 40% is actually, strictly speaking, taxes is already a big lift. My head goes fuzzy trying to understand a lot of the finer points of deductions vs credits and when something has to be deducted over multiple years and all the other arcane stuff, and I think I’m a smart enough guy with a STEM background making an earnest effort to understand all this math.
This is maybe a little tinfoil hat, but the standard deduction feels almost custom-designed to help ensure the vast majority of voters don’t understand how taxes work. It makes sure that while rich people can make all kinds of money learning weird questionably-legal tricks to document their finances differently and pay less in taxes, poor people’s taxes are guaranteed to have zero contingency on how much effort they put in. Even that has complications and loopholes (I think you can still get tax credits even if you take the standard deduction?) but the general idea of “let’s make sure most people don’t get any benefit from understanding how taxes work” seems awfully convenient. Thinking the standard deduction is some rich person conspiracy is the problem though. It isn't. It is meant to reduce paperwork and make filing taxes easy. The vast majority of Americans should be taking the standard deduction because that is the point of the standard deduction. Reread Kwark's post because he already explained this and is a lot more knowledgeable about taxes in general. I think the premise that taxes are complicated is just a non-starter in general. Your average American with a W2, no investments, and maybe a 1099-INT from bank interest who is taking a standard deduction should be able to put an hour into doing their taxes and be done. The tax prep industry is selling you a service that makes you believe they're complicated when they aren't. The most logical shift should be that the government does your taxes and tells you the difference and you either agree or itemize where their math was wrong like the rest of the world. The standard deduction would still exist in that system though.
Yeah, starting to regret posting about this stuff. I’m not especially informed and I wind up saying or implying things I don’t mean. For instance, I understand the primary purpose of the standard deduction is to simplify doing taxes for the average person whose itemized deductions wouldn’t add up to especially significant sums anyway. That’s a more or less reasonable policy, and I don’t think the standard deduction shouldn’t exist.
The trouble is that we’re working in opposite directions with a lot of our policies here. Stuff like standard deduction and automatic withholding and requiring employers to fill out all your w-2 information for you is designed to abstract away taxes to something the average person doesn’t have to understand or think about, but then we want to create all these tax credits and deductions and clever little incentives to encourage people to do this or that to save money in taxes. But none of it is automatic, you have to file for all of it and you already don’t know how taxes work because we did all this work to make sure you didn’t need to.
One ideal would be perfectly automated taxes. Then you don’t need to care where the taxes come out, you just go about your business and the government takes their share without you even realizing. The other ideal would be keeping everyone well-informed about the details of taxation, either so they can make smart financial choices (and respond better to tax incentives), or so they can make informed voting decisions. The present system looks pretty bad by either standard, and while I can see an argument that neither ideal is fully workable and we have to do something in between, I hardly think we’ve approached a best-of-both-worlds solution here either.
What we do have is a system in which the average person doesn’t understand taxation and isn’t really rewarded for understanding taxation, but if you have the money to hire professionals they can often virtually eliminate your tax burden through creative accounting that may or may not be legal, but is extremely unlikely to ever get you specifically in trouble (worst case, some accountant would probably take the fall). Meanwhile the voting public is vaguely aware rich people are employing nasty tricks to not pay taxes, but very few people are informed enough to understand what those tricks are or how they would be eliminated. So politicians can campaign on eliminating loopholes, and we aren’t equipped to evaluate their proposals and judge whether they’re real solutions or just pandering/placating the masses while protecting monied donors.
I’m rambling and I’ve already said I’m not especially informed, so I’ll cut myself off there.
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On May 08 2021 03:55 KwarK wrote:Show nested quote +On May 08 2021 01:35 Blitzkrieg0 wrote:On May 07 2021 23:21 ChristianS wrote:
Here’s one I’d probably prioritize more than either of the other two: make rent payments (at least partially) deductible the way mortgage payments are (at least partially) deductible. I’ve never understood why owners have this advantage over renters, and I think it’d make a huge difference in a lot of people’s lives. Why was interest paid on a mortgage ever deductible? The double taxation talking point doesn't make sense to me in general considering I pay income taxes and then sales tax or property tax. Every dollar you see is taxed a lot more than once. People should be focused on why we have all these special carve outs instead of a simple tax code. On May 08 2021 00:39 KwarK wrote:
The discussion should be on the restoration of exemptions and the lowering of the standard deduction, not on SALT. The discussion should be around a simple tax code that is easy to understand and enforce instead of carving out exemptions for special interests, but reality is that will never happen. Tax code is written by the wealthy and powerful to maintain and prosper. I don’t think you understood what I meant by exemptions. There’s a literal thing that existed before TCJA called exemptions.
I guess where I get lost is the difference between the personal exemption and the standard deduction. To me the TCJA just merged the personal exemption and standard deduction into the standard deduction for everyone, but my view is definitely skewed by not having children for child tax credits.
If you could provide an example on why it matters to have both I think that would be helpful. At the most basic level, a person who itemizes would get the personal exemption so they're missing out on that, but does this actually matter for most people?
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There will always be clever ways to cheat the system. One obvious example:
A high value employee travels a lot, but raising his salary would increase his taxes so much in the simple % based system it is barely worth doing. Instead, he is flown around on overpriced business class tickets, and can collect free travels or other benefits, as he uses his private bonus card. Alternately, he could even deduct the expenses as "work related" AND get the bonus points.
Computers, cars, housing, schools for kids, kindergarten... The list goes on, even without talking about accountant magic with investments and debt.
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On May 08 2021 00:39 KwarK wrote:
That’s the issue here. Restoring the SALT deduction is giving the Californian the ability to deduct an extra $1k on top of the $12k the IRS is already giving him credit for. So he pays $13k in taxes and, if SALT is restored, gets an extra $1k deducted from his income. It’s negligible. Meanwhile the red states are getting a huge gift, the taxman is giving their taxpayers just as much credit as taxpayers in states with income tax but not asking them to do shit.
The higher deduction also punishes people who regularly make charitable contributions such as religious tithers because it gives the deduction to everyone regardless of whether they actually donated.
The discussion should be on the restoration of exemptions and the lowering of the standard deduction, not on SALT.
What do you mean by "it's negligible"? You mean in the hypothetical example where you decided the California guy just barely qualifies to use SALT over the standard deduction the difference is negligible?
By contrast, 93 percent of those making $1 million or more would get a tax cut, averaging about $48,000.
That's not negligible.
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On May 08 2021 05:31 BlackJack wrote:Show nested quote +On May 08 2021 00:39 KwarK wrote:
That’s the issue here. Restoring the SALT deduction is giving the Californian the ability to deduct an extra $1k on top of the $12k the IRS is already giving him credit for. So he pays $13k in taxes and, if SALT is restored, gets an extra $1k deducted from his income. It’s negligible. Meanwhile the red states are getting a huge gift, the taxman is giving their taxpayers just as much credit as taxpayers in states with income tax but not asking them to do shit.
The higher deduction also punishes people who regularly make charitable contributions such as religious tithers because it gives the deduction to everyone regardless of whether they actually donated.
The discussion should be on the restoration of exemptions and the lowering of the standard deduction, not on SALT. What do you mean by "it's negligible"? You mean in the hypothetical example where you decided the California guy just barely qualifies to use SALT over the standard deduction the difference is negligible? Show nested quote +By contrast, 93 percent of those making $1 million or more would get a tax cut, averaging about $48,000. That's not negligible.
Explain how it's not negligible using other tax figures related to high income taxpayers. Keep in mind that around 1 trillion dollars in taxes from taxable, but uncollected sources is the going figure right now.
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On May 07 2021 22:28 ChristianS wrote:
Buy my point is, if you think wealthy people should pay more you’re wanting more progressive taxation. Adjust the marginal rate accordingly. SALT deduction says income you already paid toward another tax isn’t really income, which, well, it isn’t. In the same way that income that was actually reimbursement for business expenses, or income that went to paying exorbitant healthcare costs shouldn’t be treated as income. You know, a deduction.
Think of it this way: eliminating SALT deduction only taxes rich people more in blue states. Raising the marginal rate taxes them more in *all* states. The latter seems obviously preferable to me.
It's not binary. If you raise the top marginal tax rate it still seems like an odd choice to use some of the money you raise to give a massive tax deduction that primarily goes to the 1% in blue states.
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United States43627 Posts
On May 08 2021 04:26 Blitzkrieg0 wrote:Show nested quote +On May 08 2021 03:55 KwarK wrote:On May 08 2021 01:35 Blitzkrieg0 wrote:On May 07 2021 23:21 ChristianS wrote:
Here’s one I’d probably prioritize more than either of the other two: make rent payments (at least partially) deductible the way mortgage payments are (at least partially) deductible. I’ve never understood why owners have this advantage over renters, and I think it’d make a huge difference in a lot of people’s lives. Why was interest paid on a mortgage ever deductible? The double taxation talking point doesn't make sense to me in general considering I pay income taxes and then sales tax or property tax. Every dollar you see is taxed a lot more than once. People should be focused on why we have all these special carve outs instead of a simple tax code. On May 08 2021 00:39 KwarK wrote:
The discussion should be on the restoration of exemptions and the lowering of the standard deduction, not on SALT. The discussion should be around a simple tax code that is easy to understand and enforce instead of carving out exemptions for special interests, but reality is that will never happen. Tax code is written by the wealthy and powerful to maintain and prosper. I don’t think you understood what I meant by exemptions. There’s a literal thing that existed before TCJA called exemptions. I guess where I get lost is the difference between the personal exemption and the standard deduction. To me the TCJA just merged the personal exemption and standard deduction into the standard deduction for everyone, but my view is definitely skewed by not having children for child tax credits. If you could provide an example on why it matters to have both I think that would be helpful. At the most basic level, a person who itemizes would get the personal exemption so they're missing out on that, but does this actually matter for most people?
Exemptions create a variable size 0% bracket under the tax bands that is linked to family size so you’re not taxed on the basic money you need to eat. In the UK we have a 0% tax bracket as the lowest bracket, in the US they had a 0% tax bracket but instead of it being $0-$10,000 or whatever it was $4,000 per household member which to me makes a lot of sense.
Regular deductions work the opposite way round. They’re not a 0% tax bracket on the bottom, they’re giving you tax relief for socially beneficial spending by reducing your tax liability at your marginal rate.
Functionally to a layman they look similar so I absolutely see why the Republicans were able to sell it as a simplification but it’s not. Exemptions are good policy, it’s good to have a 0% tax bracket and it’s good for that bracket to be linked to household size. Super high standard deductions are bad policy, they act to disincentivize doing the socially good acts they’re trying to give you credit for. Unless you’re giving five figure amounts to charity annually you get zero credit for it.
It’s not even a good simplification either. That’s not a complex part of the tax code and dependent counting still happens, the only line they took out is the “dependent # * $4,000” line which wasn’t tripping anyone up. It also fucks over people in nonstandard households who previously would have gotten credit for having grandma live with them or families with lots of kids. It’s just a bad change.
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On May 08 2021 05:42 KwarK wrote:Show nested quote +On May 08 2021 04:26 Blitzkrieg0 wrote:On May 08 2021 03:55 KwarK wrote:On May 08 2021 01:35 Blitzkrieg0 wrote:On May 07 2021 23:21 ChristianS wrote:
Here’s one I’d probably prioritize more than either of the other two: make rent payments (at least partially) deductible the way mortgage payments are (at least partially) deductible. I’ve never understood why owners have this advantage over renters, and I think it’d make a huge difference in a lot of people’s lives. Why was interest paid on a mortgage ever deductible? The double taxation talking point doesn't make sense to me in general considering I pay income taxes and then sales tax or property tax. Every dollar you see is taxed a lot more than once. People should be focused on why we have all these special carve outs instead of a simple tax code. On May 08 2021 00:39 KwarK wrote:
The discussion should be on the restoration of exemptions and the lowering of the standard deduction, not on SALT. The discussion should be around a simple tax code that is easy to understand and enforce instead of carving out exemptions for special interests, but reality is that will never happen. Tax code is written by the wealthy and powerful to maintain and prosper. I don’t think you understood what I meant by exemptions. There’s a literal thing that existed before TCJA called exemptions. I guess where I get lost is the difference between the personal exemption and the standard deduction. To me the TCJA just merged the personal exemption and standard deduction into the standard deduction for everyone, but my view is definitely skewed by not having children for child tax credits. If you could provide an example on why it matters to have both I think that would be helpful. At the most basic level, a person who itemizes would get the personal exemption so they're missing out on that, but does this actually matter for most people? Exemptions create a variable size 0% bracket under the tax bands that is linked to family size so you’re not taxed on the basic money you need to eat. In the UK we have a 0% tax bracket as the lowest bracket, in the US they had a 0% tax bracket but instead of it being $0-$10,000 or whatever it was $4,000 per household member which to me makes a lot of sense. Regular deductions work the opposite way round. They’re not a 0% tax bracket on the bottom, they’re giving you tax relief for socially beneficial spending by reducing your tax liability at your marginal rate. Functionally to a layman they look similar so I absolutely see why the Republicans were able to sell it as a simplification but it’s not. Exemptions are good policy, it’s good to have a 0% tax bracket and it’s good for that bracket to be linked to household size. Super high standard deductions are bad policy, they act to disincentivize doing the socially good acts they’re trying to give you credit for. Unless you’re giving five figure amounts to charity annually you get zero credit for it. It’s not even a good simplification either. That’s not a complex part of the tax code and dependent counting still happens, the only line they took out is the “dependent # * $4,000” line which wasn’t tripping anyone up. It also fucks over people in nonstandard households who previously would have gotten credit for having grandma live with them or families with lots of kids. It’s just a bad change.
It’s worth mentioning that a number of states tie their state exemptions to the federal amount, and the way IRC 151 was changed technically didn’t remove the exemption, it just set it to 0 until 2025. That has caused all kinds of ruckus in those states.
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United States43627 Posts
On May 08 2021 05:31 BlackJack wrote:Show nested quote +On May 08 2021 00:39 KwarK wrote:
That’s the issue here. Restoring the SALT deduction is giving the Californian the ability to deduct an extra $1k on top of the $12k the IRS is already giving him credit for. So he pays $13k in taxes and, if SALT is restored, gets an extra $1k deducted from his income. It’s negligible. Meanwhile the red states are getting a huge gift, the taxman is giving their taxpayers just as much credit as taxpayers in states with income tax but not asking them to do shit.
The higher deduction also punishes people who regularly make charitable contributions such as religious tithers because it gives the deduction to everyone regardless of whether they actually donated.
The discussion should be on the restoration of exemptions and the lowering of the standard deduction, not on SALT. What do you mean by "it's negligible"? You mean in the hypothetical example where you decided the California guy just barely qualifies to use SALT over the standard deduction the difference is negligible? Show nested quote +By contrast, 93 percent of those making $1 million or more would get a tax cut, averaging about $48,000. That's not negligible.
Most people don’t make a million dollars of W2 income per year so I really don’t know where you’re going with this.
I also think you’re missing the point. The issue is that they gave every tax payer a $12.5k SALT deduction by boosting the standard deduction, that’s where the revenue is lost.
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United States43627 Posts
On May 08 2021 05:35 BlackJack wrote:Show nested quote +On May 07 2021 22:28 ChristianS wrote:
Buy my point is, if you think wealthy people should pay more you’re wanting more progressive taxation. Adjust the marginal rate accordingly. SALT deduction says income you already paid toward another tax isn’t really income, which, well, it isn’t. In the same way that income that was actually reimbursement for business expenses, or income that went to paying exorbitant healthcare costs shouldn’t be treated as income. You know, a deduction.
Think of it this way: eliminating SALT deduction only taxes rich people more in blue states. Raising the marginal rate taxes them more in *all* states. The latter seems obviously preferable to me. It's not binary. If you raise the top marginal tax rate it still seems like an odd choice to use some of the money you raise to give a massive tax deduction that primarily goes to the 1% in blue states.
More Republicans live in California than in any other state so this blue state rhetoric isn’t super relevant when discussing the impact on taxpayers.
Higher standard deductions helped people in states without state income taxes while SALT deductions helps people in states with state income taxes but this isn’t impacting the partisan governments of those states, it’s impacting taxpayers who are basically purple in every state.
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Myself and others have already posted in this thread that reinstating SALT deductions would reduce federal revenues somewhere in the neighborhood of $600 billion over 10 years. If you and farvacola consider this a "negligible" amount then I probably won't be able to convince you otherwise.
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On May 08 2021 05:55 BlackJack wrote:
Myself and others have already posted in this thread that reinstating SALT deductions would reduce federal revenues somewhere in the neighborhood of $600 billion over 10 years. If you and farvacola consider this a "negligible" amount then I probably won't be able to convince you otherwise.
This post is hilarious for reasons I wish you could recognize, but big numbers are difficult to deal with in relation to one another, particularly as a matter of priority, so it’s ok.
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On May 08 2021 05:35 BlackJack wrote:Show nested quote +On May 07 2021 22:28 ChristianS wrote:
Buy my point is, if you think wealthy people should pay more you’re wanting more progressive taxation. Adjust the marginal rate accordingly. SALT deduction says income you already paid toward another tax isn’t really income, which, well, it isn’t. In the same way that income that was actually reimbursement for business expenses, or income that went to paying exorbitant healthcare costs shouldn’t be treated as income. You know, a deduction.
Think of it this way: eliminating SALT deduction only taxes rich people more in blue states. Raising the marginal rate taxes them more in *all* states. The latter seems obviously preferable to me. It's not binary. If you raise the top marginal tax rate it still seems like an odd choice to use some of the money you raise to give a massive tax deduction that primarily goes to the 1% in blue states.
But you’re not actually “giving” them anything. Decide how much you want the wealthy to pay, and set the rate at that. Then don’t tax them for “income” they already paid at the state and local levels, because it’s not really income. If at the end of that you think they’re not paying enough, raise the marginal rate more.
I’m not exactly worried about the blue state rich people, rich people are usually fine whatever changes you make. But the point of deductions is not as a back door to changing effective rates.
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On May 08 2021 05:52 KwarK wrote:Show nested quote +On May 08 2021 05:35 BlackJack wrote:On May 07 2021 22:28 ChristianS wrote:
Buy my point is, if you think wealthy people should pay more you’re wanting more progressive taxation. Adjust the marginal rate accordingly. SALT deduction says income you already paid toward another tax isn’t really income, which, well, it isn’t. In the same way that income that was actually reimbursement for business expenses, or income that went to paying exorbitant healthcare costs shouldn’t be treated as income. You know, a deduction.
Think of it this way: eliminating SALT deduction only taxes rich people more in blue states. Raising the marginal rate taxes them more in *all* states. The latter seems obviously preferable to me. It's not binary. If you raise the top marginal tax rate it still seems like an odd choice to use some of the money you raise to give a massive tax deduction that primarily goes to the 1% in blue states. More Republicans live in California than in any other state so this blue state rhetoric isn’t super relevant when discussing the impact on taxpayers. Higher standard deductions helped people in states without state income taxes while SALT deductions helps people in states with state income taxes but this isn’t impacting the partisan governments of those states, it’s impacting taxpayers who are basically purple in every state.
Yes, everything you said is true. What exactly is your proposal though?
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On May 08 2021 06:03 ChristianS wrote:Show nested quote +On May 08 2021 05:35 BlackJack wrote:On May 07 2021 22:28 ChristianS wrote:
Buy my point is, if you think wealthy people should pay more you’re wanting more progressive taxation. Adjust the marginal rate accordingly. SALT deduction says income you already paid toward another tax isn’t really income, which, well, it isn’t. In the same way that income that was actually reimbursement for business expenses, or income that went to paying exorbitant healthcare costs shouldn’t be treated as income. You know, a deduction.
Think of it this way: eliminating SALT deduction only taxes rich people more in blue states. Raising the marginal rate taxes them more in *all* states. The latter seems obviously preferable to me. It's not binary. If you raise the top marginal tax rate it still seems like an odd choice to use some of the money you raise to give a massive tax deduction that primarily goes to the 1% in blue states. But you’re not actually “giving” them anything. Decide how much you want the wealthy to pay, and set the rate at that. Then don’t tax them for “income” they already paid at the state and local levels, because it’s not really income. If at the end of that you think they’re not paying enough, raise the marginal rate more. I’m not exactly worried about the blue state rich people, rich people are usually fine whatever changes you make. But the point of deductions is not as a back door to changing effective rates.
Should the inverse be true as well? That we should be able to deduct the full amount of federal taxes paid from our state tax bill since those taxes aren't really "income" either?
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On May 08 2021 06:38 BlackJack wrote:Show nested quote +On May 08 2021 06:03 ChristianS wrote:On May 08 2021 05:35 BlackJack wrote:On May 07 2021 22:28 ChristianS wrote:
Buy my point is, if you think wealthy people should pay more you’re wanting more progressive taxation. Adjust the marginal rate accordingly. SALT deduction says income you already paid toward another tax isn’t really income, which, well, it isn’t. In the same way that income that was actually reimbursement for business expenses, or income that went to paying exorbitant healthcare costs shouldn’t be treated as income. You know, a deduction.
Think of it this way: eliminating SALT deduction only taxes rich people more in blue states. Raising the marginal rate taxes them more in *all* states. The latter seems obviously preferable to me. It's not binary. If you raise the top marginal tax rate it still seems like an odd choice to use some of the money you raise to give a massive tax deduction that primarily goes to the 1% in blue states. But you’re not actually “giving” them anything. Decide how much you want the wealthy to pay, and set the rate at that. Then don’t tax them for “income” they already paid at the state and local levels, because it’s not really income. If at the end of that you think they’re not paying enough, raise the marginal rate more. I’m not exactly worried about the blue state rich people, rich people are usually fine whatever changes you make. But the point of deductions is not as a back door to changing effective rates. Should the inverse be true as well? That we should be able to deduct the full amount of federal taxes paid from our state tax bill since those taxes aren't really "income" either?
That’s up to the states themselves (and their citizens).
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EPT
