How did the new US tax law end up affecting your taxes?

[robby]

@Balthisar

Agreed, although I’d also keep SALT. I don’t see why people should get out of their federal obligations just because their local governments tax the heck out of them.

As I wrote here:

@robby

I’m probably a little oversensitive about this considering the fact that this change is screwing over people like me, but eliminating this deduction was in no way “closing a tax loophole.” Eliminating or reducing the deduction means that taxpayers are being taxed on the same income twice.

Until 2018, the SALT deduction has been around as long as there has been a federal income tax (i.e. since 1913).

In fact, there was a time when federal tax rates were so high (a top rate as high as 94% in WWII, and still as high as 70% up through the 1970s), that you could easily have had a situation were the combined tax rate of federal, state, and local taxes could exceed 100%, which makes absolutely no sense. In this situation, it would actually penalize you to make over a certain income.

Which is why is makes sense to be able to deduct the money paid for state and local taxes. You never see the money, and there is nothing you can do to eliminate it (unlike, for example, the deduction for mortgage interest). Why does it make sense to include this in your federal income (or conversely, why shouldn’t you be able to deduct this from your income for federal taxes, like you’ve been able to do for the last 100+ years)?

I’ll add another point: the states that have the highest state and local taxes are generally the same ones that pay more to the federal government than they get back. See here: Which States Are Givers and Which Are Takers?

So residents in states like New York, New Jersey, California, and Connecticut, with high state and local taxes are harmed most by the cap on the SALT deduction and are now paying more in federal income taxes, which makes the disparity between the “givers and the takers” even greater. :rolleyes:

As the Atlantic article states:

@The Atlantic

It’s not just that some states are getting way more in return for their federal tax dollars, but the disproportionate amount of federal aid that some states receive allows them to keep their own taxes artificially low.