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

[franklinten]

I came out a little ahead compared to 2017

[robby]

Just finished our taxes here in Connecticut. The new tax law appears to have been targeted with surgical precision to screw over people living in blue states like us. We are apparently NOT itemizing for the first time in years, but it’s no less work to prepare the taxes because I still had to enter everything.

The cap on state and local taxes (SALT) is particularly aggravating – before this year, the SALT deduction has been around as long as there has been a federal income tax (i.e. since 1913). Eliminating the deduction means that taxpayers are being taxed on the same income twice. :dubious:

Anyway, even though we lost most of our itemized deductions, the new higher standard deduction and lower rates offset most of this, so we will end up paying a grand total of about $1,500 more than last year. So much for the much-vaunted tax break from the GOP. :rolleyes:

The real problem is that the new withholding rate tables are apparently screwed up, because we didn’t have nearly enough money withheld last year (even after having additional money withheld each pay period). The bottom line is that we’ve got to come up with over $5,000 by the end of the day. Fuck. :mad: And that was after getting a small refund last year with identical W-4s.

Of course, I also need to greatly increase our withholding for 2019.

[Quimby]

I live in NJ so the loss of the SALT deduction completely hosed me as it was designed to. I paid much more than I have in the last decade and actually had to pay vs. get a refund.

BTW people keep saying the Standard Deduction doubled but it didn’t really because they got rid of the personal exemption. Before the GOP screwed us, a person taking the Standard Deduction deducted $10,400, now it is $12,000. Barely a change.

[Shodan]

We took a hit, but I expected that and adjusted my withholding accordingly. So the refund was quite small, and about the same as last year. Which is/was my goal - ideally the refund would be zero. I see no point in loaning the government my money interest-free.

The tax cuts were a bad idea, and I would support rescinding them along with spending cuts in at least a two-to-one ratio. That won’t happen. So either we will have a recession in the next year or two and Trump will be kicked out of office in favor of a Democrat who will increase the deficit, or we won’t have a recession and Trump will be re-elected and the Democrats will take over the Senate and spend more and make the deficit worse, or Trump will be re-elected, the GOP will retain the Senate and the Dems the House, and the GOP and Dems will compromise and spend more and make the deficit worse.

Regards,
Shodan

[Jophiel]

We broke even with last year, maybe a little less. But this was with the extra child tax credit applied to the end result so we must have gotten hit for about $1,000 in other places – good thing we have the kid.

[DCnDC]

We owed last year, because my wife’s work never takes out enough, same thing this year. The numbers were all about the same.

[elfkin477]

I’m single, with no kids, and pay no state income taxes. My income in 2018 was 2% more than 2017. I paid $1500 less in taxes, and will get a refund of $690 this year instead of last year’s $850.

[Balthisar]

@Shodan

The tax cuts were a bad idea, and I would support rescinding them along with spending cuts in at least a two-to-one ratio. That won’t happen.

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.

[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.

[HurricaneDitka]

@Balthisar

… I don’t see why people should get out of their federal obligations just because their local governments tax the heck out of them.

I agree.

[neutro]

The cap on local tax writeoffs of $10k hit me pretty hard this year as I paid a lot of sales taxes. Hell my property tax is more than $10k alone.

[Quimby]

@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.

Without exception every State that got hit by losing the SALT deduction gives much more to the Federal Government than it receives so please come up with something else. The extra Federal money we pay subsidizes your low local taxes not the other way around.

[HurricaneDitka]

@Quimby

Without exception every State that got hit by losing the SALT deduction gives much more to the Federal Government than it receives so please come up with something else. The extra Federal money we pay subsidizes your low local taxes not the other way around.

The Tax Policy Center has a pretty even-handed explanation of the SALT deduction. This paragraph, in particular, stood out to me:

The SALT deduction provides state and local governments with an indirect federal subsidy by decreasing the net cost of nonfederal taxes for those who pay them. For example, if state income taxes increase by $100 for families in the 35 percent federal income tax bracket claiming the SALT deduction, the net cost to them is $65; that is, state taxes go up by $100, but federal taxes go down by $35. This federal tax expenditure encourages state and local governments to levy higher taxes (and, presumably, provide more services) than they otherwise would. It also encourages those entities to use deductible taxes in place of nondeductible taxes (such as selective sales taxes on alcohol, tobacco, and gasoline), fees, and other charges.

[Ruken]

@Quimby

Without exception every State that got hit by losing the SALT deduction gives much more to the Federal Government than it receives so please come up with something else. The extra Federal money we pay subsidizes your low local taxes not the other way around.

States don’t pay taxes. Without the SALT limit, a state that raises its taxes will decrease the amount of taxes its citizens pay to the feds. This does not change the amount of money it costs to run the federal government. So its choice is then to borrow more or raise taxes on everyone. If a state lowers taxes, that similarly doesn’t change the cost to operate the federal government. So please explain how this subsidy works.

[neutro]

The real issue here is that we have so many taxes and so much double-triple dipping that’s it’s ridiculous.

Local property taxes, local sales taxes, state sales taxes, state income taxes, federal income taxes, SS tax, medicare tax, obamacare surcharge, RTA taxes (if I lived one mile closer to town I would pay about $6k more to register my cars).

So the margins start to matter a lot when we are so taxed. Limiting the state taxes to $10k is nuts in this high tax environment.

[HurricaneDitka]

@neutro

The real issue here is that we have so many taxes and so much double-triple dipping that’s it’s ridiculous.

Local property taxes, local sales taxes, state sales taxes, state income taxes, federal income taxes, SS tax, medicare tax, obamacare surcharge, RTA taxes (if I lived one mile closer to town I would pay about $6k more to register my cars).

So the margins start to matter a lot when we are so taxed. Limiting the state taxes to $10k is nuts in this high tax environment.

Perhaps that’s something you should have a word with your city / county / state elected officials about?

[Balthisar]

@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.

Let me clarify… I would modify SALT so that there are no limits at all; everyone pays, even those under the current SALT limits.

[Quimby]

@Ruken

States don’t pay taxes. Without the SALT limit, a state that raises its taxes will decrease the amount of taxes its citizens pay to the feds. This does not change the amount of money it costs to run the federal government. So its choice is then to borrow more or raise taxes on everyone. If a state lowers taxes, that similarly doesn’t change the cost to operate the federal government. So please explain how this subsidy works.

The states that get more from the Federal Government than they pay have more money available to keep their taxes lower than they otherwise would be. Money’s fungible. If the State has more Federal dollars available they need to collect less in taxes so you’re welcome for your nice new road projects.

[HurricaneDitka]

@Quimby

The states that get more from the Federal Government than they pay have more money available to keep their taxes lower than they otherwise would be. Money’s fungible. If the State has more Federal dollars available they need to collect less in taxes so you’re welcome for your nice new road projects.

Worth noting: money from the federal government is not often all that “fungible”.

[neutro]

Also I object to the idea that the money the federal government spends is somehow “need” based. At this point money is spent in a very haphazard way and we are borrowing tons of it. So I agree it’s not fungible.

Anyway nobody agrees with me that taxes are far too high. Most people seem to bang the drum of wanting even higher taxes and more social services. Both parties are tax and spend and agree on most spending.