Several Democrats fighting for tax break for the rich

[Loren Pechtel]

I don't know much about the issue. But Biden has pretty consistently stated that he is for helping people making $400,000 or less. It' not hard to imagine a person with half this salary with a million dollar house in this economy.

Yup. Last I was paying attention to house-buying advice it was a house that costs 3x your income. That would mean $1.2 million at the top of his range.

And that's quite reasonable in places like San Francisco.

 

[Loren Pechtel]

The problem I have with the SALT cap is that it is a targeted punishment to blue states. That isn't equal protection. We know stuff is cheaper in the South than the NE and West Coast. People of equivalent wealth in the South benefit fully, people in the NE and West Coast are being punished. Are they well off, most of them probably, but there are likely a number that aren't as much. Granted, yes, they get the first large chunk cut off and they are only not deducting a fraction of the cost, but that isn't equal protection of the law and it was very much intentional.

Exactly. In red areas the SALT cap makes a lot of sense. It doesn't make much sense in some very blue areas. Blue economies work better than red economies!

 

[Loren Pechtel]

I generally agree, but I also think that the SALT deductions were to generous in general. Mortgage interest deductions probably shouldn't be brought back, just like they got rid of other interest deductions in the 1980's. Before the TCJA, people were even allowed to deduct mortgage interest on second homes.

On the state income and property taxes, it always seems a bit weird to be paying federal taxes on income that already went to pay state taxes. I'd be more in favor of repealing the whole JTCA, and then starting over with real changes. One of the things the JTCA got rid of with lower rates, was deductions for R&D. That was stupid then, and the Dems changes seems to be keeping it the same, but with higher tax rates for corporations. If Team Biden really wants to compete with China and other parts of Asia, then we are going to have to engage the R&D game more, rather then blaming foreigners for our problems.

Yeah. I would be fine with phasing out the mortgage interest deduction entirely, but make state and local taxes fully deductible above the line.

In the old days you could pretty much guess what the tax code would say about a situation by looking at what taxes dollars you actually get exactly once. (Note that interest was considered dollars you didn't benefit from.) Congress has been chipping away at this for ages. His Flatulence's SALT garbage was simply a very big chip.

As far as I'm concerned interest is money you benefit from--you get to have something sooner than you otherwise would. Otherwise, though, most of the tax changes of the last 40 years should be undone. Go back to the original priniciple of taxing dollars exactly once. The problem is that would require raising the tax rate to keep the total tax take the same. In general the chips don't hit that many people and so they were a boil-the-frog approach to tax increases. (Example: A lot of things that didn't used to show up as income in the first place were then changed to income but deductible--but by now most people aren't in a position to itemize in the first place and even if they are the government gets the FICA taxes anyway--and note that for most people FICA is higher than income tax.)

 

[J842P]

I don’t know where you live but in the SF Bay Area million dollar homes are not monstrosities.

True, the median home price is 1.5 million. But I know people who own homes like these. Usually, it's two people with jobs earning over 150k each (closer to 200k each, really). I think they'll be fine.

For the same reason the house prices are high, those salaries aren’t as sunny as they look just by the number.

I know mostly middle class families of four with decent size (1200-1600 sq ft) homes above the $1M mark. And it’s not like these are even in the best school districts in the area.

Yes, these aren’t poor people but having your taxes go up by thousands of dollars after the tax changes can be stressing on a family, especially those with children who need daycare (another very expensive service in the Bay Area).

Nah. If a few thousand dollars tax increase would be "stressful" then you really are doing something wrong when your household income is something like 400k. Sell some of your stock and you're good. Or spend slightly less eating out. And these people almost certainly have a ton of money in securities. My friend made over 100k just from the stock bonus when she switched jobs, this is on top of her ~190k salary.

 

[Rhea]

According to the linked article, the average SALT deduction in Rockland and Westchester counties in NY (the places most likely to have the highest average) Is $36K and $22K, respectively.

If a person has a large enough home and a high enough income to pay that much in state and local taxes and is within $36,000 of being “hurt,” I’ll send them financial planning advice for free.

It would be worth what you're charging. You don't understand how expensive the cost of living is in some of those areas.

I do understand. I’m looking at the averages of $22K to $36K for the SALT in two of the wealthiest counties in NY. I clearly quoted it. I grew up in one of those neighborhoods (Boston suburb), and worked in the mortgage dept of a bank. I understand quite well, and my data have shown that.

If you’re the deducctions-worth of $22K from being “hurt” ( which is about 1/3 of the amount over $10K - or about $4K) when you earn enough to pay $22K in taxes, then you need financial advice.


People need to live within their means and if you were relying on government help of $4K to $8K to deal with your $22K - $36K state and local tax burden, then you need advice.

That’s the whole point. The actual value of the SALT cap is the taxation on the amount over $10K. So if the average SALT is $36K, you only lost the deduction on the amount over $10K, which is $26K, and tthe tax deduction will result in about 30% (at worst) additional tax burden, or $8K.


So I will say again, if you are earning enough to pay $36K in SALT and $8K is going to “hurt” you, then you need financial advice.


Also, I agree it was meant to hurt blue states and that’s bad the way they deliberately did that. But the deduction itself was bad to begin with. It was a way for Blue states to make the Federal govt pay for stuff in the state. Which again is not horribe, since blue states put in more than they get out. But it needs to be above-board.

 

[Rhea]

In case the numbers I’m throwing around were too disjointed, here’s the calculation:

Low end of the high counties was $22K in SALT
That was a deduction that we sued to be able to take, reducing our INCOME and thereby reducing our taxes.
So we’d reduce our tax burden by about $7K (30% on the $22K)
Now we can only deduct $10K. So the impact on tax burden is 30% of that, or $3K. Meaning we have to pay about $4K more in taxes than we used to.

BEAR IN MIND that the 30% I quote as a tax rate is NEVER what we pay. For those who itemize, it’s more like 15%, really. So these numbers are double, just to be extremely generously conservative.


And my point is, if losing that tax break of $4K (or up to 8K for the highest county) on an overall state tax burden of $22K is going to “hurt you,” then you are not living within your means, and the problem is not the SALT cap.

There are a lot of inequalities to fight over. This is not one of them, in my humble opinion.

 

[Shadowy Man]

For the same reason the house prices are high, those salaries aren’t as sunny as they look just by the number.

I know mostly middle class families of four with decent size (1200-1600 sq ft) homes above the $1M mark. And it’s not like these are even in the best school districts in the area.

Yes, these aren’t poor people but having your taxes go up by thousands of dollars after the tax changes can be stressing on a family, especially those with children who need daycare (another very expensive service in the Bay Area).

Nah. If a few thousand dollars tax increase would be "stressful" then you really are doing something wrong when your household income is something like 400k. Sell some of your stock and you're good. Or spend slightly less eating out. And these people almost certainly have a ton of money in securities. My friend made over 100k just from the stock bonus when she switched jobs, this is on top of her ~190k salary.

It didn’t only hit people making $400k in these areas though. And these salaries don’t buy as much as they might look like in the expensive areas. Employers offer higher salaries because cost of living is high. The same jobs in lower cost of living areas pay less. You need to normalize your view of middle class by the economies in play.

What exactly do you think “middle class” means? I’m just saying that they always say they don’t want to raise taxes on the middle class but those are the people hit by these taxes in these higher cost of living areas.

 

[Rhea]

It didn’t only hit people making $400k in these areas though.

I get that. It hit me.

And these salaries don’t buy as much as they might look like in the expensive areas. Employers offer higher salaries because cost of living is high. The same jobs in lower cost of living areas pay less. You need to normalize your view of middle class by the economies in play.

What exactly do you think “middle class” means? I’m just saying that they always say they don’t want to raise taxes on the middle class but those are the people hit by these taxes in these higher cost of living areas.

Is “middle class” earning $400K/year? I tend to not include them in “middle class”
I would put middle class in the median, not the average. And those in the top 5% of income I do not consider “middle class.” Do you?

“Those salaries don’t buy as much as they might look like in those areas,” but it should still be possble for those people to live within their means and not need to be subsidized, nor should it “hurt” them if their tax burden goes up by 1-2%.

 

[J842P]

For the same reason the house prices are high, those salaries aren’t as sunny as they look just by the number.

I know mostly middle class families of four with decent size (1200-1600 sq ft) homes above the $1M mark. And it’s not like these are even in the best school districts in the area.

Yes, these aren’t poor people but having your taxes go up by thousands of dollars after the tax changes can be stressing on a family, especially those with children who need daycare (another very expensive service in the Bay Area).

Nah. If a few thousand dollars tax increase would be "stressful" then you really are doing something wrong when your household income is something like 400k. Sell some of your stock and you're good. Or spend slightly less eating out. And these people almost certainly have a ton of money in securities. My friend made over 100k just from the stock bonus when she switched jobs, this is on top of her ~190k salary.

It didn’t only hit people making $400k in these areas though. And these salaries don’t buy as much as they might look like in the expensive areas. Employers offer higher salaries because cost of living is high. The same jobs in lower cost of living areas pay less. You need to normalize your view of middle class by the economies in play.

What exactly do you think “middle class” means? I’m just saying that they always say they don’t want to raise taxes on the middle class but those are the people hit by these taxes in these higher cost of living areas.

Dude, I'm a software engineer and I live in San Francisco. I know exactly what these salaries buy at that cost of living. And I'm telling you, if you can afford a home in the Bay Area you can definitely afford to pay 5k more in taxes. People like this easily spend 1000 dollars a month just on eating out.

 

[Shadowy Man]

It didn’t only hit people making $400k in these areas though. And these salaries don’t buy as much as they might look like in the expensive areas. Employers offer higher salaries because cost of living is high. The same jobs in lower cost of living areas pay less. You need to normalize your view of middle class by the economies in play.

What exactly do you think “middle class” means? I’m just saying that they always say they don’t want to raise taxes on the middle class but those are the people hit by these taxes in these higher cost of living areas.

Dude, I'm a software engineer and I live in San Francisco. I know exactly what these salaries buy at that cost of living. And I'm telling you, if you can afford a home in the Bay Area you can definitely afford to pay 5k more in taxes. People like this easily spend 1000 dollars a month just on eating out.

I can’t speak to your financial situation but people making $250k a year got hit by the taxes not just $400k. And that may still sound like a lot
But for a family of four with two kids in daycare(which can be $20k per year per kid) mortgage on a $1M house, car payments, gas at $4/gal, etc etc it’s not as rosy as you make it sound. I’m not saying these people are poor. They’re “middle class” yes even at these salaries. They may not just have $5k of fooling around money they’re easily willing to part with.

I’m likely not going to convince anywhere here so I’ll call it quits.

 

[Harry Bosch]

It didn’t only hit people making $400k in these areas though. And these salaries don’t buy as much as they might look like in the expensive areas. Employers offer higher salaries because cost of living is high. The same jobs in lower cost of living areas pay less. You need to normalize your view of middle class by the economies in play.

What exactly do you think “middle class” means? I’m just saying that they always say they don’t want to raise taxes on the middle class but those are the people hit by these taxes in these higher cost of living areas.

Dude, I'm a software engineer and I live in San Francisco. I know exactly what these salaries buy at that cost of living. And I'm telling you, if you can afford a home in the Bay Area you can definitely afford to pay 5k more in taxes. People like this easily spend 1000 dollars a month just on eating out.

I can’t speak to your financial situation but people making $250k a year got hit by the taxes not just $400k. And that may still sound like a lot
But for a family of four with two kids in daycare(which can be $20k per year per kid) mortgage on a $1M house, car payments, gas at $4/gal, etc etc it’s not as rosy as you make it sound. I’m not saying these people are poor. They’re “middle class” yes even at these salaries. They may not just have $5k of fooling around money they’re easily willing to part with.

I’m likely not going to convince anywhere here so I’ll call it quits.

Of course you're right. Salaries are relative to the area where you live. You can live like a king with $100K in salary in Madras Oregon. Same salary in San Francisco: poor house.

 

[laughing dog]

It didn’t only hit people making $400k in these areas though. And these salaries don’t buy as much as they might look like in the expensive areas. Employers offer higher salaries because cost of living is high. The same jobs in lower cost of living areas pay less. You need to normalize your view of middle class by the economies in play.

What exactly do you think “middle class” means? I’m just saying that they always say they don’t want to raise taxes on the middle class but those are the people hit by these taxes in these higher cost of living areas.

Dude, I'm a software engineer and I live in San Francisco. I know exactly what these salaries buy at that cost of living. And I'm telling you, if you can afford a home in the Bay Area you can definitely afford to pay 5k more in taxes. People like this easily spend 1000 dollars a month just on eating out.

I can’t speak to your financial situation but people making $250k a year got hit by the taxes not just $400k. And that may still sound like a lot
But for a family of four with two kids in daycare(which can be $20k per year per kid) mortgage on a $1M house, car payments, gas at $4/gal, etc etc it’s not as rosy as you make it sound. I’m not saying these people are poor. They’re “middle class” yes even at these salaries. They may not just have $5k of fooling around money they’re easily willing to part with.

I’m likely not going to convince anywhere here so I’ll call it quits.

The SALT restriction was also enacted with a charitable contributions. My household income was significantly less than $250,000, but my tax liability went up because the combination of mortgage interest deductions, property taxes, state income taxes and my charitable contributions exceeded $25,000. My taxes did not go up much, but that is not really the point.

There were households that may long-range plans (i.e. home purchase) within the last 5 years who factored in the effect of the tax laws at that time on their finances. Any household whose tax liability went up from that partisan-driven tax change got a tax increase solely from partisan animus based on geography. Regardless of the ability to pay the tax increase, that is simply wrong. Income tax law should be about raising revenue in the most efficient and socially desirable manner, not punishing people for their presumed ideology.

 

[RVonse]

The problem I have with the SALT cap is that it is a targeted punishment to blue states. That isn't equal protection. We know stuff is cheaper in the South than the NE and West Coast. People of equivalent wealth in the South benefit fully, people in the NE and West Coast are being punished. Are they well off, most of them probably, but there are likely a number that aren't as much. Granted, yes, they get the first large chunk cut off and they are only not deducting a fraction of the cost, but that isn't equal protection of the law and it was very much intentional.

Exactly. In red areas the SALT cap makes a lot of sense. It doesn't make much sense in some very blue areas. Blue economies work better than red economies!

But isn't that exactly why the government taxes the middle class in the first place? The government always goes where it can tap the most money for the least amount of effort. Why would the government want to squeeze turn ups out of the red states when there is all manner of fruit hanging from the blue states? So that is why the upper middle class will always pay the most. There are a lot of them out there and they have the means.

And for those in the blue economies that think this kind of taxation is so unfair, all you need to do is follow the footsteps of Elon Musk. It is perfectly legal to move and no passport required going from California to Texas.

 

[RVonse]

Income tax law should be about raising revenue in the most efficient and socially desirable manner, not punishing people for their presumed ideology.

They are. There is a lot of easy money to reap from the blue states and it has nothing to do with politics. It has to do with reaping the most for the least amount of effort.

 

[laughing dog]

Income tax law should be about raising revenue in the most efficient and socially desirable manner, not punishing people for their presumed ideology.

They are. There is a lot of easy money to reap from the blue states and it has nothing to do with politics. It has to do with reaping the most for the least amount of effort.

The last tax bill was about punishing blue states - the deductions that were used most by households in the blue states were targeted. There are more open and more efficient methods to raise revenue than by arbitrarily limiting deductions based on geographical pain.

 

[RVonse]

Income tax law should be about raising revenue in the most efficient and socially desirable manner, not punishing people for their presumed ideology.

They are. There is a lot of easy money to reap from the blue states and it has nothing to do with politics. It has to do with reaping the most for the least amount of effort.

The last tax bill was about punishing blue states - the deductions that were used most by households in the blue states were targeted. There are more open and more efficient methods to raise revenue than by arbitrarily limiting deductions based on geographical pain.

From what I have seen so far of this thread, the last tax bill was a very sound tax plan targeting the very people most likely to afford to pay the tax. Yes, that does happen to be the blue states. But their political ideology has nothing to do with the fact that they indeed are the richest people who not only should pay more tax but most importantly are able to pay more tax. The most efficient way to collect money is to go after the most people who have the money.

And it was not a punishment for anyone. No more of a punishment than our progressive tax rate schedules. You are always welcome to earn less money and/or move to another low cost state if you think the tax is too much. That is what freedom and liberty is all about.

 

[laughing dog]

The last tax bill was about punishing blue states - the deductions that were used most by households in the blue states were targeted. There are more open and more efficient methods to raise revenue than by arbitrarily limiting deductions based on geographical pain.

From what I have seen so far of this thread, the last tax bill was a very sound tax plan targeting the very people most likely to afford to pay the tax. Yes, that does happen to be the blue states. But their political ideology has nothing to do with the fact that they indeed are the richest people who not only should pay more tax but most importantly are able to pay more tax. The most efficient way to collect money is to go after the most people who have the money.

Sorry, but if you actually paid attention to the debates, it was about punishing the residents of blue states. BTW, there are rich people in red states as well. Some of those red states do not tax income and are first at the federal trough to suck up revenue so that they are net gainers in the revenue -tax contributions.

Take two households with the same income and same expenditures on private goods and charitable contributions. It is possible that the household in the red state saw their tax liability stay the same or fall while the household in the blue state saw it stay the same or rise. One's residence should not affect one's federal tax liability. The change in federal tax law should treat households that are identical in every relevant respect but geography the same.

 

[RVonse]

I can’t speak to your financial situation but people making $250k a year got hit by the taxes not just $400k. And that may still sound like a lot
But for a family of four with two kids in daycare(which can be $20k per year per kid) mortgage on a $1M house, car payments, gas at $4/gal, etc etc it’s not as rosy as you make it sound. I’m not saying these people are poor. They’re “middle class” yes even at these salaries. They may not just have $5k of fooling around money they’re easily willing to part with.

I’m likely not going to convince anywhere here so I’ll call it quits.

Of course you're right. Salaries are relative to the area where you live. You can live like a king with $100K in salary in Madras Oregon. Same salary in San Francisco: poor house.

It makes no sense to me whatsoever why anyone would be so foolish as to live in San Francisco. But I'm glad they do though. Because now the federal government has an easy source of money to tap into. Hopefully so the poorer people in this nation can pay less tax.

 

[Shadowy Man]

The last tax bill was about punishing blue states - the deductions that were used most by households in the blue states were targeted. There are more open and more efficient methods to raise revenue than by arbitrarily limiting deductions based on geographical pain.

From what I have seen so far of this thread, the last tax bill was a very sound tax plan targeting the very people most likely to afford to pay the tax. Yes, that does happen to be the blue states. But their political ideology has nothing to do with the fact that they indeed are the richest people who not only should pay more tax but most importantly are able to pay more tax. The most efficient way to collect money is to go after the most people who have the money.

And it was not a punishment for anyone. No more of a punishment than our progressive tax rate schedules. You are always welcome to earn less money and/or move to another low cost state if you think the tax is too much. That is what freedom and liberty is all about.

Having a high cash flow in a high cost of living area doesn’t mean one is rich. That’s the point. The incomes, which are being taxed, are high but the expenses are also very high.

 

[RVonse]

The last tax bill was about punishing blue states - the deductions that were used most by households in the blue states were targeted. There are more open and more efficient methods to raise revenue than by arbitrarily limiting deductions based on geographical pain.

From what I have seen so far of this thread, the last tax bill was a very sound tax plan targeting the very people most likely to afford to pay the tax. Yes, that does happen to be the blue states. But their political ideology has nothing to do with the fact that they indeed are the richest people who not only should pay more tax but most importantly are able to pay more tax. The most efficient way to collect money is to go after the most people who have the money.

Sorry, but if you actually paid attention to the debates, it was about punishing the residents of blue states. BTW, there are rich people in red states as well. Some of those red states do not tax income and are first at the federal trough to suck up revenue so that they are net gainers in the revenue -tax contributions.

But you can always move if you really think they have the better deal. There is no law I am aware of that prevents you from moving to another state if you think their tax situation is better.