Democratic States Oppose Trump Tax Reform Which Makes Wealthy Pay Fair(er) Share

[bobhikes]

You still get to deduct the full amount of your property taxes.
And now you'll get to pay a lower income tax rate.

I acknowledge it didn't hurt me, however, like I said a few friends and family with slightly bigger property are being effected. Just so you know on average my property tax goes up 250 dollars per year so 5 years and it will effect me. In the last 10 years my salary has gone up 1.5 per hour or 3120 dollars total and I don't expect it to accelerate so I still won't make more than 100,000 per year.

 

[Revoltingest]

I acknowledge it didn't hurt me, however, like I said a few friends and family with slightly bigger property are being effected. Just so you know on average my property tax goes up 250 dollars per year so 5 years and it will effect me. In the last 10 years my salary has gone up 1.5 per hour or 3120 dollars total and I don't expect it to accelerate so I still won't make more than 100,000 per year.

Let's say their property taxes are $11K/yr.
$10K of it is still deductable.

But consider people too poor to own such a house.
They rent an apartment. Part of the rent covers
property taxes, but they can't deduct any of it.
This is fairer.

 

[jonathan180iq]

Like the title?
It's click bait, for sure.
But it's also accurate in their language.
They're taking the tax cuts, but they don't want to lose
deductability of their home property taxes over $10,000/year.
They say they're being singled out, but it applies to everyone.

Ref....
https://www.youtube.com/user/theyearinreview?feature=etp-gs-rew-rx1
New York, New Jersey, Connecticut and Maryland sued the federal government over the Republican-led tax overhaul Tuesday, alleging the new law championed by President Donald Trump unfairly singles out high-tax blue states.

The lawsuit, filed in the Southern District of New York, was dismissed as a long-shot political stunt by supporters of the new tax code, but New York Gov. Andrew Cuomo said it is a practical act of self-defense against an adversarial federal government. The challenge alleges that lawmakers crafted the new tax code to target left-leaning states and interferes with their constitutionally granted taxing authority.

"This is their political attempt to hurt Democratic states," said Cuomo, a Democrat who is considered a possible White House contender in 2020. "It's totally repugnant."

The tax law passed by Congressional Republicans and signed into law last year by Trump caps a deduction for state and local taxes at $10,000. The deduction was especially popular in high-tax, Democratic states, where many homeowners will see big increases in their federal tax bill. New York estimates that taxpayers will pay $14 billion more in 2018.

The suit seeks to block the cap on deductions for state and local taxes, known as SALT. It names the Internal Revenue Service and the U.S. Treasury Department as defendants. Cuomo first announced plans to sue seven months ago and was quickly joined by leaders from the other states.

It may technically apply to everyone, but only a small percentage of any population is going to be in a financial situation where they can deduct or exempt $10,000 from their property tax bill (and it be beneficial.) *EDIT

That being said, you're absolutely right that the people protesting it are the same people who were benefiting from it's previous nonexistence. It was a win-win move on the Republican's part, giving those Democrats no possible response that would make them look good.

At the State and County levels, this is what I do for a living. And last year, in an effort to correct value discrepancies that have existed in our urban areas for decades (severely undervaluing high dollar properties) the people who were benefiting the most from that imbalance launched a political campaign (in the name of fairness, of all things) to attempt to discredit every facet of what we were doing. Our work was sound, both mathematically, legally, and ethically (if that matters). And what I found most fascinating was that the arguments didn't divert along party lines. Democrats and Republicans alike seemed to only care about their wallets, which I suppose is a facet of human nature that I shouldn't find surprising at all.

 

[bobhikes]

Let's say their property taxes are $11K/yr.
$10K of it is still deductable.

But consider people too poor to own such a house.
They rent an apartment. Part of the rent covers
property taxes, but they can't deduct any of it.
This is fairer.

My point is that I am struggling and not rich. I hate my house (The money pit). I need 5,000 dollars to fix my garage, I need 1,300 dollars to take down a dead tree(hoping for a hurricane to take it down for free and do no damage), I need 1300 to fix a leak in my 1st floor shower(we don't use it), I need 1,800 before winter to fix my heating pipes and all this needs to be done before I can sell the house. If I am hoping to leave New Jersey for fairer state I have to give them 4% of my home sales. House prices in New Jersey have not gone up because more people and job's are leaving the state then entering it. So if the Federal Government is going to take more taxes from the state then they can start giving us more federal aid.

 

[jonathan180iq]

Any tax structure that hurts those in need is simply unethical by almost any basic moral standards, as are the cuts to Medicaid, the ACA, and CHIP. Nor is Trump's tax cuts "conservative" since it significantly ramps-up the deficit.

It is a win-fall for the wealthy-- "pure" & simple.

https://www.gpo.gov/fdsys/pkg/BUDGET-2019-MSR/pdf/BUDGET-2019-MSR.pdf

Deficit = $1.085 Trillion

 

[Revoltingest]

That being said, you're absolutely right that the people protesting it are the same people who were benefiting from it's previous nonexistence. It was a win-win move on the Republican's part, giving those Democrats no possible response that would make them look good.

To me it's just good policy.

 

[Revoltingest]

My point is that I am struggling and not rich. I hate my house (The money pit). I need 5,000 dollars to fix my garage, I need 1,300 dollars to take down a dead tree(hoping for a hurricane to take it down for free and do no damage), I need 1300 to fix a leak in my 1st floor shower(we don't use it), I need 1,800 before winter to fix my heating pipes and all this needs to be done before I can sell the house. If I am hoping to leave New Jersey for fairer state I have to give them 4% of my home sales. House prices in New Jersey have not gone up because more people and job's are leaving the state then entering it. So if the Federal Government is going to take more taxes from the state then they can start giving us more federal aid.

If you move, I recommend rural Michiganistan.
Taxes in cities are too high.

 

[jonathan180iq]

To me it's just good policy.

I don't disagree.
I think benefiting from loopholes and exploiting unintended parts of the tax code for personal gain is gross.

 

[Revoltingest]

I don't disagree.
I think benefiting from loopholes and exploiting unintended parts of the tax code for personal gain is gross.

I wouldn't say "gross".
It's just that high tax rates require offsetting personal deductions.
Tis just best to lower the rates & eliminate the deductions.
It's simpler, & it doesn't distort the housing market.

 

[jonathan180iq]

I wouldn't say "gross".
It's just that high tax rates require offsetting personal deductions.
Tis just best to lower the rates & eliminate the deductions.
It's simpler, & it doesn't distort the housing market.

Man, if everyone would just play by the basic rules things would work out great...

 

[Revoltingest]

Man, if everyone would just play by the basic rules things would work out great...

When the rules themselves create dysfunctional incentives, we need new rules.

 

[suncowiam]

Because to not have one would be even worse.

We should have some faith in it.

I get your point of the hypocrisy but like I mentioned earlier, politicians from all sides of the fence will eat their own words. Trump is no better not many other Republican.

The core issue really is about the legality of what this law suit is addressing.

 

[Revoltingest]

We should have some faith in it.

I've no faith in the 'justice' system.
I take a probabilistic, ie, do what it takes to win, but don't expect it.
As my lawyer says....
You can have an airtight case with all the evidence & arguments on your side
You're guaranteed to win.
And 80% of the time, you will.

I get your point of the hypocrisy but like I mentioned earlier, politicians from all sides of the fence will eat their own words. Trump is no better not many other Republican.

The core issue really is about the legality of what this law suit is addressing.

They want to claim that Congress & Trump are sticking it to
states which have wealthy mansion owners with high property
taxes, which makes them predominantly Democratic?

There are high property tax rate states which voted in Trump:
PA, TX

 

[suncowiam]

I've no faith in the 'justice' system.
I take a probabilistic, ie, do what it takes to win, but don't expect it.
As my lawyer says....
You can have an airtight case with all the evidence & arguments on your side
You're guaranteed to win.
And 80% of the time, you will.

They want to claim that Congress & Trump are sticking it to
states which have wealthy mansion owners with high property
taxes, which makes them predominantly Democratic?

There are high property tax rate states which voted in Trump:
PA, TX

Mansions? Is that your perception of all this?

Well... I suggest your premise is already at fault. Many here that falls into that category do no own mansions.

If you support capitalism, which I think you do then you support the free market. The more we discuss, the more I see your argument is political than it is financial or economical.

 

[Revoltingest]

Mansions? Is that your perception of all this?

Of course, in NYC a $1,000,000 property would be a miserable little apartment.
But mirthful use of mansion aside, it makes sense not to subsidize expensive
home ownership. The $10,000/yr limitation means that the tax bite will really
affect the wealthy. And it offsets the cut in the income tax rates.
You can't have both without worsening the deficit even more.

Well... I suggest your premise is already at fault. Many here that falls into that category do no own mansions.

I observe that people genearally buy bigger homes than they need.
This new tax policy incentivizes earning more, & over-buying less.
It's good policy, & fairer...especially to renters, who get nuthin.

If you support capitalism, which I think you do then you support the free market. The more we discuss, the more I see your argument is political than it is financial or economical.

My argument (if you read it) is both.
Political:
- Fairness to renters is political.
- Avoiding dangerous housing bubbles due to subsidized borrowing & property tax payment inflating prices.
Economic:
- Income tax rate cuts without offsetting budget cuts would be irresponsible.
Imposing deductability limits mitigates the federal budget problem.
- Curbing subsidies of home ownership reduces real estate price distortion.

This isn't really about capitalism.
It's about the fact that we must pay taxes, & the
question is how best to structure our obligation.

 

[suncowiam]

Of course, in NYC a $1,000,000 property would be a miserable little apartment.
But mirthful use of mansion aside, it makes sense not to subsidize expensive
home ownership. The $10,000/yr limitation means that the tax bite will really
affect the wealthy. And it offsets the cut in the income tax rates.
You can't have both without worsening the deficit even more.

I observe that people genearally buy bigger homes than they need.
This new tax policy incentivizes earning more, & over-buying less.
It's good policy, & fairer...especially to renters, who get nuthin.

My argument (if you read it) is both.
Political:
- Fairness to renters is political.
- Avoiding dangerous housing bubbles due to subsidized borrowing & property tax payment inflating prices.
Economic:
- Income tax rate cuts without offsetting budget cuts would be irresponsible.
Imposing deductability limits mitigates the federal budget problem.
- Curbing subsidies of home ownership reduces real estate price distortion.

This isn't really about capitalism.
It's about the fact that we must pay taxes, & the
question is how best to structure our obligation.

Real estate distortion is a fancy term for expensive neighborhoods versus poor neighborhood. That is simply a subjective notion.

Of course, a beach front property will have more value than a property in a remote forest.

I understand that the government has to protect against bubbles but I think you're far from proving that there is a real-estate bubble even in areas of high cost of living.

I've been reading from many economists on that and a majority of them do not believe we're in a bubble.

Again, some of your premises might not be as proven as you think they are.

We all pay taxes... The question now, is what percentage do we all pay taxes at.

A "wealthy" person from California is paying more taxes than a "wealthy" person from North Dakota. I bet you that a person from North Dakota that actually owns a mansion is paying less taxes proportional than a person from California, who only owns a single family home. So again, who really is paying their fair share of taxes?

If you think that's fair, then well, that's your opinion. I understand your logic but you're disregarding many other factors when only considering a flat cap.

 

[Revoltingest]

Real estate distortion is a fancy term for expensive neighborhoods versus poor neighborhood.

No, "market distortion" is something else.
This should clarify.....
https://www.investopedia.com/terms/m/marketdistortion.asp

Regarding real estate, subsidizing ownership (interest & property taxes) will....
- Increase the ability of the buyer to pay a higher price.
- Incentivize borrowing more.
- Increase prices because of increased demand.
- Give federal subsidies to locales with high property taxes.

I understand that the government has to protect against bubbles but I think you're far from proving that there is a real-estate bubble even in areas of high cost of living.

I'm not proving anything...just giving observations & understanding from having been in the business for decades.
The bubble is exacerbated by other factors....
- Institutionalized inflation induces homeowners to treat their home as an investment which is a hedge against inflation. There's a widespread tendency to borrow as much as they can to buy as much as they can because this maximizes their return. This is because the loan amount doesn't increase, but the home's value does, thus their equity increases.
- Capital gains taxes are waived (up to a limit) so that profit is tax free.
- The Association Of Realtors has very effective propaganda about the desire & financial advantages of home ownership.
- Government created Fannie Mae & Freddie Mac to provide highly leveraged low interest loans, thereby encourage maximal borrowing.

I've been reading from many economists on that and a majority of them do not believe we're in a bubble.

I'll wager they didn't sound the alarm for the last one either.

Again, some of your premises might not be as proven as you think they are.

You're welcome to disagree.

We all pay taxes... The question now, is what percentage do we all pay taxes at.

The percentage is only one question.
But given a particular percentage, there's still the issue of how to arrive at it.
Different ways provide different incentives & disincentives.
I'd prefer to incentivize earning, & disincentivize over-buying of homes.

A "wealthy" person from California is paying more taxes than a "wealthy" person from North Dakota. I bet you that a person from North Dakota that actually owns a mansion is paying less taxes proportional than a person from California, who only owns a single family home. So again, who really is paying their fair share of taxes?

If you think that's fair, then well, that's your opinion. I understand your logic but you're disregarding many other factors when only considering a flat cap.

We'll agree to disagree about whether the tax code changes are an improvement.

 

[suncowiam]

No, "market distortion" is something else.
This should clarify.....
https://www.investopedia.com/terms/m/marketdistortion.asp

Regarding real estate, subsidizing ownership (interest & property taxes) will....
- Increase the ability of the buyer to pay a higher price.
- Incentivize borrowing more.
- Increase prices because of increased demand.
- Give federal subsidies to locales with high property taxes.

I'm not proving anything...just giving observations & understanding from having been in the business for decades.
The bubble is exacerbated by other factors....
- Institutionalized inflation induces homeowners to treat their home as an investment which is a hedge against inflation. There's a widespread tendency to borrow as much as they can to buy as much as they can because this maximizes their return. This is because the loan amount doesn't increase, but the home's value does, thus their equity increases.
- Capital gains taxes are waived (up to a limit) so that profit is tax free.
- The Association Of Realtors has very effective propaganda about the desire & financial advantages of home ownership.
- Government created Fannie Mae & Freddie Mac to provide highly leveraged low interest loans, thereby encourage maximal borrowing.

I'll wager they didn't sound the alarm for the last one either.

You're welcome to disagree.

The percentage is only one question.
But given a particular percentage, there's still the issue of how to arrive at it.
Different ways provide different incentives & disincentives.
I'd prefer to incentivize earning, & disincentivize over-buying of homes.

We'll agree to disagree about whether the tax code changes are an improvement.

We are both opining on the economy which is really the best anyone can do.

I like the tax reform with the increase in standard deductions. This helps the low and mid incomes. However, it sucks for me being a very specific demographic that has committed to a strategy based on precedence. I can adjust, but I don't think it's exactly fair. Many of these "wealthy" folks are not living in mansions. They're living in typical 3-4 bedroom single family houses, yet we're paying more taxes overall and proportionally than our peers elsewhere.

Let's just not lump us all up because of where we live and what we think.

 

[Revoltingest]

I like the tax reform with the increase in standard deductions. This helps the low and mid incomes.

Personal deductions aren't the only way to reduce taxes.
Increasing the threshold at which one pays taxes is another.
Lowering the rates is yet another.
Let's consider a hypothetical.
Suppose that you pay $x under both of the following scenarios, which are revenue neutral.

Scenario #1:
You get a big personal deduction for home mortgage interest & property taxes.
Your income tax rate is 20%.
You pay income tax of $x.
Any additional money you make is taxed at 20%

Scenario #2:
You get no personal deductions.
Your income tax rate is 10%
You pay income tax of $x (same as scenario #1).
Any additional money you make is taxed at 10%.

Scenario #2 offers....
- Less incentive to do things which generate personal deductions,
eg, buy a home with higher interest & property tax expenses.
- More incentive to earn more money because it's taxed less.

I prefer the incentives in #2.

However, it sucks for me being a very specific demographic that has committed to a strategy based on precedence. I can adjust, but I don't think it's exactly fair. Many of these "wealthy" folks are not living in mansions. They're living in typical 3-4 bedroom single family houses, yet we're paying more taxes overall and proportionally than our peers elsewhere.

Let's just not lump us all up because of where we live and what we think.

You're used to getting personal deductions to reduce your taxes.
But it's possible to pay the same amount of tax, with a structure
which encourages earning more than spending.

 

[suncowiam]

Personal deductions aren't the only way to reduce taxes.
Increasing the threshold at which one pays taxes is another.
Lowering the rates is yet another.
Let's consider a hypothetical.
Suppose that you pay $x under both of the following scenarios, which are revenue neutral.

Scenario #1:
You get a big personal deduction for home mortgage interest & property taxes.
Your income tax rate is 20%.
You pay income tax of $x.
Any additional money you make is taxed at 20%

Scenario #2:
You get no personal deductions.
Your income tax rate is 10%
You pay income tax of $x (same as scenario #1).
Any additional money you make is taxed at 10%.

Scenario #2 offers....
- Less incentive to do things which generate personal deductions,
eg, buy a home with higher interest & property tax expenses.
- More incentive to earn more money because it's taxed less.

I prefer the incentives in #2.

You're used to getting personal deductions to reduce your taxes.
But it's possible to pay the same amount of tax, with a structure
which encourages earning more than spending.

This issue is precedence. Part of investing is knowing the tax laws because income can be generated from earning extra, or decreasing our costs. Taxes are costs.

But my point again is that someone in North Dakota won't be penalized at all compared as someone from California for living the same relative wealth.

I see your points. And if I had to start over, I would agree that a simplified tax plan with less specific deductions would be better for everyone. But many of us have committed to a strategy that is basically locked in for decades. So it's not easy to change because of the precedence set. The government cannot change these tax plans so drastically every year. Businesses will flounder because they can't commit to a long term strategy.

You own commercial properties so you're used to your deductions too just in the form of operating expenses. The question is, if the government changes its deductions on businesses, will you still get the same amount in return? And then what would be the difference? But then let's say we have two plumbers in different areas that is basically doing the same job, but then one pays more taxes overall and proportionally then the other... Wouldn't that be seen as unfair?