I am in Fresno, about 180 miles south of SF. There are towns between here and SF (the Bay Area) that have ridiculous housing costs now because of people who commute to the Bay Area. Towns like Los Banos, Merced and Modesto. I believe the real reason for the high speed rail project is so the Silicon Valley companies won’t have to pay their employees high enough salaries to live in the Bay Area near their work, they can just pay to commute from 1-2 hours away.
When I grew up in Sunnyvale in the 60s and 70s, the idea of commuting from Los Banos to the valley would have been totally preposterous. The fact that the chunk of the route between Morgan Hill and South San Jose was called ‘Blood Alley’ wasn’t helping any.
Los Banos really is in the middle of nowhere, but in the last ten years with people commuting homes are being built there at an amazing pace. I only go thru there now on my way to Monterey, but from there to the 101 and then north or south is crazy now.
I am in San Jose, and just our property tax itself is more than $10k.
Also as someone else mentioned mortgage interests are itemized separately from SALT which includes state income taxes, property tax, vehicle registration fee, CASDI (CA state disability insurance premium) etc. Depending on the mortgage interest, the total itemized deductions for families in high home valuation areas in CA, may still likely be more than the increased standard deduction.
I will admit that my brain just kept glazing over every time I tried to figure out what this “trick” entailed. Can someone with more focus figure out if this is viable?
It basically involves states restructuring their revenue generation so that it’s still deductible at the federal level.
It’s totally viable – it does require state governments to get on the ball.
It shifts the state income tax (paid by individual, no longer deductible) to a payroll tax (paid by business, totally deductible). It’s a great response to the fucked-up tax bill, and it goes to show how stupid non-deductibility of state and local taxes is-- I imagine if some big states do this, it will totally throw off the federal deficit projections.
I would imagine anyone living within 30 miles of the coast from Marin to Tijuana who is paying a mortgage is probably over the deduction limit.
Actually, the “convert state taxes to charitable donations” is a different trick than “convert state income taxes to payroll taxes” outlined in the Vox piece.
I can see the charitable donations one being voided by federal courts, for example, but not the payroll tax one. The charitable donations one has the advantage of being easier to implement with fewer side-effects.
It’s the same basic idea - make non-deductible revenue deductible. There are a variety of possible means, some more artificial than others.
Sure a great idea lets replace a progressive income tax with a regressive payroll tax oh and let’s eliminate a tax on unearned income. Truly the Democrats are starting to morph into the old Republican paryt focusing on protecting their elite donor base.
The 10K SALT cap has virtually no effect on households making less than $150K, which is in the top 10% of all households
It only has a significant effect on those making 300K+ which is in the top 2% and even then they will probably owe less taxes not more despite the cap on SALT.
Imagine a couple making $300K in the Bay Area they bought a house several years ago for 850K and currently owe $600K and have $24K in interest deduction a $10K property tax bill, and misc deduction of ~10K resulting in an AGI of ~260K. They owe ~$16K in CA income tax. The property tax alone hits the SALT limit,
so they lose $16K of deduction which results in them owing $3800 more in Federal dollars. However, they are also the 24% bracket vs the 28% at their AGI that is almost a 10K reduction, and more if they have kids.
In fact, when CBS hired an accountant to do the taxes for this Fresno couple making $300K they ended up with $13K less in taxes.
Last segment, but the whole thing is worth watching.
Regardless of how much you end up paying, it’s stupid for the tax law to treat business and individual state and local taxes differently. It shouldn’t create incentives for states to play these games.
And remember, if you do end up paying less, it is because the tax law is creating societal debt for your private gain.
So if you pay nothing you are just a leech on society? Sorry, just being snarky. But I guess my point was that for many paying a little less might make life easier for them.
While I more than appreciate the snark, I’d argue that you’re not too far from the truth. I’d just phrase it slightly differently; you’d be a leech on the economy.
A person who pays zero tax but gains the benefits of the economy they live in is taking more than they’re giving. Note, this applies to a wide swath of people (including most kids) and in no way, shape, or form is it a judgement on their value to society, as that’s a very different calculation.
Reduced taxes are, imho, a societal debt for private gain because someone is trying to engineer specific behaviors. It then becomes a question of whether those behaviors are worth the burden your countrymen suddenly share.
Which is basically capitalism. We don’t live in a communist country so anything below 100% taxation is private gain… as it should be. The question is how much should go to societal gain and how much to the private and for which group… which is in a constant state of debate.
This isn’t correct. Households with 150k or less, with a home mortgage of $500-600k, and a home that is assessed at $10k property tax range, are very common in Bay Area. Keep in mind that your mortgage interest payment is around $20-24K at those amounts, even if you have a great 30 year APR (like perhaps, 3.3 - 3.6%)
The only reason these households will save money in the new tax plan is if they have kids (because of the increased child credit and the expanded income allowance range). A married couple with $150k income and no kids with the above mentioned deductions will pay overall more taxes under this new plan.
Technically, I’d say that reduced REVENUES are a societal debt for private gain, in that at various points (though not the fantasy suggested by Trump) revenue and tax rates don’t move in lockstep.
Interesting angle, and I can’t argue with it.
True enough.
So… nuking the SALT will have an effect on one in every ten American households. Or roughly 32 million people.
The other thing is that these people are not evenly distributed. It won’t be one house in a row of ten in Omaha, it will be no one in Omaha but 75% of the households in a large number of counties in New York, California, etc.
It is a penalty on people living in blue states. And pretty much engineered to be so.