A Guide to the Tax Changes

[bluehende]

You do not have to hold your breath to check this out.

https://taxfoundation.org/who-itemizes-deductions/

30.1 percent itemize deductions from IRS data.

You also forgot in your analysis two things. These come from the tax bill not the mainstream media that you obviously do not believe.

1. The personal exemption is now gone. That negates amazingly all but around 30% of that benefit. That as I believe has been said is the overwhelming majority.
2. You do not know if you will itemize deductions until dec 31. You will have to do all the paperwork and keep track. The only simplification is that you do not have to add the numbers at the end.

I do not see where anyone is throwing out talking points. In fact I commend everyone for keeping it civil and walking that political line. You commented on a post that was discussing high tax states loss of deductions and whether that is fair. Do you really need a link to believe that this is true. Good people can disagree on the fairness but not the fact they are going away. The funny part is I do not actually endorse some of the "fixes" I have mentioned. However, I do see a bit of truth to them. The conversation would be way too political , but I would love to have conversations with the group that are discussing tax fairness right now. It is a civil and interesting discussion.

 

[bluehende]

Real estate cost is a function of supply and demand.

It likely that because interest and property taxes were deductible, real estate prices were driven too high.

Absolutely agree. The problem is with correcting that problem. Since low real estate areas work under the same tax code why should the high tax states be punished by a quick reversal of long standing tax policy.

 

[wilma]

Brian's point above is correct. Many are believing the mainstream media's narrative about the new tax law, and I see many of their talking points in the replies on this thread. Trust me folks, doubling your standard deduction will have a major effect on your taxes owed - and that change is not only going to benefit the wealthy. Also, just the simple change of doubling that standard deduction, is going to make the tax process simpler for those that used to itemize, and now won't have to (I will fall into that group). If anyone believes otherwise, please share some real sources, with some real facts, that prove your case. I won't be holding my breath waiting for all of your replies.

While it may be simpler to not itemize and instead take the larger standard decution, some middle class taxpayers in high tax states will pay more under the new tax law. Do you not believe that? There are many sources that describe this increase for some middle class in states like calif, new york, etc. look it up.

 

[ace2000]

How do we know for sure the ratio of itemizers? Someone said something, now it has been repeated, but I did not hear IRS give any stats whatsoever, so I doubt the idea that so few itemize.

It's real... here's a source for you.

“Overall, only 30 percent of taxpayers itemize now, and only about 10 or 12 percent will itemize once the new law goes into effect. So it’s a small group of taxpayers at that top end of the income distribution who will be affected.”

https://www.marketplace.org/2017/12...operty-tax-payment-early-deduction-irs-reform

 

[bluehende]

Here is a good outline of the new tax bill. It also gives hundreds of links if you want to delve deeper.

https://www.thebalance.com/trump-s-tax-plan-how-it-affects-you-4113968

 

[ace2000]

While it may be simpler to not itemize and instead take the larger standard decution, some middle class taxpayers in high tax states will pay more under the new tax law. Do you not believe that? There are many sources that describe this increase for some middle class in states like calif, new york, etc. look it up.

No, I don't believe that. I believe it's possible that some may, but the benefit of doubling the standard deduction will more than make up for that loss, for the large majority. Think about it - the standard deduction for a married couple is doubling to 24K. You would have to be paying a huge share to your state to not receive a positive return in that exchange.

Regardless, as has been stated before - why should the low tax states subsidize the high taxed states with that deduction anyway?

 

[VacationForever]

vice versa, why should I have to pay more in federal income taxes because my state is better at managing its finances than those with extremely high state/local taxes that are able to be written off federal returns?

no change is ever going to make 100% of the people involved happy when you are talking hundreds of millions of folks...it quite simply isnt possible.

I agree completely that taxes should be "fair" across the board...but the problem is if you poll 300 million people asking them what is fair, you are likely to get 200 million different answers.

Well said, Brian.

 

[VacationForever]

Right. And just think of all the people in states like NY- the ones upstate- who do not live and work in NYC and have lower incomes and still have incredibly high taxes! Not everyone in New York has high incomes- in fact- most don't. Many are making low to mid 5 figure salaries and have high taxes and expenses.

I will add that high tax states like NY and California, however, are high production states as compared with many others and contribute to the coffers of the entire country.

You just have to fire your state lawmakers who put in policies to suck taxes out of their people.

 

[WinniWoman]

You just have to fire your state lawmakers who put in policies to suck taxes out of their people.

Unfortunately, there are too many people who either don't pay taxes or evidently like taxes that live in our state. NYC votes ruin the rest of the state. Which is why there is even a movement to divide upstate NY with downstate. Many want NYC and LI and Westchester and Rockland Counties to be its' own entity like Washington DC is to the USA. They want upstate NY to become a new state called New Amsterdam.

 

[ace2000]

I do not see where anyone is throwing out talking points. In fact I commend everyone for keeping it civil and walking that political line. You commented on a post that was discussing high tax states loss of deductions and whether that is fair. Do you really need a link to believe that this is true. Good people can disagree on the fairness but not the fact they are going away. The funny part is I do not actually endorse some of the "fixes" I have mentioned. However, I do see a bit of truth to them. The conversation would be way too political , but I would love to have conversations with the group that are discussing tax fairness right now. It is a civil and interesting discussion.

See my last post above regarding some of your questions. No way you can have a discussion about tax fairness without getting political, so you'll have to go elsewhere for that debate.

Just to be clear, are you saying that most people will not benefit from the new changes??? Because, what I am saying is that regardless of all the nitpicking going on about the changes regarding the state tax deductions, the vast majority of taxpayers are going to get tax relief from the new law - including those in the high tax states. Disagree?

 

[bluehende]

No, I don't believe that. I believe it's possible that some may, but the benefit of doubling the standard deduction will more than make up for that loss, for the large majority. Think about it - the standard deduction for a married couple is doubling to 24K. You would have to be paying a huge share to your state to not receive a positive return in that exchange.

Regardless, as has been stated before - why should the low tax states subsidize the high taxed states with that deduction anyway?

However a family of 4 loses 16k in personal exemptions.

 

[ace2000]

While it may be simpler to not itemize and instead take the larger standard decution, some middle class taxpayers in high tax states will pay more under the new tax law. Do you not believe that? There are many sources that describe this increase for some middle class in states like calif, new york, etc. look it up.

See my previous post. There may be some that don't, but the overwhelming majority will get tax relief - including those in the high tax states.

 

[bluehende]

See my last post above regarding some of your questions. No way you can have a discussion about tax fairness without getting political, so you'll have to go elsewhere for that debate.

Just to be clear, are you saying that most people will not benefit from the new changes??? Because, what I am saying is that regardless of all the nitpicking going on about the changes regarding the state tax deductions, the vast majority of taxpayers are going to get tax relief from the new law - including those in the high tax states. Disagree?

Not at all. I believe the analysis that shows 85% will benefit. What I see though is a single group of people singled out. These are high tax states citizens that are upper middle class. I take exception to them being categorized as "takers". They contribute a lot to the tax coffers for the single fact that their incomes are higher. IMHO these tax breaks helped to even that out. What I will disagree with is that the benefit received is worth the cost. I would have loved to see a tax bill that gave larger tax cuts to the middle class and kept the bill much closer to revenue neutral.

 

[klpca]

See my previous post. There may be some that don't, but the overall majority will get tax relief - including those in the high tax states.

I have run my numbers and was surprised to see a small reduction in taxes. Yippee for us. Saving ~$500. I know someone else who is saving $15k. I think that crumbs have been given as a way to placate the masses. But 1.5 trillion added to the national debt. Really? I'm not happy about that at all. I am surprised that this group (tuggers) who agonize about a $50 increase in maintenance fees is not more upset about that!

 

[rapmarks]

See my previous post. There may be some that don't, but the overwhelming majority will get tax relief - including those in the high tax states.

I would agree with this if the personal exemptions hadn't been taken away.

 

[Elan]

I have run my numbers and was surprised to see a small reduction in taxes. Yippee for us. Saving ~$500. I know someone else who is saving $15k. I think that crumbs have been given as a way to placate the masses. But 1.5 trillion added to the national debt. Really? I'm not happy about that at all. I am surprised that this group (tuggers) who agonize about a $50 increase in maintenance fees is not more upset about that!

Yeah, like missing the forest for the trees. There was no "objective" to this tax bill, as far as I can tell. It really didn't simplify anything and it won't result in huge tax savings for the working class, where, as has been proven time and time again, it matters in terms of economic stimulus. Yet, we get to pay interest on another 1.5 trillion in debt. That's not progress, folks.

 

[klpca]

I would agree with this if the personal exemptions hadn't been taken away.

I din't know if you have run your numbers, but the rate adjustments seem to have offset this (honest - I checked a number of my family members whose returns that I prepare - similar results across the board). That said, I still do not support this law change as is is far from fiscally responsible, imho.

 

[ace2000]

Not at all. I believe the analysis that shows 85% will benefit. What I see though is a single group of people singled out. These are high tax states citizens that are upper middle class. I take exception to them being categorized as "takers". They contribute a lot to the tax coffers for the single fact that their incomes are higher. IMHO these tax breaks helped to even that out. What I will disagree with is that the benefit received is worth the cost. I would have loved to see a tax bill that gave larger tax cuts to the middle class and kept the bill much closer to revenue neutral.

Thank you for being honest with your 85% statement. That's exactly my point.

I can go along with a lot of what you're saying. But, you're going to have a hard time convincing people from the low tax states that it is fair to subsidize the people from the high tax states with their federal tax dollars. And that's regardless of the "way it's always been".

 

["Roger"]

Thank you for being honest with your 85% statement. That's exactly my point.

I can go along with a lot of what you're saying. But, you're going to have a hard time convincing people from the low tax states that it is fair to subsidize the people from the high tax states with their federal tax dollars. And that's regardless of the "way it's always been".

California, for example, sends far more money to the federal government than it receives in return. Just the opposite is true for most if not all the low tax states. Yet the high tax states are now the ones being portrayed as being subsidized by the low tax states. Interesting.

 

[Elan]

You know, this thread has proven what I've long thought about taxes. As soon as something changes, many folks knee-jerk reaction is to figure out how to game the system or at least adjust to best suit their short term personal situation. Yet, they ignore the fact that if we didn't have to pay interest on our debt, we could all presumably enjoy lower taxes. It's about time we started thinking (and voting) with our brains instead of our pocket books. (And the sad reality is we're not even doing that, in the long run). Remember when we were actually, for a brief period in time, paying down our debt??? I'll take that any day over $500 in annual tax savings.

 

[CalGalTraveler]

Although it would seem logical that the SALT write-off benefits the high tax states, the notion is simply not true when you look at the bigger picture. According to the IRS (and based on Census population figures), high tax states tend to pay more in federal taxes than the lower tax states. As you will see in the chart below, California, New York, New Jersey, Illinois and Minnesota top the list and pay as much or more per capita. Florida is also up there in terms of total contribution but they pay far less per capita ($8k Florida vs. $10k CA) than the other states.

In terms of Gross Revenue in 2015, Calif, NY, NJ, Illinois and Minnesota combined constituted 33% of the gross tax collections to the U.S. Government.

 

[ace2000]

You know, this thread has proven what I've long thought about taxes. As soon as something changes, many folks knee-jerk reaction is to figure out how to game the system or at least adjust to best suit their short term personal situation. Yet, they ignore the fact that if we didn't have to pay interest on our debt, we could all presumably enjoy lower taxes. It's about time we started thinking (and voting) with our brains instead of our pocket books. (And the sad reality is, we're not even doing that, in the long run). Remember when we were actually, for a brief period in time, paying down our debt??? I'll take that any day over $500 in annual tax savings.

Definitely true. And I'm walking a fine line here, because I also believe that paying down our debt is our number one national security issue - and I tend to vote accordingly.

Even though I believe our taxes are currently too high, just cutting taxes without corresponding cuts in expenditures is assinine.

 

[bluehende]

Thank you for being honest with your 85% statement. That's exactly my point.

I can go along with a lot of what you're saying. But, you're going to have a hard time convincing people from the low tax states that it is fair to subsidize the people from the high tax states with their federal tax dollars. And that's regardless of the "way it's always been".

Here I will give you actual data.

http://www.businessinsider.com/the-...st-dependent-on-the-federal-government-2015-7


This shows the states that receive the least and most of their state budget from the federal government. You will notice that the ones that get the least from the federal government are all high income states. I so not think that is a coincidence. If they did not pay high taxed then they should be entitled to more from the federal government. This analysis does not take into account total dollars. Here is a link to an article that goes into details.

https://people.howstuffworks.com/wh...the-federal-government-which-get-the-most.htm

Here are a few paragraphs.

New Jersey was the most generous donor state, paying $9,902 in federal taxes per resident and only getting back $6,740 in federal spending. That's 61 cents for every tax dollar. Nevada was the second big donor, mostly because of taxes on casinos, followed by Connecticut, where its high-earning residents got back 69 cents on their federal tax dollar.

The other top recipient states were Mississippi with its large low-income population and Alaska, whose small population numbers and long history of Washington D.C. earmarks, resulted in nearly $14,000 in federal spending per resident compared with $5,400 in taxes paid.


The whole list generally runs along the high tax low tax line with some exceptions. It is interesting that CA & NY have a large number of people that are on assistance which keeps them off the top of the donor state list but does not knock them into the recipient category.

I think we can argue over whether the higher income states should pay more taxes, but I do believe that saying you are subsidizing them is inaccurate at best.


PS In looking through these numbers I realize my state DE is getting screwed. But then our extenuating circumstance is our franchise tax that helps our budget to not be dependent on the Federal government.

 

[VacationForever]

Here I will give you actual data.

http://www.businessinsider.com/the-...st-dependent-on-the-federal-government-2015-7


This shows the states that receive the least and most of their state budget from the federal government. You will notice that the ones that get the least from the federal government are all high income states. I so not think that is a coincidence. If they did not pay high taxed then they should be entitled to more from the federal government. This analysis does not take into account total dollars. Here is a link to an article that goes into details.

https://people.howstuffworks.com/wh...the-federal-government-which-get-the-most.htm

Here are a few paragraphs.

New Jersey was the most generous donor state, paying $9,902 in federal taxes per resident and only getting back $6,740 in federal spending. That's 61 cents for every tax dollar. Nevada was the second big donor, mostly because of taxes on casinos, followed by Connecticut, where its high-earning residents got back 69 cents on their federal tax dollar.

The other top recipient states were Mississippi with its large low-income population and Alaska, whose small population numbers and long history of Washington D.C. earmarks, resulted in nearly $14,000 in federal spending per resident compared with $5,400 in taxes paid.


The whole list generally runs along the high tax low tax line with some exceptions. It is interesting that CA & NY have a large number of people that are on assistance which keeps them off the top of the donor state list but does not knock them into the recipient category.

I think we can argue over whether the higher income states should pay more taxes, but I do believe that saying you are subsidizing them is inaccurate at best.


PS In looking through these numbers I realize my state DE is getting screwed. But then our extenuating circumstance is our franchise tax that helps our budget to not be dependent on the Federal government.

With NV being the 2nd largest donor, the statement which several of you made about high state taxes subsidizing the low/no income tax states no longer holds true. It really does not matter whether those taxes come from corporate or individuals as we are talking about state level. As an individual, it certainly is advantageous to live in NV with no state taxes.

As you have also pointed out, many of high income tax states also support a large number of those on "welfare", which offsets a significant amount of taxes collected by Federal as they get returned in the form of Medicaid and other programs.

 

[CalGalTraveler]

With NV being the 2nd largest donor, the statement which several of you made about high state taxes subsidizing the low/no income tax states no longer holds true. It really does not matter whether those taxes come from corporate or individuals as we are talking about state level. As an individual, it certainly is advantageous to live in NV with no state taxes.

As you have also pointed out, many of high income tax states also support a large number of those on "welfare", which offsets a significant amount of taxes collected by Federal as they get returned in the form of Medicaid and other programs.

Nevada is an exception because of casino revenue which makes this a unique outlier that cannot be replicated in other states. I seem to recall that Nevada also has a large population of homeless living underground in the sewer system in Las Vegas and in Reno, so it is also taking federal assistance - but like California and NY, they are not getting good ROI from the Federal Govt on their tax contribution.

This tax contribution to benefit imbalance may be why the Calif state govt is thumbing their nose at the Feds e.g. SALT workarounds, creating trade agreements with China (CA has a GDP larger than France, Canada and Russia and is the 6th largest in the world so has considerable leverage), signing climate agreements, legalizing marijuana, creating sanctuary state etc. IMO my fear is that with this rift, if we have a major earthquake or event, will the Federal government be there to assist?

If we throw out Nevada as an outlier, high tax states subsidizing low tax states still holds true. What is interesting is that most people were unaware of this situation until now.