Tax bill: SALT deduction repeal is another blow for blue-state wealth
New York, California are the most affected Tax reform is a particularly thorny political undertaking because the process of eliminating deductions and changing tax rates inevitably creates winner and losers. The winners may or may not provide political support to help shepherd reform to passage, but the losers?particularly if it?s a special interest with a powerful lobby?will fight to the bitter end to kill the bill.
By eliminating or capping a number of deductions related to housing, Republicans in Congress have shifted losses to wealthy people in states and districts that traditionally vote for Democrats, with state and local property tax (SALT) deductions being the clearest example.
Currently, taxpayers who itemize can deduct the amount they pay in state and local taxes?such as property taxes and income taxes?from their federal tax return. For income taxes, the deduction keeps income from being taxed twice, once at the state level and again at the federal level. Both the House and Senate tax reform bills eliminate all SALT deductions, with the exception of a state and local property tax deduction capped at $10,000. On Tuesday, The New York Times published a breakdown of how this would hit blue states harder than red states. The obvious is that a number of red states?like Texas, Alaska, Tennessee?don?t even have state income taxes, while reliably blue states with dense urban areas?like New York and California?have high state and local taxes.
For low- to moderate-inc...
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