by Countable | 1.9.19
In its 2017 tax bill, the Trump administration took some steps toward reducing certain deductions, particularly the State and Local Tax (SALT) and mortgage interest deductions. Lane notes that both of these deductions have contributed to suburban sprawl in the U.S.
The SALT deduction particularly benefitted high-income residents of wealthy suburbs, and Rep. Nita M. Lowey (D-NY) is trying to restore it. Lane explains the effects that would have:
“Fifty-six percent of the benefits from reinstating the SALT break would go to the top 1 percent of households, those making $755,000 or more, according to the Tax Policy Center. It would also resurrect the nontransparent situation whereby residents of low-tax states cross-subsidized their counterparts in high-tax states.”
A tax increase for ultra-high earners is one element of Rep. Alexandria Ocasio-Cortez’ (D-NY) sweeping Green New Deal proposal to address climate change. Her proposal would raise an estimated $720 billion over the next ten years, which, as Lane points out, is considerably less than the CBO’s estimated savings from eliminating tax deductions. Furthermore:
“The move would be highly progressive, because more than 30 percent of individual tax deductions accrue to the top 1 percent on the income scale, and 80 percent go to the top fifth, according to the Congressional Budget Office...
“Beyond those wealthy few households, however, it would make little or no difference to the American social fabric. Removing federal tax policies that effectively subsidize wealthy suburbs would undermine a broad array of privileged arrangements, residential and educational.”
Lane goes so far as to posit that ending tax deductions that encourage suburban sprawl might actually do more to address climate change than the Green New Deal. When asked to explain, he told Countable that less suburban sprawl would lead to less driving, less fuel consumption, less energy spent heating large, single-family homes, and various other sources of greenhouse gas emissions.
Should we eliminate all tax deductions? Why or why not? Tell your reps what you think, then share your thoughts below.
—Sara E. Murphy
(Image Credit: iStock.com / imacon)
Written by Countable
Taxes should be fair for all. What republicans passed last year was a joke. Businesses get too many breaks and need to pay their share. Not one republican even knew what was in the bill they passed, only that it benefited their donors.
No. Not unless we are going to go to a flat tax system and eliminate all tax loopholes for everyone, mainly the rich and corporations.
Certainly for businesses, yes, as well as most corporate subsidies. As for personal taxes... we could do that, but understand that a flat tax benefits the wealthy the most and we would also have to remove all the tax caps. Flat tax is inherently regressive due to a more significant portion of the total funds available to the low-income earner going to the tax expenditure. While the upper-income payer still pays the same percentage, they have enough income to offset this tax load. A progressive tax is actually the more equitable choice since the more wealthy you are, proportionately, the less of your income you spend.
Let’s make taxes simple. One flat percentage and no deductions. Deductions are where all the loopholes are.
I might be for it if we had a 10% flat tax for EVERYONE, rich and poor.
FLAT TAX and BUILD THE WALL!
Eliminate tax deductions on things such as mortgage interest and charitable deductions, and you eliminate the incentive for people to be charitable, or to work towards home ownership.
No, eliminating all deductions is as arbitrary as just making up new ones. Also, a flat tax is HIGHLY REGRESSIVE and impacts lower wage earners far more than higher. For example, taxing everyone 10% means that a household that earns $50,000 will pay $5,000 and have $45,000 left over to live on where a household that earns $200,000 will pay $20,000 and have $180,000 to live on. Not OK in expensive places like SFO, NYC... The flat tax also only solves the federal taxes - don't forget state and local. Flat tax is a nice soundbite but not at all fair.
A Simple Question for our Progressive Socialist leaning Democrats? What about the 50%+/- who pay no federal or state income taxes but are subsidized with federal funds, education, SNAP, medical, and lord knows what else that they and illegal migrants receive. SneakyPete.......... 🤔🤔🤔🤔🤔. 1*9*19.........
I like the idea of removing deductions, which majority go to the wealthy. Also, many deductions are loop holes created by Republicans for unethical advantages to the wealthy and special interests. If we could simplify the tax code, there is less ambiguity and less opportunity for unethical people to exploit the system and the American citizens.
Presently, tax deductions and loopholes favor the wealthy. We need to move to a sales tax only or at least overhaul the revenue tax policy, to benefit the people who need money the most...the poor and middle classes. Millionaires don’t need tax breaks to become even richer.
Many deductions, such as charitable, mortgage, and property taxes offer incentives for the public good, incentives for home ownership, greater fairness in middle class tax burdens, and a balance between local, state, and federal taxes. The charitable deduction is one of the greatest hallmarks of our democracy, as it helps to generate more effective services for the public good, which can be delivered more efficiently and much less expensively than comparable services provided by the government.
People who give money to organizations that help the needy should be able to use it for a tax deduction. The way to get more tax money would be for the people with more to be taxed at the same rates as the middle class.
My wife and I contribute thousands to charity and non-profits every year. Being able to deduct this from our taxes is very important to us. We are worried about how the new tax law will impact our rebate for our next filing.
We, The America Voter, Needs Bearing Witness & The Watching Of The Pelosi’s Controlled U.S. House. The idea of removing deductions, which the majority of which, according to our Democratic commentators, go to the wealthy. B$ Also, many deductions are loop holes created by Democrats for unethical advantages to their wealthy and special interests supporting $$$$ donators. I agree that the tax code does need simplification. We need seeing less ambiguity and opportunity for Democrats to manipulate and exploit the tax system and the American citizens. SneakyPete.......... 👿 DEMOCRATS 👿. 1*9*19.........
Only (and I mean only) if we move to a true flat tax, based on consumption. Everyone pays. And everyone pays the same percentage.
I don’t like the cap of 10k on state income tax/ property tax and sales tax. I loose a large part of my deductions as we live in CA with a high state income tax.
End deductions and make a low flat tax. The tax code is way too complicated. The government is bloated and it needs to trim itself down.
Keep the standard deduction, which gives a tax refund to many wage earners. Eliminate the rest, which the wealthy use to lower their effective tax rate well below the average American.
SneakyP. You’re making some very baseless claims. The most pernicious misconception about people who don’t pay federal income taxes is that they don’t pay any taxes. That oft-heard claim ignores all the other taxes Americans encounter in their daily lives. Almost two-thirds of this “special” 47 percentage work, for example, and their payroll taxes help finance Social Security and Medicare. Accounting for this, the share of households paying no net federal taxes falls to 28 percent. And those aren’t the only other taxes they bear. According to economic research, the corporate income tax discourages domestic investment; that depresses wages, so workers are effectively paying some of the corporate tax. More directly, many households pay federal taxes on gasoline, beer and cigarettes. And then there are state and local sales, property and income taxes — all of which are often less progressive than the federal income tax. Putting all these together, a family of three with an income of $30,000 would owe no federal income tax (in fact, they would get money back). But they could easily pay more than $4,500, or 15 percent of their income, in taxes. Politicians and commentators often talk about those who don’t pay federal income taxes as though they’re in a special club with lifetime membership. In fact, it’s a highly diverse group, some of whom move in and out from year to year. When they first join the workforce, for example, young people may not earn enough to pay federal income taxes. The same is true for many of the temporarily unemployed, working parents and entrepreneurs whose businesses experience a loss. But most of these people look forward to the day, perhaps in just a year or two, when their incomes will rise and they will join or rejoin the 53 percent of Americans who do pay federal income taxes. The reverse is true for many senior citizens: They may pay no federal income tax in retirement, but most did during their working years. Indeed, the vast majority of people who pay no federal income tax have low earnings, are elderly or have children at home. They are exempt from the income tax because of deliberate features Congress added to the tax code, thanks to bipartisan efforts, to help these groups. For example, Presidents Ronald Reagan and Bill Clinton both favored the earned-income tax credit (EITC), which has helped millions of families stave off poverty. About half of these households don’t pay federal income tax simply because their incomes are low. More than one-fifth are retirees who benefit from tax breaks for seniors, including an exemption for most Social Security benefits. And another one-seventh are working families with children whose income tax liability is eliminated because of the child tax credit, the EITC, or the child and dependent care credit. Together, these three groups of taxpayers account for almost 90 percent of the households that pay no federal income tax. If they need help from our public safety networks... They are American citizens, so what? That is why those programs exist. You want to let the elderly, children, and poor people starve or what? As for the undocumented immigrants... America’s undocumented immigrants likely pay more in taxes than Donald Trump. According to a report from The Institute on Taxation & Economic Policy (ITEP), they pay a hefty amount of state and local tax, just like other people living in the United States. Collectively, America’s undocumented immigrants pay an estimated $11.64 billion in state and local taxes every year with at least 50 percent of undocumented immigrant households filing tax returns using Individual Tax Identification Numbers. Many who do not file tax returns still have taxes deducted from their pay checks. Out of that $11.64 billion total, undocumented immigrants pay $6.9 billion in sales and excise taxes, $3.6 billion in property taxes and about $1.1 billion in personal income taxes. ITEP estimated that if America’s 11 million undocumented immigrants were granted citizenship or visas allowing them to work legally, current state and tax contributions would be boosted by over $2.1 billion a year. Oh as for another myth I hear a lot: There is no direct way to match people’s tax records and voting habits, so we have little else but circumstantial evidence on how the 47 percent votes — but they certainly aren’t all shoo-ins for Democrats. Let’s take low-income and elderly households, which are particularly likely to pay no federal income taxes. Low-income households do tend to vote Democratic — when they get to vote. But fewer than half of individuals in households with incomes below $30,000 voted in 2008, according to the census, compared with about 60 percent of people with higher incomes. On the other hand, Republicans almost always hold a lead over Democrats among elderly voters, a group that votes enthusiastically. So let’s put that myth away too. The share of households paying no income tax is near record highs not only because of tax policy but also because of the struggling economy. Higher earnings, particularly for low- and moderate-income workers, would move more Americans into the income-tax-paying category. Indeed, projections show that the share of households paying no federal income tax will decline by more than one-fifth in the coming decade because of economic growth and inflation. That drop would be faster and steeper with a stronger, prolonged recovery, which would give more Americans the pleasure of paying federal income taxes.