EDITOR'S NOTE
What bothers me most about getting rid of the SALT cap again (which would lower tax bills in high-tax states) is that it papers over the policy choices that have resulted in high-cost states, in order to fund the same kind of policies that would raise the cost of living nationwide.
We had Congressman Josh Gottheimer, of northern New Jersey, on Squawk Box yesterday. He is all for doing away with the cap, because taxes in his towns are very, very high. Let's say, conservatively, the median home price in his densest county, Bergen County, is $460,000. Property taxes are roughly 2.2% of that, or about $10,000 a year.
By contrast, a typical home in the Virginia town where I grew up (it's lovely, but rural) lists for $299,000, and has property taxes of just $1,440 a year. Or take Florida, where so many New Jersians are flocking. My former neighbors sold their house last year, bought one for two-thirds the cost near Tampa, and by my estimate are paying half of what they were paying in New Jersey for property taxes.
So the middle class looks at this, and especially in a post-Covid, work-from-home world, goes I'll take the cheaper town, thanks. What about the wealthy? The really nice homes in Gottheimer's district might easily have property taxes of $35,000 and up per year. New Jersey also has among the highest state income taxes--9% for those earning over $500,000, and now almost 11% for those making over a million bucks a year. So call that another $50,000 to $100,000 in taxes for high earners every year.
Again, by contrast, Virginia's top state income tax is less than 6% of income, and Florida has no state income tax. So the middle class is leaving, the wealthy are leaving, and the Democratic party looks at this population drain from blue states and realizes it could lose political heft in Washington. No wonder even Bernie Sanders supports axing the SALT cap, which would mean residents can deduct more than $10,000 in state and local taxes ("SALT") from their federal tax bills again.
And let's be clear about who this would really help. Even if the cap were just raised, instead of completely eliminated, nearly two-thirds of the benefit "would accrue to the top 1%," according to the Tax Foundation. The rest of the benefit--up to 98.5%--would go to the top 20%. So again, only 1.5% of "the bottom 80%" of the public would be helped.
The last I heard, the White House was not super jazzed about this. It wasn't in Biden's own proposals, and press secretary Jen Psaki has said that since it's "not a revenue raiser"--in other words, it would cost other, presumably less wealthy, taxpayers money--lawmakers who want to remove it need to figure out how to pay for that.
And all of this is part of the Democrats' $3.5 trillion budget proposal that would "prohibit" tax hikes for those making less than $400,000 while raising taxes on companies and the wealthy. None other than Senator Sanders himself said the bill "will finally...address the needs of our working families by asking the wealthy and large corporations to pay their fair share of taxes"--while he supports SALT repeal for the 1%.
Capital gains taxes would go up, assets over $1 million would be taxed upon death, the corporate tax rate would go up...all to fund initiatives like free universal preschool, an expanded or permanent child tax credit, national paid leave, and so on. It's either paradise...or New Jersey, on a national level. Meaning, expensive.
"Some experts are skeptical Senate Democrats can raise the $3.5 trillion...without higher taxes for those making less than $400,000," the CNBC writeup last month noted. "And...it could be hard to avoid so-called 'indirect' taxes that may result from a higher corporate tax rate," like lower wages or higher consumer prices, one expert said.
For now, people in high-cost states can still vote with their feet. That gets harder when these policies go national.
See you at 1 p.m!
Kelly KEY STORIES
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Selasa, 24 Agustus 2021
Getting SALT-y
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