My Facebook friends who live in California are thinking hard about how to minimize their federal tax liability. This month they are prepaying their property taxes as far out into the future as possible. For next year, however, they want to turn the state into a “charity” so that they can make voluntary charitable contributions in exchange for a 100 percent state tax credit (Bloomberg discusses this idea; the LA Times talks about it specifically for California).
If you support higher taxes and a bigger government, why not simply pay with a smile? (maybe even send an extra voluntary check to the U.S. Treasury!) It seems that they would do so, but for the hated Donald Trump having been elected by the racist, sexist, and stupid voters in other states. They don’t want to give Donald Trump more money to spend on policies with which they disagree (though if Congress appropriates $X, won’t taxpayers in other states have to pony up $X eventually, even if Californians come up with ways to avoid contributing? The Trump Administration will still spend the budgeted amount, but maybe borrow more to replace what Californians would have paid in taxes)
Here are some more explanations from the virtuous:
People- myself included- generally don’t mind paying more when you get something in return from a societal perspective.
This tax plan hurts our local system and just goes to subsidize people who voted to lower their own state taxes and gut their own state services and are now complaining about the impact. [i.e., he wants middle class people in lean-government Texas to subsidize rich people in fat-government California and New York]this tax reform accomplished nothing productive or beneficial for the state or most individuals- it is pure partisan politics.
That is, of course, unless you are in real estate development. [from a woman who never started or managed a company; her spending power came from (a) parents, (b) a W-2 job at a non-profit, then (c) the labor of her husband. I find it interesting that she characterizes the changes to the tax code as “tax reform“, demonstrating how deeply embedded doublespeak is in our society]
What about the fact that the same people attacked Donald Trump for purportedly taking all of the deductions provided for in the tax code at the time (one rather insane feature of which, apparently, was that a real estate developer could deduct at least some of the money put up (and then lost) by investors!)? It turns out that was reprehensible while tax-avoidance via prepayment of 2019 or 2020 property tax was virtuous. Trump wrote off a “fake loss.”
A libertarian friend got into an argument with some of these rich tax-avoiding passionate Democrats. The response?
Logic and rational argument DOES seem boring to an increasing number of Americans, which is how we ended up with our current administration.
(i.e., the smart and logical people all voted for Hillary)
Related:
- The tax-avoidance strategies of folks who support higher taxes (mostly about Massachusetts)
Like Obama says, If you like your high taxes you can keep your high taxes!
Happy Valley, Goldman Sachs – what’s the difference?
“Goldman Showers Execs With $100 Million In Early Bonuses To Avoid Trump Tax Hit”
https://www.zerohedge.com/news/2017-12-30/goldman-showers-execs-100-million-early-bonuses-avoid-trump-tax-hit
Everyone is a republican around here, in private. Socialism is more about being popular.
Here is another example of just how hard it is to remove an existing tax benefit, regardless if it makes sense or not. Democrats usually condemn “tax breaks for the rich” yet in this case they are loudly campaigning to preserve this tax break for the upper class, those rich enough to itemize above the newly-doubled standard deduction. I can’t think of a logical reason why this SALT deduction exists at all but California governor Brown and NY governor Cuomo are particularly vehement that their states deserve this break. As a resident of a lower tax state, I disagree. So what is fair? When related to taxes, it seems that “fair” means “other people pay more.”
@Dave D.:
“So what is fair? When related to taxes …”
What is fair is for the Federal Government to become nimble and stop regulating the States by passing laws as if one-fits-all.
@David D
The argument is that by eliminating the SALT deduction, you are charging a tax on top of a tax.
Yes, I understand the argument that this is “double taxation” but that practice is accepted in other situations. For example, you don’t subtract your FICA tax from your income before calculating your federal income tax. States levy income taxes on your whole income, not just what’s left after paying the federal income tax, so they are doing the very thing they are complaining about.
I don’t see how the SALT deduction makes sense. States and local governments mostly run things that don’t (or didn’t, as of a few years ago) overlap with the federal government. The Feds run the post office and the military. The state/local governments do schools, police, firefighters, local roads, etc. Why does it make sense to pay for the latter with pre-federal-tax dollars?
[Actually I’m kind of surprised that, under the old law, towns didn’t add $10,000 per year to every family’s property tax and then give back a $10,000 Visa gift card to every household for buying food, medical deductibles, and other “essentials”. Maybe the Alternative Minimum Tax made this pointless? Otherwise, why not enable everyone who lives in a town to purchase food with pre-tax dollars?]