Charles Lane (no relation) makes the obvious point:
What the deduction does is enable higher-income states and localities to tax — and spend — more than they otherwise would, while shifting some of the cost to other states. It also encourages them to collect revenue in forms that are easier to deduct on federal returns.
Two states, California and New York, reaped almost 30 percent of the deduction’s value in 2009, the latest year for which I could find Internal Revenue Service data. Other states that benefit disproportionately include Connecticut, New Jersey, Illinois, Massachusetts and Maryland.
I’m arguing against interest here, by the way. My taxes would go up. I assume, so would Charles’. And so would about 3/4ths of the Media elite’s, which is why you’re going to see a lot of people in print and broadcast journalism get the vapors over this. These folks are on the sweet side of a wealth transfer, after all.
…Which is something that they should be disclosing, mind you.
Moe Lane
Illinois state income tax is 5%, and the Illinois 1040 starts by asking for the federally adjusted gross and dividend/interest right off the fed 1040.
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5%, though, isn’t where Illinois has a big deduction… The real estate tax deduction (fed schedule A) is usually equal or greater. I’m not sure, and don’t feel like digging through http://www.city-data.com to see how a more property-tax-centric State would stack up.
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Please don’t take this the wrong way, I think killing the state income tax deduction is a Good Thing, and one that we should pursue. It just can’t be the end goal… More of a milestone.
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Mew
Kill the state deduction, also kill mortgage deductions over 250K. Hit the blues where it hurts
Step the mortgage deduction, 100% below 50,000 .. drop 10% per 50,000 as follows:
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100,000 mortgage 90% deductible
150,000 mortgage 80% deductible
200,000 mortgage 70% deductible
250,000 mortgage 60% deductible
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etc. etc.
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Oh, and while we’re at it, re-index the AMT to the rate of inflation and reasonable dollar amounts, and add a 20% excise tax on any monies over $1,000,000.00 earned in a period of less than 10 months. (i.e. a typical Hollywood film shoot) Y’know, if we’re gonna go for blood, let’s go for the *throat*.
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Mew
I don’t see this every happening, but it does seem fundamentally unfair that these blue states can effectively short the feds money because they choose a bunch of perks through state govt. that they have to pay for.
We don’t have a state income tax here, but at one point we were able to deduct some portion of sales tax.
The weird thing about taxes is I notice that most liberals know more about deductions and tax breaks than most conservatives I know. This is just anecdotal from discussions with people that aren’t super politically active.
I have observed the same thing, earlgrey.
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One of my more .. let’s say plugged-in conservative associates pointed out a couple books any conservative small business type should have memorized, including:
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http://www.amazon.com/Succeed-Nice-Guys-Small-business/dp/0930566017/ref=sr_1_1?s=books&ie=UTF8&qid=1352394496&sr=1-1
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(not sure if Moe will get a ref off that link, so maybe click it, close out, then go back via a Moe link and search by title)
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In short, the tax laws aren’t fair, and conservatives need to get up to speed.
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Mew
Maybe conservatives wouldn’t be so conservative if they were as successful at getting tax breaks as libs are. Ha Ha.
Let’s rethink dividend taxation. Income from dividends get special treatment because they are paid out of after tax income by corporations.
Make dividends paid deductible to corporations. This might encourage them to pay higher dividend rates and re-patriot overseas earnings. Make up for lost tax revenue by taxing dividends as ordinary income. Let Kerry and Buffet pay taxes on their real income.
Freddie, I like that. No .. I *LIKE* that.
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Dividend income as regular income and dividends as regular expenses (i.e. tax-deductible profit-reducing) makes *sense* of both.
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It also collects the tax at the right place, individuals not corporations – any corporation lacking a need to stockpile ca$h will declare any profits as a dividend and pay no tax, while the investors who receive those dividends will.
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Mew