Author Topic: SALT Rant!!  (Read 2606 times)

DeniseNJ

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SALT Rant!!
« on: February 06, 2020, 01:27:13 PM »
Damn!  I paid 25K in state income and property taxes and 11K in mortgage interest.  That would have been itemized deductions of 36K.  But since I can't claim 25K SALT as that tops out at 10K, I'm left with deductions of only 21K so I have to take the standard deduction of 24K and can't itemize.  Which makes my AGI higher by at least 12K, and means I can't take the tuition credit for my college kid and also I contributed too much to our roths.  It's a freakin' snow ball of taxes.  That higher AGI is screwing up everything.  I think it's bad enough I have to pay fed tax on 15k more than the SALT limit, but then it disqualifies me from other benefits.  I'm so pissed.

I know that this is a MMP Problem, but our AGI is just over 200K and we're paying over 30K in fede tax alone.  I'm afraid to fill out the NY and NJ tax. 

Seriously I only get about half my paycheck after health ins., life ins., pension contribution, Medicare, Soc Sec, fed tax, state tax, etc. and now I go to file and I owe even more money.

tooqk4u22

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Re: SALT Rant!!
« Reply #1 on: February 06, 2020, 03:00:18 PM »
Ah NJ,  all the taxes and then some of CA but without the pretty weather and geography (nor growth and innovation).     

You mention pension contribution so do you work for the government?

DeniseNJ

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Re: SALT Rant!!
« Reply #2 on: February 06, 2020, 03:24:12 PM »
Ah NJ,  all the taxes and then some of CA but without the pretty weather and geography (nor growth and innovation).     

You mention pension contribution so do you work for the government?
Yep.  Federal and dh is a teacher so he works for state of NJ.  When I retire I'm moving to DE by the beach--or Costa Rica.  NJ is a piece of crap.  Between the prop tax and income tax, I rent rent a house elsewhere and still be way ahead.  Don't know what possessed me to move to NJ.  Now the kids are in school and I'm stuck for another 4 yrs.  Piece o' crap.

MishMash

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Re: SALT Rant!!
« Reply #3 on: February 06, 2020, 04:51:05 PM »
SALT didn't just hit high income folks, it screwed my 78 year old retired, living social security check to social security check, mother this year too. 

reeshau

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Re: SALT Rant!!
« Reply #4 on: February 07, 2020, 01:33:18 AM »
...and also I contributed too much to our roths.

It doesn't sound like you are looking for a silver lining, but you could recharacterize your Roth as non-deductible contributions to a traditional IRA, then back door it.  Still some paperwork and time / energy to do the flip-flop, but it's not a lost opportunity.  Maybe it could feel like a little revenge to still "get away" with it.

BTDretire

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Re: SALT Rant!!
« Reply #5 on: February 07, 2020, 06:59:34 AM »
Just look at it as "I get to keep 85% of my money"
On an income of $200,000, I don't think 15% is all that bad.           

tooqk4u22

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Re: SALT Rant!!
« Reply #6 on: February 07, 2020, 07:28:06 AM »
Ah NJ,  all the taxes and then some of CA but without the pretty weather and geography (nor growth and innovation).     

You mention pension contribution so do you work for the government?
Yep.  Federal and dh is a teacher so he works for state of NJ.  When I retire I'm moving to DE by the beach--or Costa Rica.  NJ is a piece of crap.  Between the prop tax and income tax, I rent rent a house elsewhere and still be way ahead.  Don't know what possessed me to move to NJ.  Now the kids are in school and I'm stuck for another 4 yrs.  Piece o' crap.

I ask the same thing of myself regularly.   At least being a fed and NJ teach you are direct beneficiaries of the tax receipts, even if you are giving more back now.   And Keep in mind that a significant portion of the property taxes, and to some extent state income taxes via transfers, go to teachers in NJ which have some of the highest salaries and benefits in the country (among other NE states). 

I think about the day when my kids are grown and on their own and hope to live somewhere else that has better mix but I fear that by raising my kids here they will then end up getting jobs and starting families here which means I will then stay here to be around them. 

DE beaches are great, the only problem I have with permanently relocating to an area like that is that outside of summer it is pretty desolate and there are very few things to keep interesting.

« Last Edit: February 07, 2020, 07:37:18 AM by tooqk4u22 »

StarBright

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Re: SALT Rant!!
« Reply #7 on: February 07, 2020, 08:53:20 AM »
Just posting to say I hear you!

We are also in an area with high property, state and local taxes (I'm in the midwest) and my DH is a teacher with a high required contribution and I am a remote worker who ends up paying full taxes to two states and two cities. 

The new tax law absolutely hurts.

It also feels like we'll have a ton of money for retirement (thanks to high required contributions) but not always enough to spend now.

It isn't fun. I feel your rant and ranted about it last tax year! :)

DeniseNJ

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Re: SALT Rant!!
« Reply #8 on: February 07, 2020, 09:12:51 AM »
Just look at it as "I get to keep 85% of my money"
On an income of $200,000, I don't think 15% is all that bad.         
Nope, not even close. I guess we probably made like 228K.  But I'm paying 31 in fed taxes, Another 25 in NJ/NY taxes, so that's 56 just in taxes.  Then there's Medicare and Soc Sec.  There's the pension, life ins, health ins, dh has mandatory union dues, dis ins, fam leave ins, and a bunch of other stuff.  We get about a bit more than half our pay.  So I guess if I get to keep 55% of 228K, that's not bad, I guess.  But I pay 10K in property tax on a not that nice town house.  And now I've got tuition for state college for two kids with no financial aid at all.

Wah wah, I know, first world problems.  It's just that 200,000 sounds like SO MUCH money and I thought we'd be flush by the time we got to this point.  Can't wait to wipe the dust of this state off my shoes.

DeniseNJ

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Re: SALT Rant!!
« Reply #9 on: February 07, 2020, 09:14:55 AM »
...and also I contributed too much to our roths.

It doesn't sound like you are looking for a silver lining, but you could recharacterize your Roth as non-deductible contributions to a traditional IRA, then back door it.  Still some paperwork and time / energy to do the flip-flop, but it's not a lost opportunity.  Maybe it could feel like a little revenge to still "get away" with it.

Yes, definitely.  I started that process yesterday.

Padonak

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Re: SALT Rant!!
« Reply #10 on: February 07, 2020, 09:22:13 AM »
So you made 238k last year paid by federal and  NJ taxpayers. You also don't like that you pay so much in taxes. Don't you think that you are part of the problem here?

DeniseNJ

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Re: SALT Rant!!
« Reply #11 on: February 07, 2020, 09:36:19 AM »
So you made 238k last year paid by federal and  NJ taxpayers. You also don't like that you pay so much in taxes. Don't you think that you are part of the problem here?
lol--yes I'm paid by tax payers for the job I do.  That I pay taxes and wish to limit my tax liabilty is unrelated to the fact that I work and get paid.  I also pay property taxes, bc, guess what, I own property.  Still I don't want to pay more than I'm supposed to.

Even ppl who work for Apple would take a discount on iphones if they can get one, without thinking they are putting their jobs on the line by reducing company profit.

Padonak

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Re: SALT Rant!!
« Reply #12 on: February 07, 2020, 03:31:10 PM »
So you made 238k last year paid by federal and  NJ taxpayers. You also don't like that you pay so much in taxes. Don't you think that you are part of the problem here?
lol--yes I'm paid by tax payers for the job I do.  That I pay taxes and wish to limit my tax liabilty is unrelated to the fact that I work and get paid.  I also pay property taxes, bc, guess what, I own property.  Still I don't want to pay more than I'm supposed to.

Even ppl who work for Apple would take a discount on iphones if they can get one, without thinking they are putting their jobs on the line by reducing company profit.

Here's the problem I have with this analogy. Nobody forces me at gunpoint to buy Apple products and pay Apple employees' salary.


DeniseNJ

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Re: SALT Rant!!
« Reply #13 on: February 07, 2020, 03:39:19 PM »
So you made 238k last year paid by federal and  NJ taxpayers. You also don't like that you pay so much in taxes. Don't you think that you are part of the problem here?
lol--yes I'm paid by tax payers for the job I do.  That I pay taxes and wish to limit my tax liabilty is unrelated to the fact that I work and get paid.  I also pay property taxes, bc, guess what, I own property.  Still I don't want to pay more than I'm supposed to.

Even ppl who work for Apple would take a discount on iphones if they can get one, without thinking they are putting their jobs on the line by reducing company profit.

Here's the problem I have with this analogy. Nobody forces me at gunpoint to buy Apple products and pay Apple employees' salary.

While it's true you HAVE to pay taxes, it's also true that you would have to pay for public services anyway, roads, libraries, security, Medicare, etc.  You'd have to pay the fire dept to come to your house and put out the blaze.  Hopefully, pooling our money helps us pay for public services more efficiently (maybe). 

the point is that anybody who works, gets paid, and anybody who pays taxes should only pay what they have to and not a penny more.  I'm not going to volunteer to pay more tax just bc I'm a gov't employee and somehow I'll get it back in my pay check.  (Not to mention that I make a lot less than I would in private industry, but that's another story--I'm not claiming my employment as a public servant is somehow a charitable endevour.)

And even as a fed I get to complain about taxes just like everyone else.  It's all-American.  I pay taxes so I get to whine and moan about it.

Padonak

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Re: SALT Rant!!
« Reply #14 on: February 07, 2020, 03:54:09 PM »
Fair enough...

BTDretire

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Re: SALT Rant!!
« Reply #15 on: February 08, 2020, 09:35:39 AM »
Just look at it as "I get to keep 85% of my money"
On an income of $200,000, I don't think 15% is all that bad.         
Nope, not even close. I guess we probably made like 228K.  But I'm paying 31 in fed taxes, Another 25 in NJ/NY taxes, so that's 56 just in taxes.  Then there's Medicare and Soc Sec.  There's the pension, life ins, health ins, dh has mandatory union dues, dis ins, fam leave ins, and a bunch of other stuff.  We get about a bit more than half our pay.  So I guess if I get to keep 55% of 228K, that's not bad, I guess.  But I pay 10K in property tax on a not that nice town house.  And now I've got tuition for state college for two kids with no financial aid at all.


 That is really a bad tax situation. I'm in Fl, No state tax. I had years were we earned close to $100k and got to keep 80%, it would have been higher, about 86% but we were self employed and paid both halves of the SS tax. Plus I only pay about $1100 property tax.
You start with $228k end with $115k, I start with $95K end with $76k.
Plus the cost of living is at least 15% less in Fl.
 But think of all the great services your taxes buy :-(
 Sorry for your situation.
Rejoice in the benefits a Fed employee has.



dhc

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Re: SALT Rant!!
« Reply #16 on: February 16, 2020, 07:56:36 AM »
Just look at it as "I get to keep 85% of my money"
On an income of $200,000, I don't think 15% is all that bad.         
Nope, not even close. I guess we probably made like 228K.  But I'm paying 31 in fed taxes, Another 25 in NJ/NY taxes, so that's 56 just in taxes.  Then there's Medicare and Soc Sec.  There's the pension, life ins, health ins, dh has mandatory union dues, dis ins, fam leave ins, and a bunch of other stuff.  We get about a bit more than half our pay.  So I guess if I get to keep 55% of 228K, that's not bad, I guess.  But I pay 10K in property tax on a not that nice town house.  And now I've got tuition for state college for two kids with no financial aid at all.

Wah wah, I know, first world problems.  It's just that 200,000 sounds like SO MUCH money and I thought we'd be flush by the time we got to this point.  Can't wait to wipe the dust of this state off my shoes.


You know that pension, life insurance, health insurance, disability insurance, etc are all benefits, not taxes, right? I mean, if you really wanted to have no insurance, you could probably opt out and "keep" that money, although of course then it would be taxable, so thinking of it as not getting paid that amount is kind of backwards.


And then you complain about tuition...umm, that's spending. When you want expensive things, it costs money.


I'm not defending the removal of SALT deductions, and I know you recognize it's a first-world problem, but your posts sure make it sound like you just want something for nothing.

v8rx7guy

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Re: SALT Rant!!
« Reply #17 on: February 16, 2020, 08:19:08 AM »
Ah NJ,  all the taxes and then some of CA but without the pretty weather and geography (nor growth and innovation).     

You mention pension contribution so do you work for the government?
Yep.  Federal and dh is a teacher so he works for state of NJ.  When I retire I'm moving to DE by the beach--or Costa Rica.  NJ is a piece of crap.  Between the prop tax and income tax, I rent rent a house elsewhere and still be way ahead.  Don't know what possessed me to move to NJ.  Now the kids are in school and I'm stuck for another 4 yrs.  Piece o' crap.

Why are you stuck in NJ?  Is it because you need to get in-state tuition rates?

salt cured

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Re: SALT Rant!!
« Reply #18 on: February 16, 2020, 08:52:13 AM »
You’re both in the public sector, do neither of you have access to a 457b? Maxing one or two out would lower your taxable income by another $20k-$40k.

DeniseNJ

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Re: SALT Rant!!
« Reply #19 on: February 16, 2020, 06:43:03 PM »
Ah NJ,  all the taxes and then some of CA but without the pretty weather and geography (nor growth and innovation).     

You mention pension contribution so do you work for the government?
Yep.  Federal and dh is a teacher so he works for state of NJ.  When I retire I'm moving to DE by the beach--or Costa Rica.  NJ is a piece of crap.  Between the prop tax and income tax, I rent rent a house elsewhere and still be way ahead.  Don't know what possessed me to move to NJ.  Now the kids are in school and I'm stuck for another 4 yrs.  Piece o' crap.

Why are you stuck in NJ?  Is it because you need to get in-state tuition rates?
Yep in state tuition.

DeniseNJ

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Re: SALT Rant!!
« Reply #20 on: February 16, 2020, 06:47:58 PM »
Just look at it as "I get to keep 85% of my money"
On an income of $200,000, I don't think 15% is all that bad.         
Nope, not even close. I guess we probably made like 228K.  But I'm paying 31 in fed taxes, Another 25 in NJ/NY taxes, so that's 56 just in taxes.  Then there's Medicare and Soc Sec.  There's the pension, life ins, health ins, dh has mandatory union dues, dis ins, fam leave ins, and a bunch of other stuff.  We get about a bit more than half our pay.  So I guess if I get to keep 55% of 228K, that's not bad, I guess.  But I pay 10K in property tax on a not that nice town house.  And now I've got tuition for state college for two kids with no financial aid at all.

Wah wah, I know, first world problems.  It's just that 200,000 sounds like SO MUCH money and I thought we'd be flush by the time we got to this point.  Can't wait to wipe the dust of this state off my shoes.


You know that pension, life insurance, health insurance, disability insurance, etc are all benefits, not taxes, right? I mean, if you really wanted to have no insurance, you could probably opt out and "keep" that money, although of course then it would be taxable, so thinking of it as not getting paid that amount is kind of backwards.


And then you complain about tuition...umm, that's spending. When you want expensive things, it costs money.


I'm not defending the removal of SALT deductions, and I know you recognize it's a first-world problem, but your posts sure make it sound like you just want something for nothing.
True, but I was more showing how you could make a ton of money and still bring home half a pay check. Most ins is optional, some not. Don't want something for nothing, although I'd take it. Just lamenting how getting screwed on the salt tax gives me one more reason to hate NJ

StarBright

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Re: SALT Rant!!
« Reply #21 on: February 17, 2020, 05:59:38 AM »
You’re both in the public sector, do neither of you have access to a 457b? Maxing one or two out would lower your taxable income by another $20k-$40k.

I'm not sure about NJ but where I live local taxes are based on gross, not adjusted income. It is particularly rough on teachers and government workers because after insurance, union dues and defined contribution for retirement they generally are bringing home less than half of what they make. So no matter what your paycheck says, you are paying local and school on your full income (and usually to more than one municipality because here you generally pay to the town where your job is located and where you are living).

We stopped putting into a 457b because while we were doing great saving for retirement, we were finding it uncomfortable living on our take home income.

FINate

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Re: SALT Rant!!
« Reply #22 on: February 17, 2020, 08:57:53 AM »
True, but I was more showing how you could make a ton of money and still bring home half a pay check. Most ins is optional, some not. Don't want something for nothing, although I'd take it. Just lamenting how getting screwed on the salt tax gives me one more reason to hate NJ

Just to be clear: It's not a tax, it's a cap on the deduction for other taxes paid. I'm sure you know this, but words matter. Presumably state and local taxes pay for services. The higher the SALT the higher the services...unless, of course, you want to argue that government is highly inefficient.

How is it equitable for those paying for, and receiving, very high level of services to then recieve an additional tax break at the federal level over and above lower service areas?

If the problem is that the tax burden w/o the SALT deduction falls disproportionately on middle class households (though I think anyone would be hard-pressed to call +200k middle class) then state and local governments have the ability to remedy who and how much they tax. In other words, your rant should be directed at your elected state and local officials.

seattlecyclone

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Re: SALT Rant!!
« Reply #23 on: February 17, 2020, 01:04:58 PM »
How is it equitable for those paying for, and receiving, very high level of services to then recieve an additional tax break at the federal level over and above lower service areas?

The argument for this is basically that the federal government doles out funding to states pretty inequitably. States with higher incomes (which often correlates with bigger cities and more Democrats) tend to pay in way more to the federal government than they get back. Poorer states often have a higher portion of their funding for various things like roads and schools come from the federal government, while the richer states have to charge more state tax to get the same level of service. The deduction for state taxes helps bring things closer to balance, while limiting it increases the disparity in overall transfers to/from the federal government on a state-by-state basis.

FINate

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Re: SALT Rant!!
« Reply #24 on: February 17, 2020, 01:48:11 PM »
How is it equitable for those paying for, and receiving, very high level of services to then recieve an additional tax break at the federal level over and above lower service areas?

The argument for this is basically that the federal government doles out funding to states pretty inequitably. States with higher incomes (which often correlates with bigger cities and more Democrats) tend to pay in way more to the federal government than they get back. Poorer states often have a higher portion of their funding for various things like roads and schools come from the federal government, while the richer states have to charge more state tax to get the same level of service. The deduction for state taxes helps bring things closer to balance, while limiting it increases the disparity in overall transfers to/from the federal government on a state-by-state basis.

I get that higher income states pay more in income taxes, this is a natural result of both higher incomes and progressive tax brackets. What I'm missing, though, is why it's necessarily the case that richer states have to charge more in state taxes to get the same level of service, and why this should be solved at the federal level.

seattlecyclone

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Re: SALT Rant!!
« Reply #25 on: February 17, 2020, 02:22:52 PM »
How is it equitable for those paying for, and receiving, very high level of services to then recieve an additional tax break at the federal level over and above lower service areas?

The argument for this is basically that the federal government doles out funding to states pretty inequitably. States with higher incomes (which often correlates with bigger cities and more Democrats) tend to pay in way more to the federal government than they get back. Poorer states often have a higher portion of their funding for various things like roads and schools come from the federal government, while the richer states have to charge more state tax to get the same level of service. The deduction for state taxes helps bring things closer to balance, while limiting it increases the disparity in overall transfers to/from the federal government on a state-by-state basis.

I get that higher income states pay more in income taxes, this is a natural result of both higher incomes and progressive tax brackets. What I'm missing, though, is why it's necessarily the case that richer states have to charge more in state taxes to get the same level of service, and why this should be solved at the federal level.

If State A gets $120 per capita in federal highway funding and State B gets $100 per capita, State B needs to charge an extra $20 in state taxes if they want to spend the same amount on highways as State A gets for "free" from the feds. The deduction for state tax then gives State B's residents back a fraction of that $20. The $10k limitation gives them back a smaller fraction of the $20.

FINate

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Re: SALT Rant!!
« Reply #26 on: February 17, 2020, 03:34:16 PM »
How is it equitable for those paying for, and receiving, very high level of services to then recieve an additional tax break at the federal level over and above lower service areas?

The argument for this is basically that the federal government doles out funding to states pretty inequitably. States with higher incomes (which often correlates with bigger cities and more Democrats) tend to pay in way more to the federal government than they get back. Poorer states often have a higher portion of their funding for various things like roads and schools come from the federal government, while the richer states have to charge more state tax to get the same level of service. The deduction for state taxes helps bring things closer to balance, while limiting it increases the disparity in overall transfers to/from the federal government on a state-by-state basis.

I get that higher income states pay more in income taxes, this is a natural result of both higher incomes and progressive tax brackets. What I'm missing, though, is why it's necessarily the case that richer states have to charge more in state taxes to get the same level of service, and why this should be solved at the federal level.

If State A gets $120 per capita in federal highway funding and State B gets $100 per capita, State B needs to charge an extra $20 in state taxes if they want to spend the same amount on highways as State A gets for "free" from the feds. The deduction for state tax then gives State B's residents back a fraction of that $20. The $10k limitation gives them back a smaller fraction of the $20.

If you have data on rich states getting less funding per capita I'm interested in seeing it. I've always heard rich states get less than they pay, not that they get less per person.

Even so, assuming this is correct, isn't the best solution to change the funding levels instead of an elaborate deduction mechanism that is unevenn, helping those who run up big tax bills (eg buying way more house than needed) vs those living more modesty.

seattlecyclone

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Re: SALT Rant!!
« Reply #27 on: February 17, 2020, 03:56:17 PM »
How is it equitable for those paying for, and receiving, very high level of services to then recieve an additional tax break at the federal level over and above lower service areas?

The argument for this is basically that the federal government doles out funding to states pretty inequitably. States with higher incomes (which often correlates with bigger cities and more Democrats) tend to pay in way more to the federal government than they get back. Poorer states often have a higher portion of their funding for various things like roads and schools come from the federal government, while the richer states have to charge more state tax to get the same level of service. The deduction for state taxes helps bring things closer to balance, while limiting it increases the disparity in overall transfers to/from the federal government on a state-by-state basis.

I get that higher income states pay more in income taxes, this is a natural result of both higher incomes and progressive tax brackets. What I'm missing, though, is why it's necessarily the case that richer states have to charge more in state taxes to get the same level of service, and why this should be solved at the federal level.

If State A gets $120 per capita in federal highway funding and State B gets $100 per capita, State B needs to charge an extra $20 in state taxes if they want to spend the same amount on highways as State A gets for "free" from the feds. The deduction for state tax then gives State B's residents back a fraction of that $20. The $10k limitation gives them back a smaller fraction of the $20.

If you have data on rich states getting less funding per capita I'm interested in seeing it. I've always heard rich states get less than they pay, not that they get less per person.

I'm not going to spend a huge amount of time doing this research, but here's a table of federal highway funding by state. Looks like there's a total of $42 billion doled out among the states last year. This is about $128 per person, but some states got more than this and others less. Mississippi (one of the poorest states) got about $175 per person, while Maryland (one of the richest) got $107.

Quote
Even so, assuming this is correct, isn't the best solution to change the funding levels instead of an elaborate deduction mechanism that is unevenn, helping those who run up big tax bills (eg buying way more house than needed) vs those living more modesty.

I'm not arguing that this tax break is the best solution (or even a good one). I'm just saying that removing it (without correcting funding imbalances at the source) has the effect of exacerbating these imbalances rather than narrowing them.

FINate

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Re: SALT Rant!!
« Reply #28 on: February 17, 2020, 07:10:15 PM »
I'm not going to spend a huge amount of time doing this research, but here's a table of federal highway funding by state. Looks like there's a total of $42 billion doled out among the states last year. This is about $128 per person, but some states got more than this and others less. Mississippi (one of the poorest states) got about $175 per person, while Maryland (one of the richest) got $107.

Quote
Even so, assuming this is correct, isn't the best solution to change the funding levels instead of an elaborate deduction mechanism that is unevenn, helping those who run up big tax bills (eg buying way more house than needed) vs those living more modesty.

I'm not arguing that this tax break is the best solution (or even a good one). I'm just saying that removing it (without correcting funding imbalances at the source) has the effect of exacerbating these imbalances rather than narrowing them.

Thanks for the data. I did some searching around today and found similar numbers. The numbers are all over the place. NY:$210/person, NJ:$121/person, CA:$108/person...I'm not seeing any rhyme or reason to the difference, other then for some reason Congress has apportioned different amounts to different states, presumably because each have different projects and needs. On average red states are more dependant on federal dollars than blue states (I was already aware of this), but on an individual basis they are again all over the map, with some states like KS the least dependant, and CA and NY middling, and of course a few poor red states very dependant. But even the notion of dependency is difficult to nail down. What federal dollars should be counted? Federal detention facilities, military installations, research facilities? I very much doubt many Californians would welcome an artillery range or munitions dump in their area.

Regarding the resulting imbalance of caping the deduction. The Federal dollars for highway funding in CA are near $4B. To put that in context the state budget is about $200B, so this is around 2% of the overall budget. What's more, CA is currently generating about a $10B surplus (plus or minus a few billion depending on how you count it). The surplus is more than twice the Federal highway funds. The level of federal funding for highways is relatively small compared to state spending and the effects of the SALT cap.

As a lifelong Californian I have no issue whatsoever with money from rich states going to help poorer states. And certainly do not mind if more funds go to fund things like the interstate network in sparsely populated states. The value of these networks isn't just the linear feet of pavement in a given location, but the interconnectedness that the entire network provides. The whole is more than the sum of the parts.

From a policy perspective, the disproportionate allocation of funds is why we have an income tax and the 16th amendment to begin with. If a state is not getting the funds they need then, again, take it up with your elected representatives to do a better job of getting funding. 
« Last Edit: February 17, 2020, 07:12:33 PM by FINate »

tooqk4u22

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Re: SALT Rant!!
« Reply #29 on: February 18, 2020, 07:25:57 AM »
How is it equitable for those paying for, and receiving, very high level of services to then recieve an additional tax break at the federal level over and above lower service areas?

The argument for this is basically that the federal government doles out funding to states pretty inequitably. States with higher incomes (which often correlates with bigger cities and more Democrats) tend to pay in way more to the federal government than they get back. Poorer states often have a higher portion of their funding for various things like roads and schools come from the federal government, while the richer states have to charge more state tax to get the same level of service. The deduction for state taxes helps bring things closer to balance, while limiting it increases the disparity in overall transfers to/from the federal government on a state-by-state basis.

I get that higher income states pay more in income taxes, this is a natural result of both higher incomes and progressive tax brackets. What I'm missing, though, is why it's necessarily the case that richer states have to charge more in state taxes to get the same level of service, and why this should be solved at the federal level.

If State A gets $120 per capita in federal highway funding and State B gets $100 per capita, State B needs to charge an extra $20 in state taxes if they want to spend the same amount on highways as State A gets for "free" from the feds. The deduction for state tax then gives State B's residents back a fraction of that $20. The $10k limitation gives them back a smaller fraction of the $20.

If you have data on rich states getting less funding per capita I'm interested in seeing it. I've always heard rich states get less than they pay, not that they get less per person.

I'm not going to spend a huge amount of time doing this research, but here's a table of federal highway funding by state. Looks like there's a total of $42 billion doled out among the states last year. This is about $128 per person, but some states got more than this and others less. Mississippi (one of the poorest states) got about $175 per person, while Maryland (one of the richest) got $107.

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Even so, assuming this is correct, isn't the best solution to change the funding levels instead of an elaborate deduction mechanism that is unevenn, helping those who run up big tax bills (eg buying way more house than needed) vs those living more modesty.

I'm not arguing that this tax break is the best solution (or even a good one). I'm just saying that removing it (without correcting funding imbalances at the source) has the effect of exacerbating these imbalances rather than narrowing them.

According to this https://blog.cubitplanning.com/2010/02/road-miles-by-state/  MS has 161,909 lane miles and MD has 70,792 lane miles.   So by that measure MD might be getting more than it should.   Of course there are other variables to consider. 

But more comprehensively, there are definitely states that get more back from the fed than they contribute, in fact its most of them.  Only a handful of states pay more into the fed than they get back.   

« Last Edit: February 18, 2020, 07:38:10 AM by tooqk4u22 »

dandarc

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Re: SALT Rant!!
« Reply #30 on: February 18, 2020, 07:35:26 AM »
My limited experience driving in Maryland is that they desperately need more lane-miles-per-capita. Not as much as I-95 needs a third lane in South Carolina the whole way, but it is pretty bad.

Undecided

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Re: SALT Rant!!
« Reply #31 on: February 18, 2020, 11:27:06 AM »
True, but I was more showing how you could make a ton of money and still bring home half a pay check. Most ins is optional, some not. Don't want something for nothing, although I'd take it. Just lamenting how getting screwed on the salt tax gives me one more reason to hate NJ

Just to be clear: It's not a tax, it's a cap on the deduction for other taxes paid. I'm sure you know this, but words matter. Presumably state and local taxes pay for services. The higher the SALT the higher the services...unless, of course, you want to argue that government is highly inefficient.

How is it equitable for those paying for, and receiving, very high level of services to then recieve an additional tax break at the federal level over and above lower service areas?

If the problem is that the tax burden w/o the SALT deduction falls disproportionately on middle class households (though I think anyone would be hard-pressed to call +200k middle class) then state and local governments have the ability to remedy who and how much they tax. In other words, your rant should be directed at your elected state and local officials.

In other, other words, this is exactly the point of this aspect of the 2017 tax law---to create pressure to shrink state governments, not just the (non-military) federal government.

ctuser1

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Re: SALT Rant!!
« Reply #32 on: February 18, 2020, 11:53:09 AM »
In other, other words, this is exactly the point of this aspect of the 2017 tax law---to create pressure to shrink state governments, not just the (non-military) federal government.

Taking your logic to it's conclusion:
The goal was to put pressure on the "successful" states, the ones that give, so that they are brought down to the same level as the more ideologically conforming "taker" states so that their regressive tax regimes can be preserved!!

It is a typical modus-operandi of any authoritarian regime or ideology - bring down the uppity over-achievers so that everyone is equally miserable!!

How nice!!