While nearly everyone is seeing a tax cut as a result of President Donald Trump’s Tax Cuts and Jobs Act passed in December of last year, the wealthy in the particularly liberal States are seeing just the opposite.
Residents of States with high State and local taxes, such as California and other coastal States, are more likely to face tax increases than residents of other states. This is in large part because the Trump tax cuts package severely restricts the ability of taxpayers to deduct state and local taxes on their federal tax returns. The inclusion of a last-minute compromise that allows taxpayers to deduct a combination of state and local income taxes and property taxes capped at $10,000 was not enough to offset its effects for some.
In particular, California is getting hit the hardest. According to the Sacramento Bee:
Californians will lose a collective $12 billion because the new law caps a deduction they have been able to take for paying their state and local taxes, according to a new analysis by the Franchise Tax Board.
Very wealthy Californians earning more than $1 million a year will pay the lion’s share of that money, with 43,000 of them paying a combined $9 billion. About 751,000 households with incomes under $250,000 probably will owe more tax. All together, they’ll owe an extra $1.1 billion.
Overall, however, most Californians will see a tax cut. The new federal law doubles the standard deduction available to all taxpayers, and it increases a child tax credit.
On average, that comes out to $209,302 per family that will be owed by those households earning more than a million dollars a year in California. Keep in mind, however, that is just an average and is heavily skewed upwards by the fact that California is home to more of the nation’s billionaires than any other State (and country except China).
Amusingly, this could explain why someone like Nancy Pelosi called Trump’s tax plan the “worst bill in the history of Congress,” because it costs her money. According to her 2016 financial disclosure, she has assets that generate up to over $10 million a year (though it’s impossible to know the exact figure, because the disclosure form only gives a range of figures, such as between $0-100k, or $500k-$1m from a specific asset).
It’ll be interesting to see the effects that this has on the State of California population, which is already hemorrhaging taxpayers. In 2016, California had 142,932 more residents exit to live in other states than move to California. The top destination for those fleeing has been Texas, a State that’s the polar opposite to California politically.
Is Pelosi only thinking about herself? Let us know your thoughts in the comments below.
