When I saw the headline “Minimizing the Pain of the Trump Tax Cuts” over at the New York Times, I expected the usual liberal talking point about tax cuts; that they overwhelmingly benefit the rich. My second guess was that perhaps we’d hear an argument about how the tax cuts are starving government, which will force cuts to social services for the poor.
Little did I expect to see the Times bemoaning the fact that their fellow coastal elites would be paying more in taxes.
As you may already know, part of the Trump tax cut package (which cut personal income tax rates, and the corporate income tax) capped state and local tax deductions (such as state and local income taxes, and property taxes) to $10,000. While that cap doesn’t affect the average person, it does severely limit how much income a wealthy person can deduct against their federal income taxes.
This mainly impacts the wealthy in left-leaning coastal states. Simply because home prices are higher, those on the coasts have higher property tax burdens, and income taxes are higher on the coastal states than the heartland. The mortgage interest deduction is also capped in the Trump tax plan, only now applying to mortgages up to $750,000. These deductions are known as SALT (State And Local Tax) deductions.
And all of a sudden, the Times isn’t happy with that. “Longtime New Yorkers Joanne and Vince Intrieri left their 3,100-square-foot three-bedroom near the United Nations earlier this year, trading it in for a sunny three-bedroom condominium in Downtown Miami,” their story begins. “My husband and I have been in New York City for more than 20 years, but we aren’t tied to an office anymore and our kids are older,” said Ms. Intrieri. “Between the state and city taxes, plus about $50,000 in property taxes, it is a lot of money going out the door. Why do it?”
According to the Times, nearly half of Manhattan’s taxpayers have taken SALT deductions in the past, and the average deduction has been over $60,000 a year. Because of the prior uncapped deductibility, such SALT deductions allows high-tax states to outsource the cost of their high taxes to the federal government (and thus everyone in lower taxed states).
The Times continues, in amazement that the laws of economics are still operating; “The specter of higher taxes has prompted some New Yorkers, like the Intrieris, to seek relief by moving to lower-tax states, while others have deliberately sought out buildings with tax abatements to reduce their costs.”
Hasn’t this been the conservative argument all along, that high taxes make states and businesses uncompetitive? Florida has no state income tax, and low property taxes, which is hard to pass up. The Times quotes Robert Westley, a New York City-based CPA, who said that “With almost all of our clients it (moving) comes up, and I would say about half of them are really looking into it.”
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The housing market has grown in Florida since the Trump tax cuts – and slowed in New York. And of course, it’s hardly just the housing market of Florida (and other relatively low tax states) benefiting. Contrary to the most hysterical predictions, the Trump tax cuts that have resulted in record corporate earnings, rising wages, and the lowest unemployment of this century, and a stock market that is constantly hitting all-time-highs.
And despite all that, the Times complaint is that it is causing rich people to pay too much in taxes and move.
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