The trouble with large numbers

exemptWith our budget vote I am standing with the 99 percent who will see a tax break with a compromise on the state and local tax deduction. The hardworking people I’m standing with deserve more money in their paychecks and the good paying jobs that tax reform will bring to our region. –Rep. Tom Reed (facebook, Oct. 26)

(Reed has never offered evidence in support of his claim.)

The trouble with large numbers

The trouble with large numbers is that we can’t grasp them. Tom Reed claims that SALT (State and local tax exemption) benefits only the wealthy. There is some truth in this.

  • Low income taxpayers don’t itemize.
  • Taxpayers who do itemize pay more in State and local taxes.

But what about very wealthy persons, the rich and super rich? Donald Trump is said to have amassed a fortune of 3 billion in about thirty years. This implies an annual income of about 100 million which is incredible, off the charts.

The Tax Foundation (right leaning) supports Tom’s view that SALT favors the rich. But the data they use covers incomes from 0 to a million–a hundred time less than Trump’s presumed income. Is SALT valuable to the likes of Donald Trump? No way:

  • The only tax Trump pays is probably AMT (Alternative Minimum Tax), which is slated for repeal as is the Estate Tax.
  • Trump presumably takes advantages of tax loopholes which dwarf SALT.

Reed, like Trump, refuses to release his tax returns. It would embarrass his family, Reed says.

Tax policy is hard. It is blatantly misleading to suggest that SALT benefits the rich without defining “rich” and without considering the many other factors which might make tax policy “fair.”

Republicans continue to squirm over taxes. The latest proposal is to allow property tax deduction but not income tax or sales tax deduction. This is a compromise between Republican factions, rather than some more reasonable compromise. Gary Cohn ( Director of the National Economic Council and chief economic adviser to President Donald Trump) has proposed a gas tax increase, which Tom Reed has hitherto bitterly opposed. Will Reed now change his mind about that?

Personal disclaimer: I never had income in six figures, but I did benefit from SALT.

The articles cited give the right-leaning Tax Foundation’s view, not mine.

https://taxfoundation.org/state-and-local-tax-deduction-primer/

https://taxfoundation.org/five-implications-retaining-property-tax-deduction-federal-tax-reform/

 

 

 

 

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About whungerford

* Contributor at NewNY23rd.com where we discuss the politics, economics, and events of the New New York 23rd Congressional District (Allegany, Cattaraugus, Chautauqua, Chemung, (Eastern) Ontario, Schuyler, Seneca, Steuben,Tioga, Tompkins, and Yates Counties) Please visit and comment on whatever strikes your fancy.
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