undefined | Better HN

0 pointsgreysphere5y ago0 comments

Imagine these scenarios: People want to build a park

Either 1) A local government increases taxes to build a park

2) The federal government increases taxes to build a park

And Either A) A SALT deduction exists

B) A SALT deduction doesn't exist

And independent of this, the federal government collects tax on income to do whatever it currently does.

1A) people end up paying: (income - income.(park tax)).tax - income.(park tax) -for-> park + std_services

2A) people end up paying: (income).(tax + park tax) -for-> park + std_services

1B) people end up paying: (income).tax - income.park_tax -for-> park + std_services

2B) people end up paying: (income).(tax + park tax) -for-> park + std_services

Note 1A, 2A and 2B are all equivalent. In 1B people pay more overall tax to get the same services.

So under B, any reasonable person given the choice between 'should the local government build the park (1B), or should the federal government build the park (2B)', should logically choose 'federal (2B)'.

IE the local government's ability to do build parks is weakened by the lack of a SALT exemption.

0 comments

3 comments · 1 top-level

disgrunt5y ago· 2 in thread

Given your example, the rich local tax payer is a direct beneficiary of the park they helped fund through local taxes. Who is the beneficiary of their uncapped deductions? The rich local tax payer is the obvious primary beneficiary, and indirectly the local government may be a benefactor to this uncapped deduction. Meanwhile, the rich local tax payer pays fewer federal taxes, the wealthy area in which this tax payer lives gets a new park, which further increases property values in an already rich area. Rich get richer. What's not to like?

Forgive me if I take the position that if a rich local tax payer wants a park, they should pay for the park and not expect the federal government to allow them to deduct that expenditure. They're directly benefitting from the park. If they don't like the high local taxes, then they can accept the trade-off of living in a lower taxed area. Who knows, maybe the rich person moving to that area will help spread the wealth instead of pooling those tax dollars in a few exclusive areas?

greysphereOP5y ago

There was no rich/poor distinction in my example.

The only variant is local vs federal funding.

And comments to 'who does the park value more', is irrelevant as well. The park could be substituted with anything with any moral (or immoral) value.

If it cost 10$ in resources to cure cancer for everyone in the world forever, the federal government would be able to do it for 10$, while for the local government it would cost 12$, 10$ to cure cancer and 2$ in taxes paid to the federal government by it's constituency.

disgrunt5y ago

There was no rich/poor distinction in your example because you're ignoring the fact that the SALT deduction only comes into effect with itemized tax filings. >90% of the country takes the standard deduction, of which this SALT deduction has no effect. As such, only the highest tax brackets are affected by this cap.

Let's be honest about what this uncapped deduction was, it was a means to disproportionately keep rich tax payers tax dollars in their local areas. The middle and lower classes don't even come close to this $10K cap, nor do they file itemized taxes. Do we really need tax laws to help further the rich enrich themselves?

If you really want to end this double taxation, then I'm all in favor. But it must apply to all forms of taxation and all tax brackets.

j / k navigate · click thread line to collapse