> "it also mostly only affected rich people in Democrat led states"
Please could you explain why? (Assuming it's not just that Democratic states have more wealthy people?)
edit: thanks for the replies!
Please could you explain why? (Assuming it's not just that Democratic states have more wealthy people?)
edit: thanks for the replies!
Edit: also, Democrat led states have higher land prices, so generally, percent based taxes like property tax will be nominally much higher and hit the SALT deduction cap quicker.
It disproportionately punishes richer people in states with higher taxes (usually Democrat led) compared to richer people in states with lower taxes (usually Republican led), giving more incentive for richer people in states with higher taxes to either vote for lower taxes in their own state (i.e. vote Republican), or move to a state with lower taxes (a Republican led state).
“More concentrated on higher-income earners” is both more accurate, and more relevant to the effect of the SALT limit (though having higher average income is also relevant to the SALT limit, overall tax burden and distribution across the income spectrum aside.)
E.g., R-trifecta Iowa has a higher overall tax burden than D-trifecta California, but substantially lower high-end taxes. [0][1]
[0] https://wallethub.com/edu/states-with-highest-lowest-tax-bur...
[1] actual total state & local tax burden by income is hard to find, but top income tax rates are indicative here: https://turbotax.intuit.com/tax-tips/fun-facts/states-with-t...
Edit: my context was about taxes in general not specific enough to SALT
“High earners” includes capitalists; one of the reasons the SALT cap hits hard in California is that California not only has the highest high-end income tax rate, it (unlike many states and the federal government) taxes capital gains as normal income, not at a reduced rate. Both parts of this policy are things that the SALT cap is designed to put pressure against.
The SALT cap, not the state and local taxes it targets, is pro-capitalist and anti-worker.
Because instead of eliminating deductibility they capped it, and Democratic states in general have more people with state and local taxes above the cap, because of a combination of higher average income and more progressive state taxes (often characterized as higher, but even when this is true in overall tax burden, its often still lower for same-income taxpayers for low- to moderate-income.)
Cities have high cost of living, and also tend to have high income earners. So tax burdens (and incomes, and expenses) tend to be much higher. In some cases, 5-10x higher.
The largest cities in the US are also in democratically controlled states with high taxes.
SALT allowed many of those high earners in those states to offset some of the tax burden by offsetting their federal taxes. Essentially moving tax revenue from the fed to the state.
So the GOP managed to screw over the primary fundraisers of their opponents and increase tax transfers to the federal gov’t at the same time by capping SALT.
Most of their supporters (and all their key votes) are in rural areas with lower cost of living (and often state taxes) which generally fit well under the cap.
More accurately, before the limit, SALT excluded all covered state and local for the purposes of federal income tax, keeping federal tax policy neutral on state tax policy.
With the limit, there is a cap on the absolute amount of state and local taxes per person that get that treatment, creating a federal tax penalty for both strongly progressive taxes (which concentrate tax burden on a smaller number of rich taxpayers) and state economic success (which, for any tax policy less regressive than a straight capitation, increases the absolute tax liability per individual.)
For instance, for pre-cap SALT to have resulted in a truly neutral federal tax policy, it would have had to not existed at all and have federal taxes be unaffected by state taxes.
Since it did exist, assuming a population has some fixed amount of taxes they consider ‘too much’ and all gov’t actors are looking to maximize towards that limit, it incentivizes states to take as much as they can, since the federal taxes ‘give way’.
The cap basically says ‘eh, we’ll let you do that, but only so much’. The ‘how much’ just so happens to still benefit their constituents while not helping their opponent’s constituents.
Which yes, has those effects you are stating, as their constituents tend to be more rural, which tends to have less economic activity in general, have lower incomes, etc, and hence aren’t hurt in the same way.
Though many of their donors tend to have higher incomes, and I imagine it took some convincing that it was worth taking a potential hit to ‘stick it to the libs’.
The lowest tax burden states have the worst schools, poorest health outcomes, crumbling infrastructure, and expect the federal government to bail them out. Forget that, I'm tired of subsidizing the lazy states.