Taxpayers will be pondering the tax cut in April, and again in November. I decided to do a little experimenting with the tax code, using a spreadsheet that I invite you to download.
The 2017 tax cut that its main promoter described as huge is a mixed blessing. It dished out some big benefits—via an increase in the standard deduction and a lowering of the top rate—but it punished high earners by limiting their itemized deduction for state and local taxes.
The perception among a lot of voters is that the law change made them worse off. Here’s something that just landed in my in-box from a group called Unidos U.S.: “43% of Latino adults said their taxes went UP after the law passed [and] just 10% think any of the savings from the law went into their households.”
Then there are the high-income residents of states like New Jersey and California who had been deducting, on their federal returns, state and local taxes—large amounts, like $25,000 or $50,000. Trump chopped that deduction to a maximum $10,000. Surely they are worse off with the tax changes?
The answer may surprise you. It surprised me.
For the experiment, I looked at what would have happened to hypothetical couples filing jointly in nine different states, including several with stiff state income taxes and two with none. I compared what their federal taxes would have been for 2020 under the old tax law with what they’re going to pay next year under the new law…Read more>>