Federal Deductibility of State Taxes

The current Republican Federal tax reform plan on offer, at least as described by the NLMSM, includes elimination of the deductibility of State taxes on our Federal tax returns.  Naturally, Progressive-Democrats object.  Here’s New York Governor Andrew Cuomo (D), as a canonical example:

This is probably one of the most destructive policies to the state of New York I’ve heard proposed in 30 years[.]

What Cuomo and his ilk carefully ignore is that with significantly lower tax rates and a doubling of the standard deduction the value of a state tax deduction—even for high-tax States—is markedly lowered.  What they also carefully ignore is that it’s primarily their hated rich who use the deduction at all—most of the rest of us don’t incur enough expenses to be able to itemize our deductions, even (especially) medical expenses, which must exceed 10% of our AGI, anyway (and which threshold those same Progressive-Democrats want to preserve).

That doesn’t seem very destructive.

Guys like Congressman Peter King (R, NY), on the other hand, simply misunderstand the situation.  King insists, for example,

The deduction is essential for these people to get by.

His beef and that of his fellows in high-tax States, though, is with those State governments, not with the tax reform plan.  What’s essential is that those States’ usurious tax rates be lowered, so “these people” can get by with more of their own money left in their own pockets.  King and his fellows should be working to lower their States’ taxes, not preserve them.

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  1. Pingback: Tax Deductions | A Plebe's Site

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