SALT fact of the day

by on November 4, 2017 at 10:55 am in Current Affairs, Economics, Law, Political Science | Permalink

In 2014 nearly 90% of the benefits of the state and local deduction as a whole flowed to those with incomes over $100,000.

So limiting the value of this deduction is obviously a good idea, right?  No one is suggesting that this “tax hike” will ruin blue state coastal economies?  Everyone is on board?  Good, glad to hear that.

That is from The Economist.

1 aMichael November 4, 2017 at 11:04 am

Boom! *mic drop*

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2 GoneWithTheWind November 4, 2017 at 11:42 am

It does not make sense to tax money that was already taken from the individuals income by another tax. I think all taxes paid, including sales taxes and gasoline taxes for example, should be deductible. In fact in most states gasoline taxes are themselves taxed with a sales tax. This is illogical and likely immoral as well.

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3 Vivian Darkbloom November 4, 2017 at 11:56 am

Allowing a deduction does not eliminate the double tax.

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4 byomtov November 4, 2017 at 12:29 pm

That’s sort of a semantic issue, isn’t it?

Suppose federal and state income tax are both 10% and I make $100.

If I’m allowed the deduction I pay $10 to the state and $9 to the feds. If not I pay $10 to each. So then I pay federal income tax on the $10 I already paid the state. I take the term “double-taxed” to mean being taxed again on income already paid in taxes, not simply being taxed by two different authorities.

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5 Vivian Darkbloom November 4, 2017 at 1:25 pm

That’s a strange definition of “double taxation”. 90 percent of the income is taxed twice in your example.

Hint: If you want to avoid “double taxation”, there’s a word for the mechanism used to do that—“tax credit”. If the federal government would truly avoid double taxation, the federal tax would be zero in your example (giving a credit for $10). That’s not merely semantics. It is simple arithmetic and dollars and sense. If the federal government were to provide a mechanism to avoid “double taxation”, I’m afraid that they would soon be out of the tax collecting business. States would simply adopt “soak up” tax rates to equal the federal rate. States currently do this to a lesser degree when the feds allow a deduction. They are in fact partially subsidizing state taxes and encouraging them to charge more than they would otherwise. I think that explains the reason for the proposal to eliminate the state and local tax deduction. High tax states are currently subsidized more in this regard than low tax states.

6 dan1111 November 4, 2017 at 12:09 pm

Why is double taxing “immoral”? If your income is taxed at 10%, and then the same income is taxed again at 10%, how would that be less moral than having a single tax of 20%?

I agree that complexity of taxes is not desirable, and being taxed multiple times adds to complexity. But surely this is not a moral issue?

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7 derek November 4, 2017 at 12:54 pm

Heh. Moral issue. Taxes due are what the government and legislature says they are. The only ‘morality’ involved is if someone wins or loses an election because of it.

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8 GoneWithTheWind November 4, 2017 at 5:34 pm

Because they are taxing your income. If your income is $100,000 before taxes and the state takes $10,000 THEN your income for federal purposes is $90,000 not $100,000. They are taxing you for income you did not get. If the state took 100% of your income would you still agree that the federal government can take 39%???

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9 BC November 4, 2017 at 12:25 pm

Why should people that consume through state and local government, say by paying taxes that subsidize the public transportation they use, get to deduct that consumption when people that pay directly for consumption, say by paying directly for gasoline and car maintenance, don’t get to deduct those transportation expenses (not just gas tax, as you suggest, but full cost of gas)? If everyone gets the same standard deduction for SALT, then each state can decide for itself how much they want their state government to do and how much they want to leave to the private sector, without federal tax laws pushing them to push more onto the government.

How would you even make gas taxes deductible? Everyone save every gas receipt?

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10 byomtov November 4, 2017 at 12:33 pm

Because some things are not amenable to private solutions. Police, fire, public schools, road repair, and so on are, outside of libertarian fantasyland, government functions.

Why should people that like to give money to their church get to deduct that consumption while those who would rather go to the movies don’t?

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11 BC November 4, 2017 at 12:44 pm

“Why should people that like to give money to their church get to deduct that consumption while those who would rather go to the movies don’t?”

Because we have decided that non-profits like churches should be tax-exempt. You can disagree with that, but the charitable deduction is *not* a “break” for the donor. It’s a necessary mechanism to tax charities at their (currently zero) rate rather than at the rates of their donors.

12 Anonymous November 4, 2017 at 1:40 pm

“Because some things are not amenable to private solutions. Police, fire, public schools, road repair, and so on are, outside of libertarian fantasyland, government functions.”

All states provide those things, the high taxes in certain states are to provide other stuff. Why should people in low-tax states pay more in federal taxes so that equally people in high-tax states get to benefit from that stuff without having to fully pay for it?

13 byomtov November 4, 2017 at 3:59 pm

I’m not talking about the tax-exempt status of churches or other non-profits. I’m talking about the deduction for contributions.

14 byomtov November 4, 2017 at 4:11 pm

All states provide those things, the high taxes in certain states are to provide other stuff.

Some states provide more and better of “those things.”

15 Anonymous November 4, 2017 at 5:00 pm

“Some states provide more and better of “those things.””

And why should anyone other than the “beneficiaries” pay for them?

16 GoneWithTheWind November 4, 2017 at 5:31 pm

You misunderstand what I said on the gasoline issue. A dollar’s worth of gas might include $.25 for federal, state and local taxes. But when you purchase it in a state with sales tax you pay a percentage let’s say 10% of the full amount, in this case a dollar even though $0.25 of that dollar is itself a tax.

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17 Anonymous November 4, 2017 at 1:50 pm

Why is the “double taxation” illogical in this instance? Double taxation on, for example, corporate income and dividends is a form of illogical double taxation because the money is going to the same place and the high effective rate is hidden, it’s common for people to cite the low rate on one and ignore the other to say “rich people only pay X rate in taxes.” In contrast, state taxes and federal taxes go to different places and pay for different things. Charging someone two “prices” to pay for the same house is illogical and deceptive. Charging them two different prices to buy a house and an adjacent plot of land is not.

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18 Thin-Skinned November 4, 2017 at 2:35 pm

The choice to live in expensive jurisdictions like NY or CA is a choice of lifestyle consumption.
The choice entails benefits to NY & CA residents as well as costs. State and Local Taxes are the price for those State and Local amenities.

Why should people in skinflint states who get skinflint public amenities be subsidizing the generous public services in other states?

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19 Moo cow November 4, 2017 at 2:47 pm

Yes and no. New York and California together account for, what, 20% of US exports and, 14% if us gdp? So if you are in an export related business, there’s a good chance you will live in one of those states.

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20 byomtov November 4, 2017 at 4:13 pm

Why should people in high-tax states subsidize farmers, ranchers, and miners in the “self-reliant” West?

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21 Anonymous November 4, 2017 at 5:03 pm
22 li November 4, 2017 at 9:47 pm

So, everyone living in NY or CA has a choice of where they can live? Ah, life is so damn simple.

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23 ZZZ November 4, 2017 at 11:05 pm

If you’re that worried about it, perhaps you should ask your state legislature to allow income tax deductions for any Federal taxes paid.

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24 BC November 4, 2017 at 12:37 pm

Also, with the standard deduction doubling, even more of the SALT deduction will go to those with high incomes, i.e., some of those with incomes below $100k that took the SALT deduction in the past would not have taken it if they had had a larger standard deduction.

The standard deduction is the same (in dollars) for everyone; it doesn’t grow with income. Those with larger incomes spend more, on SALT, mortgages, and everything else. So, deductions based on actual expenditures rather than equal standard deductions for everyone inherently favor high income earners over low income earners. Reversing that will, of course, stop the favortism from continuing (which in political language becomes “harms” those that previously were favored).

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25 al November 4, 2017 at 12:55 pm

Excellent logic.

+1

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26 Locke November 4, 2017 at 1:22 pm

So then you would also agree that we should remove the cap on payroll taxes and tax capita gains at the same rate as income?

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27 JWatts November 4, 2017 at 2:18 pm

The only cap is on Social Security. Indeed, the Medicare portion has a surcharge above $200K in income. That being said, I favor removing the cap on Social Security.

Taxing capital gains at the same rate as normal income, is an entirely separate issue. At the least the government would have to implement full inflation indexing to even attempt it and it would still be subject to capital flight.

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28 Slugger November 4, 2017 at 11:05 am

As I said on yesterday’s tax thread, politics is about getting and using power. Every rule, every regulation has winners and losers. Having gotten control, the GOP will structure the tax system to reward their side, the red states, and punish the other guys, the blue states. I live in an upscale area in a blue state. Houses in my area are at least $750,000. You could not find a Trump lawn sign last year. Elections have consequences.

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29 Moo cow November 4, 2017 at 11:23 am

Yet income 100k and over – 47% to 47%. There may not have been lawn signs but about half your neighbors voted for Trump.

Source: Roper Center

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30 Brian Donohue November 4, 2017 at 11:38 am

Yes of course. We are talking about high-income people in blue states (I’m one); these folks probably split down the middle in terms of Dem/GOP.

I’ve noticed Democrats recently furrowing brows over the budget deficit as part of the never-ending TrumpBLARGH.

But any talk of increasing THEIR taxes shows them to be as tax-phobic as your typical right-winger.

Pathetic.

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31 Brian Donohue November 4, 2017 at 11:41 am

As far as the deficit itself, it’s gone from $438 billion in FY 2015 to $585 billion in FY 2016 to $666 billion in FY 2017, despite no significant change in tax or spending policies and an economy that has continued to improve. No one cares though. Maybe everyone enjoys sticking it to their kids.

Pathetic.

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32 Brian Donohue November 4, 2017 at 11:41 am
33 Joël November 4, 2017 at 1:09 pm

True. I wonder what caused this increase of the deficit.

34 MikeP November 4, 2017 at 5:50 pm

Ever increasing older population.

35 David November 4, 2017 at 9:42 pm

Could it be the economy is improving because the deficit is increasing?

The federal government’s deficit is the private sector’s surplus.

36 byomtov November 4, 2017 at 11:55 am

Brian,

There is a difference between increasing Democrats’ taxes and increasing taxes. The SALT business is a plain bit of GOP nastiness, nothing else.

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37 Brian Donohue November 4, 2017 at 12:01 pm

Increasing high-income Democrats taxes, and a similar number of high-income GOP taxes. This is absolutely in line with Democratic philosophy.

38 Al November 4, 2017 at 12:03 pm

Agreed Brian. It is a tax plan that makes sense.

39 lonely libertarian November 4, 2017 at 12:56 pm

I am surprised that we hear little or nothing about high state and local income taxes being deductible essentially means that those of us living in states like Florida and Texas are subsidizing those taxpayers.

40 Anonymous November 4, 2017 at 1:32 pm

byomtov, so your point is that if we have this tax credit which unfairly favors people who vote for one party, it’s nastiness to eliminate it?

41 Locke November 4, 2017 at 3:51 pm

@lonely

Because you’re not. Even with the SALT deductions, those states pay far more in than Texas or Florida. California and NY subsidize you.

42 byomtov November 4, 2017 at 4:15 pm

It doesn’t unfairly favor anyone.

And it’s not a credit.

43 Anonymous November 4, 2017 at 5:02 pm

byomtov, you have yet to provide an actual argument for why it’s “fair.”

44 Anonymous November 4, 2017 at 5:27 pm

@Locke, states don’t pay taxes to the federal government, people pay taxes. It is entirely natural that when you have a system that redistributes from rich individuals to poor individuals, more taxes will come from the states where the rich individuals live. The fact is that an individual making the same income in high-tax states will pay less than if he lived in a low-tax state. You can’t deny it so you will try to change the subject.

45 Ricardo November 4, 2017 at 12:06 pm

From what I recall, many high-income blue state types are really libertarians of sorts rather than ideological liberals. About half of them vote for Democrats because they care very deeply about social issues like abortion and gay marriage. When it comes to fiscal and economic issues, though, they tend to be conservative. If the American electoral system was not so heavily weighted in favor of two parties and if the Libertarian Party was not filled with kooks and weirdos, they would have a larger constituency among high-income people in places like Connecticut and California.

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46 Joël November 4, 2017 at 3:05 pm

They are libertarian or sorts but because they are racist and anti-immigrant, they vote for Clinton who represents them well. Hey, they couldn’t vote for the son of an immigrant like Trump.

47 A Truth Seeker November 4, 2017 at 3:16 pm

“Hey, they couldn’t vote for the son of an immigrant like Trump.”
Most Americans couldn’t. He is also the husband of a former illegal working immigrant. It is the Americn Dream: ifmonenwork hard and have good looks, maybe one can marry someone rich.

48 Zig November 4, 2017 at 1:31 pm

Right and having checks and balances between branches and a two chamber legislature has consequences too. Lots of GOP house members from upper middle class areas should be nervous

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49 Moo cow November 4, 2017 at 2:49 pm

14 GOP reps in California. What is Ryan’s majority?

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50 Zig November 4, 2017 at 8:00 pm

There are GOP led affluent house districts outside of CA.

51 Larry Siegel November 5, 2017 at 1:28 am

I have the figures for my blue-state, solidly upper-middle-class, town with one of the highest proportions of college degree holders in the country. Hillary 60%, Trump 35%, third parties 5%. I voted third party.

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52 Anonymous November 4, 2017 at 1:24 pm

We need a humidity tax credit to allow people in warm, humid states to pay less tax than people of equal income in other states. If you don’t support this tax credit that’s because you want to punish people in warm, humid states who voted for Trump and by the way I just so happen to live in one of these states….

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53 byomtov November 4, 2017 at 11:28 am

Interesting but highly deceptive.

First, let’s talk about who benefits from itemized deductions in general. A minority of taxpayers, I think.

Second, the fact is that the beneficiaries of the SALT deduction are in fact concentrated to some degree in much fewer than 50 states. So yes, despite the cleverness, one might almost say smugness, of the quote, the elimination will in fact damage the economies of some blue states.

Tyler’s comments on the tax proposal continue to disappoint, but not really surprise.

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54 Meets November 4, 2017 at 12:26 pm

So high taxes do damage economies then?

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55 Yancey Ward November 4, 2017 at 12:44 pm

Ouch! I don’t think he realized the low overhead when he walked into that one.

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56 Bill November 4, 2017 at 1:06 pm

Actually, what he is saying there is a differential effect between states; it is not as if everyone bore the same impact. If every state is treated the same it is different than if some states are treated differently.

Let’s tax residents of some states more under the federal system and see how that affects differential growth rates.

Now, I think the better argument is that red states are currently being disfavored because they collect revenue with sales taxes. I would be in favor of a SALT proposal which adjusted for sales taxes and income taxes to equalize treatment.

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57 XVO November 4, 2017 at 2:11 pm

Or just get rid of SALT so that all states are treated equally, rather than subsidizing high tax states.

58 derek November 4, 2017 at 2:47 pm

> Let’s tax residents of some states more under the federal system and see how that affects differential growth rates.

If you take the deduction out of the picture, you see effects of differential tax rates on growth. The deduction shuffles the costs of high taxes onto lower tax regimes, at the federal level.

The goal is to simplify, if I understand correctly. So you are suggesting that people track how much they pay in sales taxes to equalize the deductions. Are you being disingenuous?

59 Slocum November 4, 2017 at 3:02 pm

“Actually, what he is saying there is a differential effect between states”

Yep. Will the high-tax blue-state model still work without the federal government income-tax deduction subsidy? Perhaps we’re going to find out. What’s your prediction?

60 Bill November 4, 2017 at 4:04 pm

I guess XVO, derek, and Slocum did not read the last line of my comment which talked in terms of equalizing the deduction across states to account for sales tax. I would, of course, deduct Texas, Louisiana, Mississippi and Alabama receipts from federal offshore oil leases as part of the deal. See comment below about federal contributions to states from federal revenue.

61 byomtov November 4, 2017 at 4:18 pm

Raising taxes with no benefit certainly does.

Just like increasing deficits for no reason does.

No “ouch” there, Yancey.

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62 Yancey Ward November 5, 2017 at 1:18 am

Sure. Bill did what he could, but he failed.

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63 Rock Lobster November 4, 2017 at 11:32 am

For the record I’m not a Republican, however…

The reaction to these proposals has really cracked me up. Haven’t tax wonks been talking about getting rid of dumb deductions since forever? Now somebody actually goes after them and all we hear is that the Repubs are trying to “punish” the blue states. The mortgage interest deduction was always used as a textbook case of dumb deductions, yet here we go.

I noticed on Twitter somebody talking about how taxing PhD fellowship money as income (or whatever it was) would decimate PhD programs in this country (with the emphasis on STEM of course). But aren’t we overgraduating PhDs, including in STEM, by a pretty big multiple? I hear that claim all the time. Shouldn’t we be happy about not encouraging a serious oversupply of hopelessly underemployed PhD graduates?

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64 vinny November 4, 2017 at 11:44 am

Sure but there’s a big conceptual difference from”we’re going to raise your taxes to improve infrastructure, or education, or health, or even pay down our war-debt” to “we’re going to raise your taxes and increase the deficit to…vastly lower taxes on extremely rich estates.”

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65 Brian Donohue November 4, 2017 at 12:00 pm

Like most economists, Tyler is uninterested in the state of public finance, preferring to cover topics all over the map rather than something closer to his wheelhouse.

When he does touch on these issues, he tosses in an unsubstantiated “estate tax is bad” opinion and moves on. Milton Friedman over there shakin’ his damn head.

Our inability as a nation to exhibit a shred of responsibility on the subject is astonishingly churlish. Just wait until the next recession or the coming Medicare crunch. Either we cut spending (ha!), tax, or devalue in the near future.

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66 byomtov November 4, 2017 at 12:01 pm

Exactly.

Let’s look at a different argument of the type Tyler quotes.

“One hundred percent of the estate tax affects estates worth more than $5.6 million for individuals and $11.2 million for couples. It does not, GOP lies notwithstanding, devastate family farms and businesses, or even affect more than a very tiny handful of them. Nor does it even take money away from those who have earned it. So we may as well leave them in place, right? Everyone is on board? Good, glad to hear that.”

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67 Tax Hating Democrat November 4, 2017 at 12:32 pm

This is a highly useful fig leaf. Room for me behind there?

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68 ABV November 4, 2017 at 2:28 pm

Why is there even a need for estate tax? When someone dies and passes on assets the basis shouldn’t be stepped up. Then you have a unified tax on capital and it doesn’t disrupt any businesses. But it’s a lot of the same voters whining about losing these deductions that would lose from that. They couldn’t pass on their houses or 401ks tax free if the heirs want to sell out.

Megan McCardle had a good column on this several months ago.

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69 byomtov November 4, 2017 at 4:23 pm

I don’t know what McArdle wrote, but the estate tax doesn’t disrupt any businesses, no matter what you’ve been told.

Here’s a good rule. When someone is trying to promote a policy by telling lots of lies about it, it is probably not a good policy. That perfectly describes the effort to eliminate the estate tax. “Oh gee.Think of all the family farms and Ma-and-Pa businesses that are destroyed.” Find some. There aren’t any. It’s a giveaway to the Trumps, Waltons, Kochs, etc. of the world.

70 TMC November 5, 2017 at 2:34 pm

The Trumps, Waltons, Kochs, etc. of the world already have a million ways to get around the estate tax.

71 Rock Lobster November 4, 2017 at 12:31 pm

@vinny

Don’t get me wrong, I think it’s bad to be raising the deficit by lowering taxes way more than you’re realistically going to make up by closing out deductions. But the basic statement of, “you used to be getting a stupid deduction, and now we’re stopping that” seems valid to me. Insofar as these deductions are only used by high-income people to begin with, it would mean that you’re not even creating any net distributional effects by eliminating those deductions and then reducing the overall rate by an amount to make it all revenue neutral. In practice the Repubs of course have been woefully dishonest on that basic point and will happily balloon the deficit for a tax cut.

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72 Epigen November 4, 2017 at 12:12 pm

As a note, I completed a PhD in 2013 and paid federal and state income taxes on my fellowship. However, the fellowship was FICA exempt.

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73 John November 4, 2017 at 11:39 am

As these things go, isn’t 10% hitting the below 100k crowd a lot? How does that compare to the percentage of tax paid as a whole? I.e. is the below 100k crowd getting hit harder in proportion to what they’re currently paying? I’m guessing that if we found out 50% of the tax fell on the bottom 90%, we’d consider that a disaster.

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74 A Truth Seeker November 4, 2017 at 11:55 am

I still think the Strategic Arms Limitation Talks talks are good opportunities to engage the Soviet leadership in a constructive way, appealing to their own self-interested. As Mr. Kennedy put it, “let us never negotiate out of fear, but let us never fear to negotiate.”

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75 Thor November 4, 2017 at 1:55 pm

Lol Thiago!

And besides, make deductible ICBMs great again

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76 A Truth Seeker November 4, 2017 at 3:17 pm

And make the Soviets pay for Star Wars.

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77 Borjigid November 4, 2017 at 4:25 pm

Yeah, so, SALT =/= SALT

Gotta get with the times, as they do in Uruguay.

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78 A Truth Seeker November 4, 2017 at 5:01 pm

Yet, as Aristotle, Ayn Rand and Steve Ditko have proved, A is A.
There is no Uruguay. The so-called Uruguay is actually the rogue Cisplatine Province of the former Empire of Brazil, it is a legitimate part of the Brazil and, soon or later, will rejoin our fatherland.

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79 Al November 4, 2017 at 12:02 pm

This tax plan is brilliant. Well played GOP.

Now pass it!

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80 mulp November 4, 2017 at 2:59 pm

Yep, even more liberal blue State wealth transferred to the red State conservative rich where the working poor will get screwed even more, and the blue State liberals blamed!

SUCCESS OF LIBERAL PUBLIC POLICY MUST BE PUNISHED!

Creating an uneducated underclass exploited by a few powerful and rich people by State politics MUST BE REWARDED IN FEDERAL POLICY!

Go Mississippi! Go Alabama!

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81 Meets November 4, 2017 at 8:44 pm

The working poor can barely afford to live in California and NY

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82 Ray Lopez November 4, 2017 at 12:10 pm

As a member of the 1% in a Blue state (minimum net worth $10M), my family (but not me) support Trump since he’s trying to abolish the estate tax (such a good idea, do you know how hard it is to hide money once you have over $10M? You have to set up a foundation and it’s a hassle). But at the moment we (I) don’t have kids so we’re always against school bonds (anyway, education is largely signaling once you get past the 3R’s and elementary school), and against deductions (we don’t even itemize; no need when you have a business, since you can just expense rather than use Schedule A). Tactically we’re OK with limiting the mortgage interest deduction to $500k, if we can get the other benefits Trump promises above.

In short, it’s all about the money. Trump is trying to please his constituents, as Kevin Drum wrote, but also he’s trying to abolish the death tax so his offspring get more. He’s just a rational actor trying to maximize his selfish gene.

Also consider when Trump loses power, all of this tax reform will likely be undone anyway.

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83 Sam Haysom November 4, 2017 at 12:18 pm

It was super easy for my parents. Maybe the problem is your family isn’t actually rich but poor and the lawyers are too embarrassed to explain it to you guys.

I mean there is a pretty simple heuristic. Is your “girlfriend a Filipino/a pros? If yes you aren’t rich.

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84 al November 4, 2017 at 1:01 pm

> Also consider when Trump loses power, all of this tax reform will likely be undone anyway.

Unlikely in the short term. (a) Trump will likely be in power for 8 years, 3% GDP growth, record job creation, very low unemployment. This is a very different time than the dark years of the past administration. (b) to repeal would require senate/house/white-house. It seems unlikely that they would get such power in the near term.

Some provisions will sunset in 10 years, of course, but the republican party learnt the hard way that sunsets are a very bad idea and they will try to limit them.

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85 Brian Donohue November 4, 2017 at 2:09 pm

Interesting tax timing strategy you’re cooking up there for granny’s demise.

In short, as you say, it’s all about the money.

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86 mulp November 4, 2017 at 3:42 pm

SALT deductions are phased out directly or indirectly by the AMT for those with income over a quarter million.

But for most people with income over a million, that is unearned Fed asset price inflation coupled with GOP favored monopoly power, which the GOP oppose only when gained by technology innovation out of California and by Jeff Bezos.

But the tech industry requires the knowledge that comes out of the education system you disdain and dismiss.

Google was not better than the private sector Altavista developed in DEC’s SRC labs, but the MBAs wanted to “liberate wealth”, “monetize value” and Altavista was carved out to be IPOd with researchers given stock options instead of wages and benefits, etc. Altavista “liberated” popped to a billion in wealth in the six months after Compaq bought DEC, then sank like a stone because the “monetize value” turned off users who fled to Google.

Google was sheltered in the “status seeking” academic culture and was able to learn from the failures of every other search engine, automatic or human powered, like Altavista, Yahoo! et al.

Before the 80s, corporations had research labs as sheltered as university labs, but far fewer entry level positions. Today, thanks to tax reform, those are almost entirely gone from for profit corporations. Only the university environment retains the environment that leads to innovation.

Steve Jobs did not seek the status of university degree, but without the freedom of the university it’s unlikely he would have been as iconic.

The Web not would exist without universities – it would be fragmented into AOL, MSN, and a dozen other proprietary systems based by nation or region. URL was created at CERN, the international university research consortium to make connecting data and papers spread across university computers across the world accessible.

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87 How About "No" November 4, 2017 at 12:16 pm

“I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.”-Milton Friedman

This proposal is a tax hike. Not a tax cut. FAIL.

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88 Anonymous November 4, 2017 at 1:28 pm

And this proposal cuts taxes. Concern troll fail.

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89 Locke November 4, 2017 at 4:06 pm

It cuts taxes for the ultra rich and raises them for the middle class.

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90 Anonymous November 4, 2017 at 5:01 pm

Not true.

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91 byomtov November 4, 2017 at 9:13 pm

Actually, true. Grossly, plainly true.

What happens to the PV of taxes paid by the children of the wealthy once the estate tax is eliminated? How much do the Trump kids save?

92 Meets November 4, 2017 at 8:51 pm

If it’s a tax hike why does the deficit go up?

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93 rayward November 4, 2017 at 12:39 pm

Most people earning less than $100,000 don’t itemize, so they don’t deduct SALT; indeed, over 70% of filers don’t itemize, a testament to income inequality. The House proposal would double the standard deduction so even fewer earning less than $100,000 would itemize. Like many stats, the “SALT fact” is highly misleading, but keep em coming anyway.

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94 JWatts November 4, 2017 at 3:00 pm

” indeed, over 70% of filers don’t itemize, a testament to income inequality.”

Say what ?

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95 rayward November 4, 2017 at 4:56 pm

Of course, those who don’t itemize are the less ons, while JWatts is one of the more ons who do itemize. [It’s a Smothers Brothers joke.]

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96 JWatts November 4, 2017 at 6:57 pm

Yes, we all understand that those that make less money will naturally benefit from the standard deduction, but calling it a testament to income inequality is a bit absurd.

I could more logically claim that the standard deduction is a testament to income transfers and soaking the rich. It would be a silly statement, but less silly than the one you made.

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97 Bill November 4, 2017 at 12:47 pm

My suggestion is this way to pay for the tax cut rather than SALT limitations:

Texas, Louisiana and other states which, in one of the Bush “Energy Bills” got a substantial increase on federal offshore lease money for their state budgets.

Texas is scheduled to receive $111 million federal offshore lease revenue; Louisiana, $145 million; Alabama, $56 million; and Mississippi, $61 million.

https://www.cnbc.com/2017/05/24/trump-to-stop-sharing-gulf-of-mexico-crude-oil-royalties-with-states.html

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98 Anonymous November 4, 2017 at 1:30 pm

Wow, 111 million, that’s easily comparable to the amount of money lost to the mortgage interest deduction. Great accounting there Bill.

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99 Bill November 4, 2017 at 2:07 pm

Every penny from a Red State counts.

Your comment makes it sound like Texas won’t mind.

Go for it. Found money.

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100 Brian Donohue November 4, 2017 at 2:10 pm

lol @ Bill. Please respond with your tripling down.

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101 Bill November 4, 2017 at 4:07 pm

I guess that $111 million gift to the Texas delegation doesn’t matter to them, or to Miss, Ala, and La. It’s amazing what you can attach to an Energy Bill.

By the way, Brian and Anonymous, did you know that Donald Trump is for eliminating these payments from the federal offshore oil leases.

I was keeping that to the end to see who would bite.

You both did.

102 Anonymous November 4, 2017 at 5:29 pm

“I was keeping that to the end to see who would bite.

You both did.”

I never made any judgement on whether or not the payments were justified, I was just noting how relatively small they were, but congratulations on winning another argument in your head.

103 Bill November 4, 2017 at 5:39 pm

Anonymous, I will take your admission and accordingly deduct the amount from those states. Since you admit you do not know whether such deductions are merited, I take your statement as a concession that you cannot support a claim that they are inasmuch as you had a chance to assert otherwise. Thank you.

104 Sam Haysom November 4, 2017 at 3:10 pm

If you weren’t so clearly panicked and took your recent political butt kicking with a little more grace then I wouldnt have to have this smug grin of contentment on my face so often.

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105 msgkings November 4, 2017 at 8:53 pm

No one cares, Sam. And no, me pointing that out does not in the least mean I care.

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106 Yancey Ward November 4, 2017 at 12:57 pm

I do my elderly parents’ tax returns these days. My mother is an efficient gatherer of receipts for deductible items, and every year I have the same argument with her when it comes time to do the taxes- she complains that she and my father didn’t have enough expenses to make itemizing worth it. No matter how many times I explain to her that their tax return is larger using just the generous standard deduction they qualify for than it would using Schedule A, she just doesn’t seem to get it. I see she isn’t alone.

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107 Larry Siegel November 5, 2017 at 1:39 am

Just tell her you’re required by law to take the larger of the SD and itemized amount. It isn’t true, but it will save her money and you time.

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108 Rafael R November 4, 2017 at 1:26 pm

How about a Carbon tax? 50 dollars a ton of Co2 could bring 280 billion a year, easily solving most fiscal issues.

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109 Meets November 4, 2017 at 1:40 pm

It would be great but likely regressive and highly unpopular

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110 Rafael R November 4, 2017 at 4:18 pm

If countries claim to be seriously committed to stop global warming why they haven’t put carbon taxes yet? That should have been the first priority. But apparently nobody is serious enough to put up carbon taxes.

Combined with a land tax (which is the closest to lump sum taxation you can have in terms of potential for distortions) would allow to solve any fiscal problems. Then just do a couple of negative income tax brackets to smooth out any regressive effects of these two taxes and we are good.

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111 JWatts November 4, 2017 at 7:05 pm

If Global Warming were the crisis it’s portrayed to be then there would be broad support among those who think it is a crisis for a build out of nuclear power. There isn’t, which tells me that the risks of global warming aren’t any greater than the risks from running nuclear power plants.

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112 Ben November 4, 2017 at 1:57 pm

Why not keep the estate tax or scrap the insane pass-through clause whose seemingly only purpose is to make the tax system less inefficient and benefit Trump, if you use the ‘who benefits from’ argument for everything?

Oh wait, they benefit GOP factions when the state and local tax deduction doesn’t as much.

Repeal the state and local tax deduction, but don’t shift the tax burden from Republican voters to Democrats because that’s messy and unfair politics that every economist should oppose.

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113 Slugger November 4, 2017 at 2:06 pm

I just remembered that the IRS enforcement arm has had significant reductions in resources. In the past the odds of getting audited were around one in fifty. I think I will just pay what won’t draw too much attention.

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114 John F November 4, 2017 at 2:50 pm

I would like my state to tax me at 100% and return my current bundle of consumption/savings plus federal tax reduction as a benefit. Free money. Or I will declare my own state and implement the 100%-for-0% plan

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115 Sam Haysom November 4, 2017 at 3:14 pm

What’s so delicious is Democrats always assumed they would have a Washington generals style controlled opposition which would bend over and take it in exchange for a few crumbs for their billionaire backers.

The palpable panic when they realize oh shit that heel we’ve been stomping in the face of middle America isn’t a democrat party exclusive is delightful. Politics ain’t so fun now are they Schumer.

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116 Daisy Alexandrovna November 4, 2017 at 3:22 pm

In a way, the new tax plan is beautiful. It raises taxes on the people who say things like “As a rich person, I think we should raise taxes” (e.g., upper middle class professionals who live in coastal metros) and cuts taxes on the rich people who want to pay less in taxes (e.g., midwestern small business owners). A win-win as far as I’m concerned.

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117 Bill November 4, 2017 at 4:44 pm

Daisy, It actually isn’t a win for you. You see, the Red/Blue reports are about state averages. If you are a professional or business person in even an average state, including Red states, you will be paying more. Just remember, the reports are about state averages. Go to the tables on income levels within an average state and see where you stand without the deduction. Or, just look at your own tax return and figure it out for yourself.

Now, you can cry those tears of joy. Or, maybe it isn’t joy. Whatever.

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118 Anonymous November 4, 2017 at 5:30 pm

And you can continue to assert things without evidence.

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119 Bill November 4, 2017 at 6:01 pm

Do you want me to point you to the sources or are you too lazy? If you had evidence to challenge the assertion you should have offered it.

Begin with Urban Institute and Tax Foundation; the value and frequency of the local state tax deduction is actually not as great as people report because they talk of average income in the state; but if you talk in terms of income over $90k you see that states are closer.

Here is a Pew chart showing the percentage of filings claiming SALT deductions by state http://www.pewtrusts.org/en/multimedia/data-visualizations/2014/federal-tax-deductions-and-credits

Then, go to the data on filings by income level and the percentage of those of that income level claiming SALT. About 76% of filers between $100k claim SALT; 93% of those between 200k-500k claim SALT.

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120 Bill November 4, 2017 at 6:07 pm
121 Gary Niv November 4, 2017 at 4:22 pm

That statement sounds more impressive than it is. Assume that one person pays one billion $ in local taxes and deducts all of it. If that billion represents 90% of the “benefits of the state and local deduction”, then one person is responsible for it. In reality, it’s probably the case that a few very high-income persons deduct a lot in local taxes, skewing the distribution.

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122 Borjigid November 4, 2017 at 4:29 pm

As far as forcing people to have the courage of their convictions goes, great.

As far as what will maximize GDP or revenue, maybe not so great?

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123 Curt F. November 4, 2017 at 4:44 pm

The current tax proposal would make you pay taxes on the *tuition* that was probably paid in your name to the school, probably by billing a research grant. That is, it would make you treat the tuition that was paid on your behalf as income. So if your fellowship paid you a $30k stipend and the “tuition” that the school billed your grant or fellowship was $50k, then your taxable income for the year would be $80k.

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124 Bill November 4, 2017 at 4:47 pm

Just as they coined the phrase death tax for inheritance taxes,

You should coin the phrase for this as

School Tax or Education Tax.

It pays to remain stupid.

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125 Curt F. November 4, 2017 at 5:06 pm

Apologies, I meant my prior post as a reply to Epigen.

I actually think this component of the bill is worth considering.

Government grants often (usually) pay the “tuition” for STEM Ph.D. students. This is great for schools because tuition bills effectively transform research dollars (earmarked for specific projects) into unrestricted dollars. Schools have many incentives to raise tuition to absurd levels, even for students to whom they provide no services. Late-stage Ph.D. students often take zero classes, and work full-time in a laboratory. They interact very little with faculty (often less than once per week). The Ph.D. students earn a stipend from doing their work, but in addition universities still charge the government for “tuition” paid on behalf of these Ph.D. students.

So taxing the students for the “free” “tuition” they receive would actually inject market discipline into the process. It would force students to say, wait a minute, is the value of this “free” “tuition” actually worth as much to me as the school is telling the government its worth?

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126 Joël November 4, 2017 at 11:41 pm

Good analysis. I wonder if there are rules that put limits on how much or how little a research university can declare as tuition cost when it is paying the tuition to itself. For instance, could the university say that the tuition cost of a PhD student whose tuition is paid by a university fellowship is zero, so that the student don’t have to pay any tax on the fellowship? And what if other students in the same program don’t have a fellowship and pay from their pocket some tuition?

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127 Anonymous November 4, 2017 at 5:32 pm

“Not giving me a tax break for X is really an X tax.”

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128 Bill November 4, 2017 at 5:41 pm

You don’t get the humor of the coined phrase death tax, do you. The point is that people are swayed with words like death tax.

I think we should tax stupidity and subsidize education.

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129 Anonymous November 4, 2017 at 6:10 pm

“The point is that people are swayed with words like death tax.”

Sure, but at least the phrase ‘death tax'(which I favor, I would rather eliminate the deductions and keep the estate tax) bears some resemblance to what it actually is.

“I think we should tax stupidity”

So you are willing to pay higher taxes then? The liberals were fond of claiming that, though when Trump finally gave some the opportunity with the end of the SALT deduction they were less than enthusiastic.

130 Bill November 4, 2017 at 7:35 pm

Given that all you do is call names and do not link to sources or information you have to wonder if your argument speaks more of you and your intellect than mine.

I am willing to subsidize your education.

It would be money well spent.

131 byomtov November 4, 2017 at 9:15 pm

That would bankrupt most Republicans.

132 ʕ•ᴥ•ʔ November 4, 2017 at 5:48 pm

Let me say first that I’m not terribly animated by this question. But having skimmed, I think the people who asked why do all these other things still count as deductions have a point. If you are going to go to post-tax dollars for local taxes you probably should go with post-tax dollars for charitable contributions.

The theory really was the same, that since you were doing good works one way or the other, those good works came off your reported income.

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133 A Truth Seeker November 4, 2017 at 7:26 pm

Such is life in Trump’s America.

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134 ʕ•ᴥ•ʔ November 4, 2017 at 9:11 pm

By the way, when counter-cyclical spending was discussed in the depth of the recession, some of the names above said “the problem is that you liberals won’t stop borrowing in the good times.”

Amazingly you forget that, the whole framing, the underlying Keynesian theory, to basically say

“Why won’t Democrats let us run up debt when it is our turn?”

Sorry. Two strikes against *you*, hypocrisy and economic illiteracy.

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135 Jackie November 4, 2017 at 10:02 pm

What we have here is a failure to communicate from both sides is that we’re broke. How the hell can we talk about tax cuts with a 21T deficit, no small number of states red and blue (ex: IL, KY) practically bankrupt due to pension obligations and whole regions in economic stagnation just to name a few potholes on the road to ruin. Notice barely a word about spending cuts even the knee jerk response of cutting food stamps (yeah that’ll do it). There’s plenty to cut like the trillion dollar agribusiness aka Farm Bill and other subsidies of high profitable, tax avoiding corporations, the military fiscal sinkhole, the USDA from which the Farm Bill comes from. However I think we should start with the Congress and Senate. I think anyone who promotes this charade should have their salary cut… drastically. They are not providing for the common defense of fiscal responsibility (now there’s an archaic phrase) but promoting the general welfare of their donors.

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136 zbicyclist November 4, 2017 at 11:14 pm

I’ve yet to hear complaints from charities.

But if more people take the standard deduction, fewer people will get to deduct charitable giving. This won’t affect big donors, but will affect the smaller donors who are the mainstay of, for example, most local churches.

I’m not defending the deduction so much as surprised we haven’t heard an outcry.

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137 Bill November 4, 2017 at 11:46 pm

Charities are meant to be controlled by rich people.

That simple.

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138 ckb November 6, 2017 at 9:24 pm

I missed the part where we were *just* getting an elimination of the state and local tax deduction. Cause you know what? I might even support that. Eliminate that deduction, and carefully lower rates across the board so you’re revenue-neutral and remove the distorting effect of rewarding states with income taxes–sure, that sounds good.

Oh, we’re still talking about a deficit funded monstrosity that penalizes everyone else to give money to the top percent? Then, yeah, I guess I’m against that. But then again, I’m not an economist on the Koch payroll, so what do I know about it?

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139 Jon November 8, 2017 at 11:56 am

Tyler, I don’t think anyone is arguing that this will ruin blue state economies. I have no problem with raising taxes for affluent people. The problem is that it is being done in order to cut taxes for *even richer* people.

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