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View Diary: Republicans float limiting deductions in exchange for permanent extension of Bush tax cuts (78 comments)

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  •  It only hurts you (0+ / 0-)

    if you're in one of the top brackets. Theoretically this should be a tax increase only for the top brackets, but probably not as much of one as just letting the Bush tax cuts expire. On the other hand, letting the Bush tax cuts expire would increase everyone's rates at least a little.

    I am reserving judgment until I hear concrete numbers. I suspect that what's being offered in substance is a smaller increase on the rich and no increase on anyone else, as an alternative to a slight increase on everyone combined with a larger increase on the rich.

    •  Offer would raise Democrats' taxes. (1+ / 0-)
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      capping write-offs on charities, state and local taxes, and mortgage interest payments as a percentage of each tax filer’s gross income.

      Guess which states and localities have the highest taxes? The blue ones. So capping these deductions would mainly hurt people in blue states.

      And the poor give more of their income to charity (as a % of income) than the rich. No doubt that's why the proposed charitable-deduction cap is stated as a % of income, not an absolute dollar value. If you give more sacrificially, you can deduct less. What craziness.

      the poorest fifth of America's households contributed an average of 4.3 percent of their incomes to charitable organizations in 2007. The richest fifth gave at less than half that rate, 2.1 percent...

      None of the middle fifths of America's households, in contrast, gave away as much as 3 percent of their incomes

      In a couple minutes of Googling, I could not find what % of income is spent by the poor, rich, and middle class on mortgage payments. Betcha the rich pay least, as a %. Would love to see the link, if anyone has time to chase it down.

      "The true strength of our nation comes not from the might of our arms or the scale of our wealth, but from the enduring power of our ideals." - Barack Obama

      by HeyMikey on Mon Nov 07, 2011 at 04:19:39 PM PST

      [ Parent ]

      •  A couple things to consider: (0+ / 0-)

        First, there is an election to write off state sales taxes in lieu of income taxes (a sop to Texas and Florida). Therefore I am not sure it's necessarily true that the blue states are hurt more.

        Second, with respect, I don't think that's how the proposal to cap the benefit of itemized deductions works. This is a proposal to cap the benefit of the deduction. The argument is that the government subsidizes your itemized deductions, such as charitable deductions, in a way that is linked to your marginal rate. If you get a deduction with the benefit of 35 cents for every dollar you donate to a charity (because 35% is your marginal rate), the government is subsidizing your charitable donations more than if you get a deduction with the benefit of 15 cents because 15% is your marginal rate. The proposal would be to recapture the benefit that exceeds a certain rate, so therefore it's impossible that it would affect anyone who pays under the recapture threshold.

        In other words, when you're in a lower bracket the benefit of deduction is already capped at a lower rate, and this brings rich folks' deductions down to the same dollar amount of benefit.

        •  Link? (1+ / 0-)
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          What you say sounds sensible. (Though complex.) But what you say doesn't seem to square with the proposal as described in the diary. Got a link?

          State taxes per capita are here:
          Texas is #49. Florida is #37. Blue states generally at the top, red states at the bottom.

          "The true strength of our nation comes not from the might of our arms or the scale of our wealth, but from the enduring power of our ideals." - Barack Obama

          by HeyMikey on Tue Nov 08, 2011 at 07:16:33 PM PST

          [ Parent ]

          •  Sure (0+ / 0-)


            Section 401.

            It's a little dense but if you track through the language I am pretty sure you'll find it's as I describe. It basically causes the benefit of the charitable deduction to be capped at 28% and so only affects people in brackets that are higher than 28%. This is also the way I've seen it described in industry publications.

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