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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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  •  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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      Argyrios

      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: http://www.census.gov/...
      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-)

        http://www.whitehouse.gov/...

        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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