The following deductions: State and Local Tax (SALT), mortgage interest, property tax, PMI and charitable contributions are combined as a single itemized deduction. Your itemized deduction can include other items, but those referenced above make up approximately 99% of itemized deductions claimed by most taxpayers under existing tax law. Increasing the standard deduction to $24,000 under the new tax law means that virtually all middle and upper-middle class married couples will claim the standard deduction and will no longer elect to itemize (everyone has the option to take the standard deduction or to itemize – obviously most taxpayers will elect to claim the larger of the two deductions). Most taxpayer’s itemized deductions typically fall far short of $24,000.
However, under the new law, allowing the SALT deduction and all other itemized deductions to remain on the books WILL benefit those with excessively high value homes and higher salaries (i.e. the wealthy). SALT is a deduction for state income tax paid (i.e. withholding from your W-2, or voluntary quarterly tax payments by small businesses owners and 1099 contractors). With the exception of home owners living in states that do not assess income tax, wealthy persons pay more SALT tax, property taxes and mortgage interest than the rest of us; therefore, if SALT and all other itemized deductions (mortgage, interest, PMI, charitables) continue as part of the itemized deduction computation, only wealthy taxpayers will be able to claim a deduction greater than the new $24,000 standard deduction.
So, it is no wonder why Mitch McConnell and his Republican henchmen are now, at the 11th hour of tax reform , pushing through the SALT deduction to be included as part of the new tax law; he, his friends and his family will be the beneficiaries! Although there are expectations that there will be a $10,000 cap on the property tax portion of itemized deductions, very few home owners in the US pay more than $10K in property tax (with the exception of expensive homes in large metro areas such as NYC, LA, SF, etc). Even with a $10,000 cap on the property tax deduction, as proposed in the upcoming new tax law, a wealthy household’s combined itemized deduction will continue to exceed the $24,000 standard deduction.
Of course, the wealthy pay AMT ( an additional tax on higher incomes), and part of the EXISTING AMT tax calculation is to disallow some itemized deductions; therefore, we should all keep a close eye on how the NEW AMT will be calculated. Although I despise cliche’s, the devil of tax law truly is in the details; if the new AMT is watered down (as is expected), wealthy taxpayers would continue to benefit from itemized deductions, providing them with a deduction in excess of the $24,000 deduction limit that will, by default, be imposed on the rest of us.
Wow, and most Americans supporting the Republican party do so for what reason? Because either they are ill-informed; are type-A boneheads, or… they are wealthy. Unfortunately, most Republicans are not wealthy, but they do gobble up the BS being shoveled to them on Fox news and the like. They like supporting powerful and boisterous men and women, they enjoy hearing how the Dems use our tax dollars in excess to help the poor (which, I agree, is true of our broken welfare system which encourages laziness and apathy, providing fish but no instruction on how to become a good fisherman).
But being pro-business and supporting clamp-downs on the welfare system is not why most Republicans choose their party; supporting the Republican party makes party advocates feel as if they are a part of some elite club – the big boys, big boys and girls with booming voices; type-A’s. Being on the side of the so-called “tough guys” makes your average Republican feel safe, supported, riding on strong shoulders. Meanwhile, the big boys are laughing at these supporters and pissing on all of our lawns!
Trump is in ALL of our faces, letting us know full well that the billionaire boys club members are the only truly important people on this planet. Every day he and his family promote their twisted “Heart of Darkness” Camelot outreach program. Yes, we’ve always known that our government is corrupt, at least those of us with half a brain, but now McConnell is in our faces with his latest comment: when asked why the tax reform is not more balanced in favor of the middle class McConnell stated, with a snicker and his trademark wry smile, that giving more tax breaks to the middle class, and I quote, “would be impossible”. Hmm, and the middle class Republican supporters are not taken aback by such a statement (and so many others that clearly say, “FU American worker”)? How is it possible that most Republican supporters cannot understand what is at the top of the Republican Senate’s wish list? In short the Republicans are on a slow but steady trek to turn our country into a Wealthy vs Poor state, similar to Mexico (and if you didn’t know, Mexico is not a poor country, but all of its wealth is concentrated, much more so than in the US; that is why so many Mexicans cross the boarder). If things continue as they are, one day, many of us may be attempting to cross the border into Canada, but by that time, the Canadian boarders will likely be closed.
To be fair, there is no way that our Democratic leaders are much better than the Republican leadership; Democratic leadership is almost as equally bought-and-paid-for, but the Dems are better by a slim margin. Under Trump, and the Republican tour-de-force, that slim margin is growing exponentially. Unfortunately, trading the Trump era Republicans for the Dems is kind of like trading an incurable brain tumor for a slow moving, more “manageable” form of cancer. At least you have a chance with some cancers; but with brain tumors, eh, not much of a chance at all.