Politics Why Trump May Eliminate a Tax Deduction Claimed by Millions

01:57  20 april  2017
01:57  20 april  2017 Source:   MSN

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  How Republicans could pass 'TrumpCare' this month Making pro bono healthcare part of a final package could be key in securing the repeal of ObamaCare.Editor’s note: The opinions in this article are the author’s, as published by our content partner, and do not necessarily represent the views of MSN or Microsoft.

Tax reform may have moved to the back burner for the Trump administration, but that doesn’t mean that people in the executive branch aren’t thinking about it. People earning a million dollars a year claim an average deduction of 1,000. One point worth noting is that while the pain of eliminating

But despite its enormous price tag, his plan would actually significantly raise taxes for millions of Finally, for low- and middle-income caretakers, Trump ’s new tax deduction and credit for child care If this is a priority, it is unclear why Trump has not revised his plan to eliminate its tax increases on

  Why Trump May Eliminate a Tax Deduction Claimed by Millions © iStockphoto

Tax reform may have moved to the back burner for the Trump administration, but that doesn’t mean that people in the executive branch aren’t thinking about it. One of the big ideas reportedly getting its turn in the sun is repeal of the federal income tax deduction for state and local taxes.

According to Axios, the idea is gaining currency with Gary Cohn, the former head of Goldman Sachs who now serves as President Trump’s top economic adviser.

Related: The Best and Worst States for Taxes in 2017

One of the reasons it is looking attractive is that the Trump administration and its allies in Congress are determined to slash income tax rates on both businesses and individuals but need to find a way to replace lost revenue. A way to do that is to go after “tax expenditures” -- exceptions and allowances that reduce taxes that individuals and businesses would otherwise owe.

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  Here are 5 reasons tax reform is a problem for Congress A tax reform plan was supposedly imminent when President Trump met with airline executives at the White House on Feb. 9. “We're way ahead of schedule,” Trump said then. “We're way ahead of schedule,” Trump said then. “We're going to be announcing something, I would say, over the next two or three weeks that will be phenomenal in terms of tax.

Trump 's tax plan may make it harder for many taxpayers to deduct their mortgage interest, charitable giving, and state taxes . That's why neither plan eliminates these deductions — that would be a political disaster.

By claiming losses from previous years, Trump was able to save tens of millions of dollars in taxes that he otherwise might have owed. In October, The New York Times published three pages of Trump ’s 1995 returns, which showed a 6 million tax deduction that could have allowed him to

The state and local tax deduction is one of the largest tax expenditures on the books. It allows taxpayers to deduct taxes paid to states and municipalities -- primarily income and personal property taxes, but also sales tax in some cases -- from their federal tax bills. It will cost the Treasury an estimated $97 billion in 2017 and $1.3 trillion over the next 10 years.

Eliminating any major tax expenditure is politically fraught, but there are reasons to believe that the state and local tax deduction is a more viable target than many because it primarily benefits higher-income earners.

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The deduction can only be claimed by taxpayers who itemize their returns, something only about one-third of Americans do in the first place. The overwhelming majority of itemized filers take the state and local deduction, and the benefit of the deduction accrues disproportionately to Americans who earn more than $100,000 per year, about twice the median income in the U.S.

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Here are some reasons why “working people” or “middle-class” families might not receive the large tax cut promised by Trump Large families also could pay more in taxes , because Trump ’s plan, which raises the standard deduction , eliminates personal exemptions.

By claiming losses, Trump apparently In October, The Times published three pages of Trump 's 1995 tax returns, which showed a 6 million deduction that could have allowed him to Trump may have been able to use those losses to reduce or eliminate his federal tax bill for years to come.

According to the Tax Policy Center in Washington, the top 16 percent of households by income account for 75 percent of the state and local tax deductions claimed every year, with an average claim of $12,300. For the very wealthy, that deduction rises dramatically. People earning a million dollars a year claim an average deduction of $261,000.

One point worth noting is that while the pain of eliminating the deduction would not be spread evenly across income levels, it also won’t be spread evenly by geography. Individuals in states with relatively high income taxes and relatively high levels of per capita income would lose much more than residents of low-tax, low-income states.

In Maryland, New Jersey and Connecticut, for example, more than 40 percent of taxpayers claim the state and local deduction, with average claims of $12,400, $17,200 and $18,900 respectively. Other high tax states would also be disproportionately affected. In New York, more than 30 percent of filers take the deduction, claiming an average $21,000, the highest in the country.

How Trump’s tax plan could affect you

  How Trump’s tax plan could affect you President Trump's plan could cut taxes for some middle and high-income families, parents, and also reduce taxes for businesses large and small. The plan would also substantially increase the standard deduction, which reduces an individual’s taxable income, and would eliminate some common tax deductions such as those used to offset medical costs or state and local taxes.Without more details, it is difficult to know exactly how some taxpayers will fare.

This showed Trump claiming a 6 million loss, a tax deduction so big he might legally have avoided paying federal income taxes for up to 18 years, according to the Times’ analysis.

For a homeowner near the top tax bracket, it could mean saving more than ,000. That benefit, though, might not last. House Republicans have called for eliminating the popular deduction — one claimed by millions of New Jerseyans and Pennsylvanians

The pain would be much lower in states like Texas, where fewer than 30 percent of taxpayers claim the deduction, with an average claim of $7,600, or South Dakota, where fewer than 20 percent claim it, with an average claim of $5,800.

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Interestingly, the elimination of the deduction would also increase the disparity between so-called “donor” states, which send more in taxes to Washington than they receive in federal benefits, and “dependent” states, which take in more federal funding than they pay for in taxes.

Of the 18 states in which 30 percent or more of taxpayers take the state and local deduction on their federal taxes, all but four are donor states. And it won’t be lost on Trump that the majority of those states also tend to vote Democratic in presidential elections.

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Trump’s tax plan is a bold step towards draining the swamp .
Wednesday, the Trump administration delivered a two-fer: On the one hand, it took its boldest step yet in its quest to drain the swamp that is Washington, D.C., while on the other hand it played its strongest card in its effort to jump-start the kind of economic boom that would extend the benefits of the anemic Obama "recovery" beyond the bicoastal elites by fueling the kind of economic growth the natio n has not seen since the Reagan years.

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