03/13/2018

Democrat Tax Hike Plan Hits Blue States Hardest

Ryan Ellis, Forbes.com

Last week, Congressional Democrats released a detailed tax hike plan they will be running on this fall in the midterms.

What's most striking about the plan, besides the specificity not usually seen in such agendas, is that if the plan became law it would hit blue states and cities much harder than red/Trump states and areas. This is true for several reasons:

The Democratic tax hike plan restores the AMT yet leaves the SALT cap in place. The Tax Cuts and Jobs Act law all but eliminated the alternative minimum tax (AMT) for 4.4 million families. These tax households--mostly six figure mass affluent types living in expensive blue cities and suburbs--used to have to calculate their taxes two ways, and pay the higher (that is, AMT) figure. One of the things they had to do in that calculation was disallow their state and local tax (SALT) deduction. So by being in the AMT, they got no SALT deduction at all.

The new tax law restores the SALT deduction for these families, but caps it at $10,000.

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Thanks to "bracket creep," the inflation of the 1970s pushed millions of taxpayers into higher tax brackets even though their inflation-adjusted incomes were not rising. To help offset this tax increase and also to improve incentives to work, save, and invest, President Reagan proposed sweeping tax rate reductions during the 1980s. What happened? Total tax revenues climbed by 99.4 percent during the 1980s, and the results are even more impressive when looking at what happened to personal income tax revenues. Once the economy received an unambiguous tax cut in January 1983, income tax revenues climbed dramatically, increasing by more than 54 percent by 1989 (28 percent after adjusting for inflation).

 

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