LIMITING SALT DEDUCTIONS--ANOTHER NAIL IN THE COFFIN
The 2017 tax plan limited to $10,000 the itemized deduction allowed for state and local real estate and personal property taxes and either income taxes or sales taxes (SALT) on itemized income tax returns. Because the SALT deduction is primarily used by citizens in Blue States, even though also by higher income earners with high property taxes in all states, it has been attacked as politically motivated.
The defenders of the limitation, the Members of the House and Senate who voted for it, argue that the limitation of the deduction to $10,000 was necessary to allow everyone to get the tax reductions promised in the tax bill. They also point out that increasing the standard deduction to $24,000 for a married couple allows most to not have to itemize at all because the total of their deductions is under $24,000. This means that a person receiving a W2 might be able to actually file their own return without paying a tax preparer.
Deduction Versus Credit
It is important to understand the difference between a tax deduction and a tax credit. A tax credit of $10,000 reduces the taxes you owe by $10,000. A tax deduction of $10,000 reduces by $10,000 the amount of income on which you pay income tax. The tax savings created by the $10,000 deduction depends on your income tax rate. The highest rate is now 37% and the $10,000 deduction will save that taxpayer $3,700 in federal income taxes. This means that the person's net spendable after-tax income was not reduced by $10,000 but only by $6,300--effectively a subsidy of $3,700.
Because this taxpayer reduced his federal income tax obligation by $3,700, the rest of the federal income taxpayers had to pay more to compensate for this. Effectively, every tax deduction reduces the amount of income taxes collected and is borne by all of the taxpayers having to pay a higher rate to collect the amount that would have been paid but for the deductions.
It Is Ok To Evade The Income Tax
Governor Brown of California and Governor Cuomo of New York have not only attacked the SALT limitations but are actively trying to find ways of getting around them. These generally involve allowing their state residents who would be restricted by the SALT limits to make contributions of their state taxes over $10,000 to some sort of state government charity that would be deductible on their federal tax returns as a charitable deduction.
This technique is a blatant attempt to help their residents evade the federal law. It is also an acknowledgement that many citizens of their states who find themselves not getting a federal government subsidy of SALT taxes will either get upset with their state and local government or move out of the state entirely.
The Message That This Sends
Will Rogers, the beloved cowboy humorist of the 1920's and 1930's said that, "The income tax has made more liars out of the American people than golf has."
Dr. Cebula's study pointed out that income/payroll tax criminal evasion is going to be $9 trillion in the next decade. Think of what the message from the state governors is going to do to this amount. The approximately 80% of us who try to comply and our evasion, if any, is simply failure to understand the confusing and incomprehensible tax code, are now being told that we are really stupid if we follow the income tax law.
After all, aren't these governors really saying that they will create a mechanism where wealthy people can evade their taxes? Many people with whom I interact at public events and on the radio tell me that they feel that they are idiots to not evade at least some of their federal income tax because everyone around them is doing this.
If it is good for the residents of the high-tax states, why is it not ok for the rest of us to create obvious ruses by which we avoid paying federal income/payroll taxes?
We are seeing nothing less than a revolt against the present income/payroll tax system, but this time it is being led by governors of two of our biggest states. With their pronouncements, the governors are increasing the belief that the income tax unfairly treats people with higher incomes differently than the rest of us.
If everyone else is not following the law, why should the rest of us? Will Rogers said, "There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest of them have to pee on the electric fence for themselves."
It looks like the Swamp and Congress are about to learn that the income/payroll tax system has to be replaced not by reading or by observation. It looks like they have peed on the electric fence and, hopefully, the resulting shock will bring them to do something that is good for the rest of us--not just for them and their friends.
We can never, ever give up if we want to save our country from the Swamp. For the sake our children and grandchildren, we have to take the way we fund our government out of the hands of the Swamp and pass the FAIRTAX!
The truth is the truth. Remember, if we don't continue to tell the truth and demand a change, then this quote from George Orwell's 1984 may foretell our children's future:
“If you want a picture of the future, imagine a boot stamping on a human face—forever.”
WHAT CAN EACH OF US DO
Call up the local or D.C. offices of your House Member and two Senators and you can use the following script:
- I am sure that Representative ____ or Senator ____ is in favor of everyone obeying the income tax laws.
- After they assure you that their boss is not in favor of anyone breaking the law, ask if they are aware of the Cebula study showing $9 trillion of evaded income/payroll taxes over the next ten years.
- Since most will say they don’t believe their boss has seen the study, either drop off a copy or get an email address and send a copy to them for their boss.
- Say you are going to call back in a week and ask what the Representative or Senator is going to do to stop this evasion.
- In a week, call back and ask specifically what the Representative or Senator is going to do to enforce the law.
- They probably will say their boss believes that simplifying the income tax will handle the problem.
- Explain that when people evade income taxes, they are also evading the 15.3% payroll/Medicare tax and state income tax. So it is unlikely that they are going to pay 30% or 40% when they were paying 0% because they have already decided it is okay to cheat.
- Say that the only way to reduce evasion is to increase by tens or hundreds of thousands the number of comprehensive IRS audits done each year.
- Point out that Evaders do not self-identify by putting an “E” on their income tax return.
- 80% of the people likely to be audited are trying to comply, but they will be forced to endure these IRS audits as well.
- Ask if the Member is in favor of this?
- If they say no, then ask again how the Member proposes to stop people breaking the income tax laws.
- Then explain that the way to handle evasion without unleashing the IRS audits is the FAIRtax.
If you can see your Member or attend a town hall and ask these questions, you can be even more effective.
FAIRTAX - THE AMERICAN PLAN
FAIRTAX POWER RADIO EPISODE #94
In this week’s episode, The FAIRtax Guys remind everyone that the FAIRtax is nonpartisan. Furthermore, only the FAIRtax has features that meet the goals of both political parties. Using the document “Top Ten Reasons Why Democrats Should Strongly Support the FAIRtax,” found on the fairtax.org website (https://fairtax.org/research-library/demographics), we will see how the FAIRtax addresses the concerns of the Democrat party even though no Democrats are currently cosponsoring HR 25, the FAIRtax. Maybe after this episode, that will change.
Last week, they discussed some of the crazy plans by a few state leaders to get around certain provisions in the new tax plan they don’t like. States like New York and California are trying to protect their high state taxes by concocting weird and probably illegal strategies to circumvent the caps on SALT deductions in the Tax Cuts and Jobs Act of 2017 recently passed by Congress and signed into law by President Trump. It’s just insane! In this episode The FAIRtax Guys attempted to snap us back to reality as only they can do by using the FAIRtax.
Keep abreast of the tax code wrangling by listening weekly to FAIRtax Power Radio.
HELP THE FAIRTAX GUYS EDUCATE OTHERS ABOUT REAL TAX REFORM. Telling your friends and relatives about our free weekly podcasts is a great way to help us garner more support. It is the American people who must demand REAL tax reform in Congress. We must inform America about the FAIRtax! Please help us.
You can listen to FTPR on any platform - Mac or PC, iPhone or Android. And it’s 100% free.
Listen on Spreaker.com (http://bit.ly/2oesbk7), iTunes (http://apple.co/1Te8VdF) or iHeart Radio (http://bit.ly/2eqEG7y) on your computer or smartphone. The easiest way to listen to FTPR on your smartphone is by downloading the free FTPR app. Just search for “FAIRtax Power Radio” in your app store, download the app and start listening. If you have trouble finding our free app, download the free Spreaker app.
We post a new episode every Friday morning. Please listen and tell everyone you know about the FAIRtax Power Radio.
The FAIRtax: Once You Understand It, You’ll Demand It!
AMERICA’S BIG SOLUTION - AN INTRODUCTION TO THE FAIRTAX
America’s Big Solution is a basic introduction to the FAIRtax and is meant for people of any age. Do you know someone who would like an introduction to the FAIRtax and would prefer to read about it rather than search online for Tweets, Posts and Shares? If so, America’s Big Solution is your choice.
America’s Big Solution is an introduction to the FAIRtax written by Terry Tibbetts, author of A Spartan Game: The Life and Loss of Don Holleder, with help from Ron Maiellaro, President of the Florida FAIRtax Educational Association.
You can buy an electronic version of ABS as follows: AMERICA’S BIG SOLUTION is available for only $2.99 for the Amazon Kindle (http://amzn.to/1WIRHry), the Barnes & Noble Nook (http://bit.ly/1XeG8bH) and Apple iOS (http://apple.co/1tnqK0P).
You can purchase a print copy at the same Amazon link above for $9.25. Regardless of whether you choose the electronic format or the print format, you’ll find AMERICA’S BIG SOLUTION will give someone the boost they need to begin their study of the FAIRtax and the suggested resources to learn more. Buy AMERICA’S BIG SOLUTION now!
LINKS TO MORE INFORMATION
These links will help you promote and support the FAIRtax, make yourself familiar with the links below. We always do our best to keep our AFFT community up to date, and you can stay ahead of the curve using these convenient sites.
- The website of Americans for Fair Taxation (www.fairtax.org)
- Read the Summary of the Evasion Study.
- Welcome to the Online FAIRtax Community (member.fairtax.org)
- The website at which you can help make it happen. (www.bigsolution.org)
- The Facebook page for Americans for Fair Taxation
- The Facebook page for The FAIRtax Guys
- The Twitter page for Americans for Fair Taxation
- PopVox - Connecting people and lawmakers for more effective participation and better governing
- YouTube channel for AFFT
- The Official FAIRtax Logo Store (www.fairtaxlogostore.org)
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