STATE AND LOCAL TAX DEDUCTION--ANOTHER SPECIAL INTEREST
Currently there is another federal income tax deduction for state and local income and real estate taxes. If you live in a state that has local or state income taxes and if you pay real estate taxes, this deduction can be very valuable. Of course, to get the deduction you will need to itemize and since only about 30% of us itemize, this deduction is not available to 70% of income tax filers.
How Does It Work?
Under the present federal income tax system, if you are filing your tax return as a married couple, you have a $12,700 standard deduction. If you are paying more than $12,700 in things like donations to charity, mortgage interest and state and local taxes, then you are probably going to be in the 30% that itemize on Schedule A.
For example, if you are making between $91,901 to $191,650 in taxable income, you are in the 28% federal income tax bracket. If you can deduct $20,000 in state and local income taxes and real estate taxes, this reduces your taxable income and you will receive a reduction of $5,600 of federal income tax that you would otherwise be paying to the U.S. Treasury. This deduction reduces your taxable income but only for income tax purposes. (Remember, an income tax deduction does not reduce the amount contributed to Social Security and Medicare.)
The Tax Policy Center estimates that this deduction for state and local income and real estate taxes will save taxpayers $96 billion in 2017 and $1.3 trillion over the next ten years. While it is great that some people save this amount of money, the truth is that since there is a deficit the U.S. is going into debt an additional $96 billion this year.
Who Does It Help Under the Income Tax?
It is obvious that people making higher incomes that live in states with high state and local income taxes and high real estate taxes profit the most from this deduction. If you live in a state like California that has state income tax rates as high as 13.3 percent, being able to deduct the state income tax is very valuable. For example, the family above in the 28% federal income tax bracket, who is in the 9.3% income tax bracket in California, will save about 2.64% of their California taxes. Practically, this means that federal taxpayers are subsidizing part of the taxes collected by California.
Similarly, residents of New Jersey pay very high real estate taxes, and these are subsidized in the same manner by being able to use some of the federal income taxes you would have paid to lessen the amount your disposable income is reduced by the real estate taxes.
Of course, this is a benefit to the extent that the amount of these deductions exceed the standard deduction. If a married couple's itemized deductions for state and local taxes, mortgage interest and donations were $15,700, this means that the only additional amount they are saving is 28% of $3,000 and not 28% of $15,700. This fact is often omitted when lobbying groups for these special interests promote their income tax deduction.
Here is a chart showing the states and how many of their residents use the state and local income and real estate tax deductions.
State And Local Tax Deductions And The FAIRtax
The reason that there is a need for a deduction for state and local taxes under the income tax is to allow people to reclaim some of the income tax they paid. The FAIRtax is not based on income but on consumption. Therefore, instead of only getting 70% or less of the money you make after deduction of federal taxes, you get 100%. This means that you will pay your state and local income taxes and property taxes with 100% dollars.
Of course, many of the D.C. and state Elites will not like this because people in high tax states will no longer have their taxes subsidized by the federal income tax code. This is a big reason that many of these states so oppose any change to the income tax that eliminates the state and local tax deduction.
What is ignored by the high tax states is the fact that the growing evasion of the federal income tax also means that their state taxes will also be evaded. State and local income tax revenue will decline, and most of those states will just raise the rates on the fewer and fewer employees who are forced to pay through withholding because they don't have the resources to find the evaders.
Congress and the D.C. Elites have ensured that the present federal income tax system provides benefits to interest groups who in turn supply them money for their campaigns and other activities. It certainly is not the best method for collecting revenues for the government.
A 1973 magazine article wrote about tax reform and quoted Senator Russell Long. It said, “'Most people have the same philosophy about taxes,' says Senator Russell B. Long, who has heard all the variations during seven years as chairman of the Senate Finance Committee, which handles tax legislation. Long puts that universal theme to verse:
Don’t tax you,
Don’t tax me,
Tax that fellow behind the tree."
These federal income tax deductions are really nothing more than Congress and our Elites trying to make us think that they are somehow letting us pay less tax than others. Congress and the Elites don't explain that only a relatively small number of income tax filers benefit from these deductions because our total of these deductible items is less than the standard $12,700 deduction for a married couple. No, these income tax deductions like the ones for charitable donations, mortgage interest and state and local income tax, mostly benefit the higher income earners--and the numbers show it.
Congress and the Elites fear the FAIRtax because they will lose many of their funding sources and power. They also greatly fear that the citizens of the U.S., if they really know the extent of their tax burden, will create a groundswell of disapproval and make them get real jobs.
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. office of the 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.
HELP BRING ABOUT REAL TAX REFORM AND STOP FUTURE IRS ABUSES
Because of the varied attacks on the Ryan/Brady income tax plan, the White House has announced that they need to start over to determine the best tax plan to propose.
Abraham Lincoln said, “Things may come to those who wait, but only the things left by those who hustle.”
We may only have a limited time to stop the fake tax reform being promoted by some in Congress. If it passes, then the Elites will say that we need to wait before we consider any more changes. To stop this fake reform, we must be able to ensure that our message is clearly heard not only by Congress but also by President Trump. To do this we need your help.
By contributing (investing) $10.40 per month, you help provide a financial base to AFFT. If you can make larger contributions (investments), these will be used not for salaries, as we are all volunteers, but for the needed updates to our economic studies which will be vital in 2017.
Please go to this link to invest in AFFT and in your and your family’s future.
A PENCIL TEACHES US ABOUT EMBEDDED COSTS
FAIRTAX POWER RADIO EPISODE #70
Consider a pencil. Every service and new product that you purchase has embedded costs due to the current tax code - even pencils. Businesses pay dearly to keep abreast of the ever changing tax code and to pay the actual tax. Those cost, like any other cost of doing business, are rolled into the price of their product or service. The FAIRtax Guys discuss what will happen to the prices of pencils and everything else when the FAIRtax becomes law. Here’s a hint: It’s gonna be good, real good!
Last week The FAIRtax Guys discussed how the FAIRtax will help protect the enviornment. Remember that with the FAIRtax, used items are not taxed. This is a big deal when it comes to things like cars and houses. These items require HUGE amounts of energy to produce, so encouraging the purchase of used items helps reduce energy usage and thereby helps the environment. Plus, it saves you a bunch of money! The FAIRtax Guys explain in detail how this important feature of the FAIRtax will help us protect the environment. This should be important to millennials, gen-Xers, baby boomers… Everyone.
Help us spread the good new about the FAIRtax and FAIRtax Power Radio. Telling your friends and relatives about our free weekly podcasts is a great way to help us garner more support. Help us keep America informed for it is the American people who must demand REAL tax reform in Congress.
You can listen to FTPR on any platform - Mac or PC, iPhone or Android. And it’s 100% free.
Listen on Spreaker, iTunes or iHeart Radio on your computer or smartphone. Spreaker, iTunes and iHeart all have free apps. But 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. As stated earlier, we post a new episode every Friday morning. Please listen in and tell everyone you know about the FAIRtax Power Radio podcasts.
As stated earlier, we post a new episode every Friday morning. Please listen in and tell everyone you know about the FAIRtax Power Radio podcasts.
Learn more. Get involved. Make it happen!
GET YOUR SIGNED COPY OF AMERICA'S BIG SOLUTION
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. For a limited time, you can purchase a print copy, signed by both Terry and Ron from the FAIRtax Logo Store. Go online now and get your copy before they sell out.
America’s Big Solution is meant for people of any age 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 the FAIRtax Logo Store has sold out of the signed copies, you can buy an electronic or print version of ABS as follows: AMERICA’S BIG SOLUTION is available for only $2.99 for the Amazon Kindle, the Barnes & Noble Nook and Apple iOS.
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
- The FAIRtax website at which you can get involved to help make it happen.
- 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
- Provides FAIRtax promotional materials with authorized AFFT logos.
- Do your shopping, save money and support the AFFT
- The Official FAIRtax Logo Store
The FAIRtax Logo Store
Supplying Educational/Promotional Items
AMERICA'S BIG SOLUTION BOOKLET
ENTER PROMO CODE FAIRTAX07 AT CHECKOUT TO RECEIVE A 20% DISCOUNT
ON YOUR ENTIRE ORDER PLUS FREE S/H DURING THE MONTH OF AUGUST.
AMERICA’S BIG SOLUTION BOOKLET
America’s Big Solution (ABS) booklet is an simple 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 FFTEA. While supplies last, you can purchase a hard copy of this 23 page ABS booklet printed July 2017 and autographed by both Terry and Ron. They are both volunteers continuously educating the public on the merits of the FAIRtax℠ and this booklet is an extension of their efforts.
The purpose of this ABS booklet is to introduce voters to the FAIRtax℠ concept. It is not a comprehensive treatment of the subject but rather a few pages to “wet one’s appetite” to get involved.
Accordingly, your LOGO Store is pleased to offer NEW AUTOGRAPHED ABS booklets for only $10.00 each PLUS free shipping PLUS another 20% discount during the month of August.
SO, your cost is only $8.00 in August per autographed ABS booklet delivered to your home. Great deal !! Remember to enter the discount code “FAIRTAX07” at checkout to receive your 20% discount.
Ron also co-hosts a weekly FAIRtax℠ radio show with Bob Paxton called FAIRTAX POWER RADIO (FTPR). This is a weekly podcast which you can listen to on any platform – Mac or PC, IPhone or Android 100% free. This volunteer team posts a new episode every Friday morning. Listen on Spreaker.com, iTunes or iHeart Radio 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.
When visiting the Store to purchase your autographed ABS booklet, please consider other FAIRtax℠ promotional items. And remember, you will receive a 20% discount on your complete order when inserting the discount code (FAIRTAX07) upon checkout and of course, S/H is free.
The FAIRtax℠: Once You Understand It, You’ll Demand It!
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