With the president’s visit to Utah this past week, much of the focus was on national monuments, lands policy and the Antiquities Act. Unfortunately, his visit mostly eclipsed another equally important issue that will have an immediate and direct impact on thousands of Utahns during 2018: tax reform.
When Utahns read about tax reform, or hear phrases like “tax brackets” or “effective tax rates,” eyes often glaze over very quickly. It can be confusing, boring, and around April 15, even upsetting. After all, the tax plans passed by the U.S House of Representatives and the U.S. Senate had over 400 pages of complicated tax-related legalese.
While many elements of the tax reform have merit, this federal tax bill as proposed does something virtually unprecedented — it strips away our ability to claim as a deduction on our federal tax returns the state and local taxes that we have paid, otherwise known as the “SALT deduction” (for State And Local Taxes). Though eliminating the SALT deduction may seem like arcane “inside baseball” kind of tax stuff that only accountants really care about, this is a massive change in tax policy. After all, by eliminating this deduction we are effectively being taxed on money we paid to state and local government! It is a form of double taxation.
To put this massive change in perspective, the ability to deduct state and local taxes actually pre-dates the current federal income tax itself. This deduction existed in post-Civil War federal statutes, and was later incorporated into the Revenue Act of 1913, which created the modern income tax system after the 16th Amendment was passed. Over a hundred years later, it is still a central part of our tax system.
This is why Ronald Reagan, for instance, referred to this deduction as “the most sacred of cows.” This is why state and local elected officials are concerned. Eliminating the SALT deduction is disrespectful toward state and local government and is, indeed, a form of double taxation. And here’s the real effect: the elimination of this deduction will create an additional federal tax liability for a middle-class family of approximately $815 per year.
Beyond the unfairness of middle-class family tax increases,and double taxation, eliminating SALT could potentially lead to increased pressure on state and local elected officials to, in turn, lower their tax rates to offset the impact of the loss of the deductibility of those taxes. Any loss of revenue …read more
Source:: Deseret News – U.S. & World News