|Drawing by Chan Lowe, July 2016.|
Wall Street traders who rake in hundreds of thousands of dollars a year or more eagerly awaited a Republican overhaul of the U.S. tax code. Now, many are huddling with accountants and concluding the real gains will go to billionaires and other captains of the industry. Those in trenches -- the merely wealthy -- are grousing.
Atop their list of worries: New limits on deductions for mortgage interest and state and local taxes -- relatively high throughout New York, New Jersey and Connecticut -- will cost them thousands of dollars annually while depressing the value of their homes. That would chop local tax revenues and erode the quality of schools and other amenities traders expect for their families.I could have told them. Most New Yorkers are getting a much less terrible break than feared a couple of weeks ago, because the first $10,000 in state and local tax is deductible, and while our income tax rates seem pretty high, they're also pretty progressive, only very few paying the scary marginal rate of 10.3% (state and city combined), and the property tax is actually quite low (effective 0.72% in NYC). But a lot of us, and not necessarily just the wealthier, are going to see at least slightly higher taxes, and not just in New York and California and Maryland and New Jersey and Oregon—it's Iowa and Nebraska, Idaho and Maine, Wisconsin and South Carolina, where I expect quite a number of deduction-itemizing Trump voters are going be a bit surprised to see their taxes going up as well:
If you're really doing well, at $500K and up kind of well, your after-tax income is going up, but there are many people who look pretty rich to me who are going to lose money.
If the authorities ever manage to draw up the new tables, which I think is going to take quite a while longer than the IRS hopes, which is that the withholding will be ready in February (per Brian Naylor/NPR):
It sounds relatively simple to change withholding tables — just plug some new numbers into the computer. But former IRS Commissioner John Koskinen says even simple changes are complex, thanks to Kennedy-era computer programs the agency uses. "A lot of our forms are hard-coded, so you don't just enter a little thing in your computer, you actually have to go into the code and change the date or change the forms," he says.
Making the job more difficult, the IRS's budget has been slashed by $900 million since 2010, resulting in 21,000 fewer employees. Koskinen, an Obama appointee who stepped down from the agency in November, worries the IRS could find itself in a disastrous spiral.
One place where the lack of IRS personnel might be most apparent is the agency's taxpayer help line. "It's going to be a nightmare," says Jennifer MacMillan, chair of the Government Relations Committee for the National Association of Enrolled Agents, which represents tax preparers. She says the IRS couldn't keep up with all the calls from taxpayers seeking help with their returns last year; many were kept waiting on hold for over an hour.I can't help thinking this rollout is going to be a huge mess, and that at the end of it a great many of the people who find themselves getting an altogether bad deal are going to be typical Trump voters, older white guys with small businesses that have to itemize their deductions, tire retreading to Christmas tree growing, bars and barber shops, accountants and doctors, who do too much of their own work to qualify for the pass-through deduction, and are really used to those big state income and property tax deductions, who are getting a really pretty cruddy deal through this bill, compared to what they might have expected.
Along with those angry Wall Streeters:
A pair of hedge fund managers said they’ll stop donating to Republicans they’ve long supported. One of them said he spent weeks berating a politician who’s taken his money, arguing the tax bill is too tilted toward corporations, rather than individuals who should get more relief.
It's nothing compared to what's being done to Puerto Rico, where power may not be fully restored until May, thousands are still without safe drinking water or dry places to sleep, as Dana Milbank writes, and now the administration seems determined to literally destroy the manufacturing industry beyond what Maria did to the island, with insane tax policy:
The GOP tax bill, which Trump celebrated last week, treats Puerto Rico as a foreign country, imposing a 12.5 percent tax on the income that companies there receive from intellectual property — a big hit to its crucial pharmaceutical and medical-device sector. Rather than give Puerto Rico special tax treatment, which it urgently needs, Trump and his congressional allies gave employers a powerful reason to move jobs off the island.But it could be enough to really piss a substantial number of erstwhile Trumpers off as we move big time into the political season around April 15 2018, with some of that buyer's remorse. This tax cut is big, but it's not for them, and it's not what they thought they were paying for.
Cross-posted at No More Mister Nice Blog.