We can’t control what others do and we can’t stop misfortune from striking. But we can control our own actions. Those who are financially prudent will most likely enjoy success, even if events don’t always go their way.
From the Committee for a Responsible Federal Budget
According to pressreports, policymakers are considering changes to the $10,000 state and local tax (SALT) deduction cap as part of their efforts to extend the expiring parts of the Tax Cuts and Jobs Act (TCJA).
Specifically, recent discussions have centered around boosting the cap from $10,000 to $20,000 for married tax filers. Although this change would reduce the “marriage penalty” associated with the current cap – which doesn’t vary by filing status – it would also further increase the deficit effect of TCJA extension, provide a windfall to higher earners in high-tax states, and undermine tax simplicity.
We’ve writtennumeroustimes about past efforts to weaken the SALT cap. In this piece, we show doubling the SALT cap for married couples would:
Reduce revenue by $170 billion, on top of the $3.9 trillion deficit impact of extending the expiring individual and estate tax provisions in the TCJA as written.
Deliver 94 percent of the benefit to households making over $200,000 per year, disproportionately in high-tax states like New York and California.
Undermine tax simplicity by significantly reducing the number of filers taking the standard deduction.
For these and other reasons, lawmakers should avoid any efforts to weaken the SALT cap and should instead tighten the cap. At a minimum, any SALT relief should be more-than-fully offset so that, on net, SALT changes raise revenue to help cover the revenue loss of any other tax cut extensions.
SALT Relief is Expensive
Extending the expiring individual and estate tax provisions under the TCJA would reduce revenue by $3.9 trillion over the next decade, meaning lawmakers will need to include significant adjustments and/or offsets to prevent tax extensions from worsening an already unsustainable debt trajectory.
Raising the SALT cap to $20,000 for joint filers would increase that revenue loss by $170 billion, to $4.1 trillion. Covering that additional revenue loss would require the equivalent of a 1 percentage point increase in the top individual income tax rate. Further increasing the SALT cap to $15,000 for individuals and $30,000 for couples would reduce revenue by roughly $450 billion. Limiting the cap increase to those earning less than $500,000 would mitigate some revenue loss but would still result in more than $110 billion in lost revenue.
Some reports have even suggested policymakers are considering increasing the SALT cap to $100,000 for single filers and $200,000 for joint filers, which would reduce revenue by an additional $920 billion.
BenefitJack is right about the flat tax, it would cure a lot of ills with the current system. I’ve read of it for years and I always concluded that it wouldn’t fly because it would take away the ability of the politicians to promise tax favors at election time. As for how could Trump tax cuts be good or bad, it’s the way Trump plays the game with the Democrats. Biden did it the old way, tossing out dollars to various voters. Student loan borrowers for example. Trump cuts taxes, figuring more voters will be happy that way.
Trump’s Tax Cuts Were Good. A Flat Tax Would Be Better Congress should scrap itemized deductions and enact a flat personal and corporate rate of 15%.
In the article, Phil Gramm and Stephen Moore note:
“… America would suddenly have one of the lowest tax rates in the world, resulting in trillions of dollars of new capital flow and a spike in take-home pay. …”
“… The simplicity of a flat tax would reduce the deadweight costs associated with tax compliance—and the headaches. The White House Office of Information and Regulatory Affairs calculates that Americans spent almost eight billion hours filling out tax forms in 2024. The Tax Foundation estimates that this cost the economy $413 billion in lost productivity, and the Internal Revenue Service estimates that we spent $133 billion on out-of-pocket compliance costs. That adds up to a burden of $546 billion. …”
“… Getting rid of what remains of these itemized deductions and special credits—except for those dedicated to supporting families with children and dependents, a worthy investment—would unleash the economy. …”
So, flat tax, yes, but 15% is correct only if we start with the first dollar, where all with income (wages, income from pensions, capital gains, distributions from retirement savings, etc.) are treated as individual/single taxpayers with no dependents – no joint filers, no head of household filings (no adjusted gross income, no taxable income, no deductions, no exemptions) – so that withholding = tax due (like many cities do it, like Social Security and Medicare). That would allow America to wipe 80+% of the IRS off the map, leverage efficiencies, etc. – because there would be no forms to file on wages subject to withholding. There would be no forms to file for interest credited or realized capital gains reported by Banks and others, who would be required to electronically report both interest income, capital gains and withholding on the 1099.
Every American would have certainty that everyone was paying their “fair share” (whatever the hell that means) and that no one dodged the system – except for those in the underground economy. It would be up to the IRS to chase those folks down (as they would for any business or corporation), and yes, I would require individuals (you and me) to electronically file a 1099 with the IRS (“snitch” on ’em) for any personal service individual or business to whom they paid $500 or more in any calendar year (yes, lawyers, accountants, newspaper carriers, babysitters, etc.)
Stop the vote buying via changes in the individual income tax code.
If you change to 15% of everything, no deductions, no exemptions … no VOTE BUYING … you RAISE revenue, directly. And, you RAISE revenue indirectly by creating certainty in that you allow everyone and everything to move forward without worrying about how the beltway bandits will undermine your financial, business and personal decision-making.
This is Public Finance 101 (or actually, it is a 300 level course in economics, one I took way back in 1976). It hasn’t changed in the past 50 years.
Flat tax is a great idea–I believe many Eastern European countries adopted flat, or flatter tax rates, once liberated from the Russian yoke in the early 1990’s. This would, as you state, lead to simplicity and hopefully stop buying votes. But the power these folks wield is almost impossible for them to give up and our fellow citizens and businesses also want to be in on the game and influence what they pay and receive.
I have heard over the years that one way to go was to exempt the 1st $50,000 of household income and then a graduated tax of maybe 3 brackets with no deductions. The simplicity itself will be more than some folks can handle.
Thanks Jack for the information–I know it takes time but maybe a few folks will consider a flat, and maybe fairer way ,to raise revenue.
Per usual you speak about Trump tax cuts and deficits with no proof that they led to deficits–GDP numbers, which I have given over and over again, show spending as the culprit–maybe you have some empirical evidence showing the tax cuts are a major reason for the deficit. Maybe refute the GDP # that the Treasury releases.
Humble Dollar postings frequently deal with numbers and facts–folks question withdrawal rates of 4%+3%–total return % of Index v. managed money–annuity rates and numerous other areas of financial interest. Thoughts and opinions are normally reinforced with figures. You seem to fly without the numbers to reinforce your opinion– sort of like “the emperor has no clothes.”
You might want to state; “in my opinion”. If you have no facts–no problem–we all have opinions just like we all have rear ends.
Did I read today that the job creation numbers for December total in excess of 225,000? Heck, I can claim that the tax cuts stimulated the economy and job gains have followed in lock step. More jobs–more tax revenue– in my humble opinion, but also more revenue as a % of GDP.
There is plenty of data to support the fact the last tax cuts did not pay for themselves and thus added to deficits. I’m not doing your homework. Start with the analysis by the Committee for a Responsible Federal Budget. Or the analysis by the Tax Policy Center. Plus if his proposals are implemented that adds an additional $7.5 trillion in deficits over 10 years.
why are facts your enemy? what fear do you have in showing us what the deficit would have been without the tax cuts–c
common sense (not so common anymore) tells me no entity can predict 10-years ahead what numbers would be or would have been–too many variables–
did you know about Covid and shutting down the economy? Did you know about inflation (not high prices but too much $ chasing too few goods)? Do you have a crystal ball on interest rates and the effect on the economy? “People with crystal balls end up eating crushed glass”–Marty Zweig–Wall Street Week
Let’s go back to your personal reflections on your younger days you sent us a few days ago. Assume at age 9 you and friends began smoking–by age 19 we know smoking is bad for your health–first we have warning labels on the packs–then we get serious–we tax the heck out of them both feds and states–higher cost lower usage–common sense–many states expected much more revenue but were surprised that higher prices yielded less money, thus higher costs can mean lower growth–how many of your friends still smoke? Personally, I know nobody that smokes–cancer and cost!
Wasn’t it you Dick Quinn who railed against Trump tariffs–didn’t you say it would increase costs to the consumer–it’s just an added tax I believe you said–is that good for the consumer?
Raise taxes and most likely you slow economic growth–if the consumer has less $ they buy less–again common sense. The key, of course, is keeping your expenses down and we have not done that.
According to the Treasury numbers our debt related to economy is at levels not seen since the war (1945) and depressions.
Now, all you need to do is give us some numbers that show us that the tax cuts are the driver of the debt.
6.7% of the GDP in 2024 is the debt figure- up from pre-Covid 4.6%-revenue since 2019 has risen from 16.3% of GDP to 17.2%.
$4.9 trillion in revenue last year and in 2019 $3.5 trillion.
Of course from you we get crickets.
All we can conclude is that there is no answer to tax cuts and deficits. If you find it let us know.
10 year projection.. what a joke! Will be as accurate as all the others.
QUINNSCOMMENTARY 
BenefitJack is right about the flat tax, it would cure a lot of ills with the current system. I’ve read of it for years and I always concluded that it wouldn’t fly because it would take away the ability of the politicians to promise tax favors at election time.
As for how could Trump tax cuts be good or bad, it’s the way Trump plays the game with the Democrats. Biden did it the old way, tossing out dollars to various voters. Student loan borrowers for example. Trump cuts taxes, figuring more voters will be happy that way.
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Don’t tax you, don’t tax me, tax that guy behind the tree.
The best tax is the one I owe and YOU pay!
The SALT limit is colored bubbles, another cut in debt death by a thousand cuts. To repeat:
See: https://www.wsj.com/opinion/trumps-tax-cuts-were-good-a-flat-tax-would-be-better-434c1d8d?mod=opinion_lead_pos5
Trump’s Tax Cuts Were Good. A Flat Tax Would Be Better
Congress should scrap itemized deductions and enact a flat personal and corporate rate of 15%.
In the article, Phil Gramm and Stephen Moore note:
“… America would suddenly have one of the lowest tax rates in the world, resulting in trillions of dollars of new capital flow and a spike in take-home pay. …”
“… The simplicity of a flat tax would reduce the deadweight costs associated with tax compliance—and the headaches. The White House Office of Information and Regulatory Affairs calculates that Americans spent almost eight billion hours filling out tax forms in 2024. The Tax Foundation estimates that this cost the economy $413 billion in lost productivity, and the Internal Revenue Service estimates that we spent $133 billion on out-of-pocket compliance costs. That adds up to a burden of $546 billion. …”
“… Getting rid of what remains of these itemized deductions and special credits—except for those dedicated to supporting families with children and dependents, a worthy investment—would unleash the economy. …”
So, flat tax, yes, but 15% is correct only if we start with the first dollar, where all with income (wages, income from pensions, capital gains, distributions from retirement savings, etc.) are treated as individual/single taxpayers with no dependents – no joint filers, no head of household filings (no adjusted gross income, no taxable income, no deductions, no exemptions) – so that withholding = tax due (like many cities do it, like Social Security and Medicare). That would allow America to wipe 80+% of the IRS off the map, leverage efficiencies, etc. – because there would be no forms to file on wages subject to withholding. There would be no forms to file for interest credited or realized capital gains reported by Banks and others, who would be required to electronically report both interest income, capital gains and withholding on the 1099.
Every American would have certainty that everyone was paying their “fair share” (whatever the hell that means) and that no one dodged the system – except for those in the underground economy. It would be up to the IRS to chase those folks down (as they would for any business or corporation), and yes, I would require individuals (you and me) to electronically file a 1099 with the IRS (“snitch” on ’em) for any personal service individual or business to whom they paid $500 or more in any calendar year (yes, lawyers, accountants, newspaper carriers, babysitters, etc.)
Stop the vote buying via changes in the individual income tax code.
LikeLike
How can Trump tax cuts be good given deficits and debt and given they added to both?
LikeLike
If you change to 15% of everything, no deductions, no exemptions … no VOTE BUYING … you RAISE revenue, directly. And, you RAISE revenue indirectly by creating certainty in that you allow everyone and everything to move forward without worrying about how the beltway bandits will undermine your financial, business and personal decision-making.
This is Public Finance 101 (or actually, it is a 300 level course in economics, one I took way back in 1976). It hasn’t changed in the past 50 years.
LikeLike
Al Lindquist:
Flat tax is a great idea–I believe many Eastern European countries adopted flat, or flatter tax rates, once liberated from the Russian yoke in the early 1990’s. This would, as you state, lead to simplicity and hopefully stop buying votes. But the power these folks wield is almost impossible for them to give up and our fellow citizens and businesses also want to be in on the game and influence what they pay and receive.
I have heard over the years that one way to go was to exempt the 1st $50,000 of household income and then a graduated tax of maybe 3 brackets with no deductions. The simplicity itself will be more than some folks can handle.
Thanks Jack for the information–I know it takes time but maybe a few folks will consider a flat, and maybe fairer way ,to raise revenue.
LikeLike
Al Lindquist:
Per usual you speak about Trump tax cuts and deficits with no proof that they led to deficits–GDP numbers, which I have given over and over again, show spending as the culprit–maybe you have some empirical evidence showing the tax cuts are a major reason for the deficit. Maybe refute the GDP # that the Treasury releases.
Humble Dollar postings frequently deal with numbers and facts–folks question withdrawal rates of 4%+3%–total return % of Index v. managed money–annuity rates and numerous other areas of financial interest. Thoughts and opinions are normally reinforced with figures. You seem to fly without the numbers to reinforce your opinion– sort of like “the emperor has no clothes.”
You might want to state; “in my opinion”. If you have no facts–no problem–we all have opinions just like we all have rear ends.
Did I read today that the job creation numbers for December total in excess of 225,000? Heck, I can claim that the tax cuts stimulated the economy and job gains have followed in lock step. More jobs–more tax revenue– in my humble opinion, but also more revenue as a % of GDP.
LikeLike
You think this is made up?
There is plenty of data to support the fact the last tax cuts did not pay for themselves and thus added to deficits. I’m not doing your homework. Start with the analysis by the Committee for a Responsible Federal Budget. Or the analysis by the Tax Policy Center. Plus if his proposals are implemented that adds an additional $7.5 trillion in deficits over 10 years.
LikeLike
Al Lindquist:
why are facts your enemy? what fear do you have in showing us what the deficit would have been without the tax cuts–c
common sense (not so common anymore) tells me no entity can predict 10-years ahead what numbers would be or would have been–too many variables–
did you know about Covid and shutting down the economy? Did you know about inflation (not high prices but too much $ chasing too few goods)? Do you have a crystal ball on interest rates and the effect on the economy? “People with crystal balls end up eating crushed glass”–Marty Zweig–Wall Street Week
Let’s go back to your personal reflections on your younger days you sent us a few days ago. Assume at age 9 you and friends began smoking–by age 19 we know smoking is bad for your health–first we have warning labels on the packs–then we get serious–we tax the heck out of them both feds and states–higher cost lower usage–common sense–many states expected much more revenue but were surprised that higher prices yielded less money, thus higher costs can mean lower growth–how many of your friends still smoke? Personally, I know nobody that smokes–cancer and cost!
Wasn’t it you Dick Quinn who railed against Trump tariffs–didn’t you say it would increase costs to the consumer–it’s just an added tax I believe you said–is that good for the consumer?
Raise taxes and most likely you slow economic growth–if the consumer has less $ they buy less–again common sense. The key, of course, is keeping your expenses down and we have not done that.
According to the Treasury numbers our debt related to economy is at levels not seen since the war (1945) and depressions.
Now, all you need to do is give us some numbers that show us that the tax cuts are the driver of the debt.
6.7% of the GDP in 2024 is the debt figure- up from pre-Covid 4.6%-revenue since 2019 has risen from 16.3% of GDP to 17.2%.
$4.9 trillion in revenue last year and in 2019 $3.5 trillion.
Net interest 1.8% of GDP in 2019–3.1% in 2024.
What numbers do you have?
LikeLike
Of course from you we get crickets.
All we can conclude is that there is no answer to tax cuts and deficits. If you find it let us know.
10 year projection.. what a joke! Will be as accurate as all the others.
LikeLike