One of the features of the tax plan proposed by President Trump is the elimination of all itemized deductions except for the mortgage deduction and the charitable giving deduction. Keeping these deductions makes sense. Home ownership produces pride in neighborhoods, helps stabilize our society, and actually helps people achieve financial success. Charitable giving is actually one of the traits of Americans. I have had people from foreign countries who have spent time in America tell me that they are amazed at the willingness of Americans to give or to help in an emergency. Keeping both of those deductions makes a lot of sense.
One deduction that will be eliminated is going to be fought by Democrats from some states with high income taxes. That is the deduction for state and local taxes. States like New York, Connecticut, California, and Massachusetts that have high income taxes or property taxes are currently being subsidized by the federal government. People who live in those states actually get a break on their federal taxes because their state taxes are so high. You can expect Senators and Representatives from the states listed above to protest loudly against this tax proposal. However, there may be some Democrats from smaller states that are tired of subsidizing the high tax states that will support it. The Democrats generally vote as a bloc, but because most Americans support tax reform, it will be interesting to see if all of them are willing to take a suicide plunge.
Another thing to watch in the reporting of this tax plan is the narrative. In the past, any time tax cuts are proposed, the Democrats begin their battle cry of ‘tax cuts for the rich.’ That battle cry and its previous success gave us eight years of a presidency where the GDP never reached 3 percent growth. At some point the American people are going to realize that the cry of ‘tax cuts for the rich’ has not helped those in the middle class. Salaries and home ownership rates have decreased during the past eight years. The poverty rate has increased and the number of Americans on food stamps has grown exponentially.
It is interesting that President Trump will be one of the people who will take a heavy hit in taxes if this proposal goes through. He will no longer be able to deduct the real estate taxes on the properties he owns in high tax states. He would probably fare better with the loopholes and deductions in the current tax plan. So much for ‘tax cuts for the rich.’
America’s current tax plan is a tribute to lobbyists. There are a lot of very wealthy special interest groups that do not want to see major changes in our current tax plan. Those groups will be very busy in the coming weeks. The only way to counter the negative spin that will be used to fight this tax plan is to email, call, write, or speak to your Senator or Representative to Congress and tell them that you support the changes proposed. It is time to simplify the tax code and to stop forcing lower tax states to subsidize higher tax states. This plan is something that will be good for most Americans and good for America.