The GOP Tax Reform/Cuts Plan

ok, the 2 sides have apparently struck a deal on principle.  Trump will say more in a couple hours.  Corporate tax rate may be 21% instead of 20%.

I'm hearing that the comprise on SALT is that there will be a choice whether to deduct state income taxes or local property taxes. 

The AMT will not be repealed but the exemption amount will be increased.

How about CHIP and repealing the healthcare mandate?

cramer said:

I'm hearing that the comprise on SALT is that there will be a choice whether to deduct state income taxes or local property taxes. 

The AMT will not be repealed but the exemption amount will be increased.

There is a $10,000 cap on the SALT deduction. 

cramer said:

I'm hearing that the comprise on SALT is that there will be a choice whether to deduct state income taxes or local property taxes. 

The AMT will not be repealed but the exemption amount will be increased.

There is a $10,000 cap on the SALT deduction. 

I know some Trump supporters around here who pay several times more than this in property and state income taxes. It would be interesting to hear what they think as limiting the SALT deduction as a revenue enhancer almost seems specifically designed to punish blue states.

For our area, that's not very helpful.  I think the limit is still $10k for SALT.

cramer said:

I'm hearing that the comprise on SALT is that there will be a choice whether to deduct state income taxes or local property taxes. 

The AMT will not be repealed but the exemption amount will be increased.

Yup. We get screwed. 

yahooyahoo said:

For our area, that's not very helpful.  I think the limit is still $10k for SALT.

cramer said:

I'm hearing that the comprise on SALT is that there will be a choice whether to deduct state income taxes or local property taxes. 

The AMT will not be repealed but the exemption amount will be increased.

yet again....

You need to look up the term 'status quo', and then look at the changing political landscape of the last ten years or so (i.e. who gained power and how), and then reconcile them.

Don't try too hard, cause you can't.

lord_pabulum said:

Yes, gerrymandering is one of the tools used to protect the status quo 

I think a lot of NJ conservatives who itemize are ambivalent about losing the SALT deduction because they think it incentivizes high taxes in the first place.  Their anger is directed at the liberal politicians and judges of NJ who have made the state a tax nightmare, not Congressional Republicans.

I don't think NJ conservative sites, like SaveJersey and AFP-NJ, have objected to losing the SALT deduction.  The Manhattan Institute (NYS) has written a few pieces recently talking about the unfair the SALT deduction. 

I know that some of these groups are Koch-funded, but a lot of high-tax state conservatives who aren't politicians and who don't get anything from the Koch brothers seem ambivalent about losing the deduction.

Stoughton said:

cramer said:

I'm hearing that the comprise on SALT is that there will be a choice whether to deduct state income taxes or local property taxes. 

The AMT will not be repealed but the exemption amount will be increased.

There is a $10,000 cap on the SALT deduction. 

I know some Trump supporters around here who pay several times more than this in property and state income taxes. It would be interesting to hear what they think as limiting the SALT deduction as a revenue enhancer almost seems specifically designed to punish blue states.

Probably wouldn't have such high taxes if we got our fair share back from the feds.  Once they realize that won't change and, as a result, our state and local taxes won't go down, they'll see the light.

we have high taxes because we want good schools and other services.  And we pay our teachers, firefighters and cops a decent living wage.  That isn't the case in every state.  For example the average teacher in NJ is paid 50% more than the average teacher in Mississippi.  But what kind of people would we get in NJ to teach our kids if we paid them $40K a year?

the SALT deduction has been part of the federal income tax since day 1.  It's a recognition that the most basic government functions that people rely on are provided by the state and local governments.  The feds aren't going to build our local roads and maintain them, or educate or kids, or build us local mass transit. They won't pay for us to have cops, or have our fires put out.  All of those things will now be put under fiscal pressure by eliminating the SALT deduction.  

Steve said:

Probably wouldn't have such high taxes if we got our fair share back from the feds.  Once they realize that won't change and, as a result, our state and local taxes won't go down, they'll see the light.

Perhaps you are correct regarding how NJ Republicans will react, although I think many NJ Republicans are desperate to get out of this state period.  Nobody tracks out-migrants by party affiliation, but out-migrants are disproportionately white and white people are disproportionately Republican. 

But NJ's high taxes aren't due to a lack of money from the federal government except in a very small way.  

Indeed, we get less money from the federal government to fund state and local operations than most states, but we go way beyond merely compensating for that federal funding deficit and spend far more than the national average in every category of spending except higher education. 

I wouldn't say that NJ's high taxes are "voluntary," but they are due to the decisions of our own politicians (and Supreme Court.)

Also, the stats you see about federal spending as a ratio of federal taxes include things like Social Security and Medicare. Since NJ, due to its own policy decisions, is an inhospitable place to retire to, we don't get a lot of Social Security and Medicare money.

our high costs are also a function of income inequality, which the GOP couldn't give a damn about.  Incomes in our area are driven by the high cost of living that is largely driven by housing. Those housing costs are driven up by the high number of very high income people.

unless we want our teachers, cops and firefighters traveling from two hours away to work in our towns, we have to pay them more than the national average.

salaries and benefits for public employees are the primary cost drivers.  I know a lot of people are resentful of how much those people are paid.  But when the median HH income in towns like SOMA is well over $120K, how do we expect to get away with paying public employees a third or half of that?

Runner_Guy said:
Also, the stats you see about federal spending as a ratio of federal taxes include things like Social Security and Medicare. Since NJ, due to its own policy decisions, is an inhospitable place to retire to, we don't get a lot of Social Security and Medicare money.

Do you have stats supporting your statement.  Here's a table of who gets Social Security, by state.  I think if you were correct, the percentage of those on Social Security and over 65 in NJ would be a lot lower.  Also, fwiw, a higher percentage of those over 65 receive Social Security in NJ than in, say, Florida, which suggests that they're retired.

https://www.ssa.gov/policy/docs/statcomps/oasdi_sc/2016/table01.html

ml1 said:

we have high taxes because we want good schools and other services.  And we pay our teachers, firefighters and cops a decent living wage.  That isn't the case in every state.  For example the average teacher in NJ is paid 50% more than the average teacher in Mississippi.  But what kind of people would we get in NJ to teach our kids if we paid them $40K a year?

the SALT deduction has been part of the federal income tax since day 1.  It's a recognition that the most basic government functions that people rely on are provided by the state and local governments.  The feds aren't going to build our local roads and maintain them, or educate or kids, or build us local mass transit. They won't pay for us to have cops, or have our fires put out.  All of those things will now be put under fiscal pressure by eliminating the SALT deduction.  

All true, but as an example, the state projected a $4.2B cost for Medicaid.  The feds pay 50% of the state's Medicaid costs.  If we were like Mississippi and got 85% of those costs covered by the feds, that would free up a decent chunk of change for us.

 Runner_Guy said:

 but out-migrants are disproportionately white and white people are disproportionately Republican. 

I think that it's more accurate to say that Republican's in NJ are disproportionately White.

As for federal monies, see my comment above as an example.

I think this is right, but incomplete.

NJ's high taxes are only partly due to paying employees well (as would be necessary given our cost of living), NJ's high taxes are more due to the per capita ratios we have for public employees.  To use teachers as an example since they are the biggest category of public employees, NJ's student:teacher ratio is 11.9:1, which is the second lowest in the US.  Our ratios for other public employees per capita are all above average.  (NJ's teachers per capita would also be very high, although perhaps not #2)

Sometimes NJ offers services that most states don't, with PreK being an important example.  NJ's PreK spending is >$700 million, or >2% of the state budget*.  I don't know this for a fact, but my guess is that is the highest in the country in terms of a percentage of the budget and spending per pupil.  Most states offer very little state-funded PreK.  Massachusetts has virtually none of it.  

Also, the salaries and benefits are disproportionate to what our cost of living is.  

There isn't an authoritative, federal ranking of cost of living, but the rankings by respected private organizations I find put us 5th place - 10th place. 

Despite a cost of living that actually isn't at the top of the US, for police we are #2 nationally in salaries. For firefighters we are #1.  For teachers we are #5.  

You can argue that it is appropriate for NJ to have very high paid public employees and have high ratios of them. You can argue that NJ should even pay public employees more than we do.  

But as an explanation as to the _why_ of NJ's taxes, it's necessary to talk about NJ's spending, including programs most states don't offer, salaries of employees, employment ratios.

*this counts FICA taxes and TPAF.

ml1 said:

our high costs are also a function of income inequality, which the GOP couldn't give a damn about.  Incomes in our area are driven by the high cost of living that is largely driven by housing. Those housing costs are driven up by the high number of very high income people.

unless we want our teachers, cops and firefighters traveling from two hours away to work in our towns, we have to pay them more than the national average.

salaries and benefits for public employees are the primary cost drivers.  I know a lot of people are resentful of how much those people are paid.  But when the median HH income in towns like SOMA is well over $120K, how do we expect to get away with paying public employees a third or half of that?

ml1 said:

unless we want our teachers, cops and firefighters traveling from two hours away to work in our towns, we have to pay them more than the national average.

salaries and benefits for public employees are the primary cost drivers.  I know a lot of people are resentful of how much those people are paid.  But when the median HH income in towns like SOMA is well over $120K, how do we expect to get away with paying public employees a third or half of that?

But we do.

I think that town clerks or DPW workers get paid way below the SOMA median HH income. Teachers, cops and firefighters may because they have strong unions, not because we care about their travel time.

And to be fair why only public workers. Do we want the Barista who makes our coffee to have a two hour travel? If we're going to be concerned that public employees have median incomes reflecting the community they live in, then the same should be the same for employees working for private firms - the gas attendant, the store clerk, the barista.

It has to do with having a strong public union and restricting an occupation with education and other selective rules

btw- there are communities where public workers salaries far exceed the community median income. Should their salary be reduced?

I did also write that we want good schools.  And we have good schools.  And while spending doesn't guarantee good schools, higher spending does correlate with better outcomes.

You call the salaries "disproportionate."  But that's because in many categories of state employee, New Jerseyans expect a higher level of professionalism than other states do. Our teachers tend to have higher standards they have to meet.  We tend to rely on professional firefighters and not volunteers in most communities.

We get what we pay for.  You seem to be implying that we waste money in NJ.  I would say we spend more for sure.  But we're spending it because our citizens want the things we're spending it on.

If we want to be South Dakota, where they don't even bother to pave the roads any more, we could have lower taxes.  

Bottom line, you and I are never going to agree on this issue.  I put quality of life and better outcomes above tax rate in my list of priorities.  It's why I live in Maplewood.  I could have found a lower tax town that cost me an extra 7-10 hours a week in commuting.  But I'm not doing that.  And I'm also not going to insist that the state lay off teachers or stop funding PreK.  I think those would be dumb ideas, and counterproductive in the long run.

Runner_Guy said:

I think this is right, but incomplete.

NJ's high taxes are only partly due to paying employees well (as would be necessary given our cost of living), NJ's high taxes are more due to the per capita ratios we have for public employees.  To use teachers as an example since they are the biggest category of public employees, NJ's student:teacher ratio is 11.9:1, which is the second lowest in the US.  Our ratios for other public employees per capita are all above average.  (NJ's teachers per capita would also be very high, although perhaps not #2)

Sometimes NJ offers services that most states don't, with PreK being an important example.  NJ's PreK spending is >$700 million, or >2% of the state budget*.  I don't know this for a fact, but my guess is that is the highest in the country in terms of a percentage of the budget and spending per pupil.  Most states offer very little state-funded PreK.  Massachusetts has virtually none of it.  

Also, the salaries and benefits are disproportionate to what our cost of living is.  

There isn't an authoritative, federal ranking of cost of living, but the rankings by respected private organizations I find put us 5th place - 10th place. 

Despite a cost of living that actually isn't at the top of the US, for police we are #2 nationally in salaries. For firefighters we are #1.  For teachers we are #5.  

You can argue that it is appropriate for NJ to have very high paid public employees and have high ratios of them. You can argue that NJ should even pay public employees more than we do.  

But as an explanation as to the _why_ of NJ's taxes, it's necessary to talk about NJ's spending, including programs most states don't offer, salaries of employees, employment ratios.


*this counts FICA taxes and TPAF.

ml1 said:

our high costs are also a function of income inequality, which the GOP couldn't give a damn about.  Incomes in our area are driven by the high cost of living that is largely driven by housing. Those housing costs are driven up by the high number of very high income people.

unless we want our teachers, cops and firefighters traveling from two hours away to work in our towns, we have to pay them more than the national average.

salaries and benefits for public employees are the primary cost drivers.  I know a lot of people are resentful of how much those people are paid.  But when the median HH income in towns like SOMA is well over $120K, how do we expect to get away with paying public employees a third or half of that?

BG9 said:


But we do.

I think that town clerks or DPW workers get paid way below the SOMA median HH income. Teachers, cops and firefighters may because they have strong unions, not because we care about their travel time.

And to be fair why only public workers. Do we want the Barista who makes our coffee to have a two hour travel? If we're going to be concerned that public employees have median incomes reflecting the community they live in, then the same should be the same for employees working for private firms - the gas attendant, the store clerk, the barista.

It has to do with having a strong public union and restricting an occupation with education and other selective rules

btw- there are communities where public workers salaries far exceed the community median income. Should their salary be reduced?

I'm not sure what you're arguing.  You seem to be reading a lot into what I wrote..  I'm actually in favor of a lot of classes of workers being paid more than they are, including baristas and other service workers.  Just because I didn't mention them doesn't mean I don't support things like higher minimum wages and stronger private sector unions.

ml1 said:

BG9 said:


But we do.

I think that town clerks or DPW workers get paid way below the SOMA median HH income. Teachers, cops and firefighters may because they have strong unions, not because we care about their travel time.

And to be fair why only public workers. Do we want the Barista who makes our coffee to have a two hour travel? If we're going to be concerned that public employees have median incomes reflecting the community they live in, then the same should be the same for employees working for private firms - the gas attendant, the store clerk, the barista.

It has to do with having a strong public union and restricting an occupation with education and other selective rules

btw- there are communities where public workers salaries far exceed the community median income. Should their salary be reduced?

I'm not sure what you're arguing.  You seem to be reading a lot into what I wrote..  I'm actually in favor of a lot of classes of workers being paid more than they are, including baristas and other service workers.  Just because I didn't mention them doesn't mean I don't support things like higher minimum wages and stronger private sector unions.

I'm not arguing with you. I agree on the higher wages for all. The reason I posted was that its strong unions and job selectivity restrictions that have driven up wages for teachers, fire and police.

Does anyone know what they are doing with the estate tax?

From what I have read it remains with a higher exemption (basically how the Senate came down). I have not seen if this is temporary (as in the original Senate bill) or has been made permanent.

mikescott said:

Does anyone know what they are doing with the estate tax?

They're keeping it but doubling the exemption to $11 million for an individual or $22 million for a married couple. This was in the Senate bill. The House bill eliminated it entirely.

jamie said:

How about CHIP and repealing the healthcare mandate?

The consensus bill sticks with the Senate bill and repeals the individual mandate. 

cramer said:

jamie said:

How about CHIP and repealing the healthcare mandate?

The consensus bill sticks with the Senate bill and repeals the individual mandate. 

From what I have read the conference bill does not technically "repeal" the mandate (as the Senate bill did). It just sets the penalty for not having insurance at zero. A fudge designed to get Collins, who has opposed the repeal, to be able to vote yes.

Since 1970, Republicans in NJ have held the office of governor for a total of 28 years and the Democrats for a total of 20.

Who is to blame for the tax problems in NJ?  A solid case can be made for both parties.

Runner_Guy said:

I think a lot of NJ conservatives who itemize are ambivalent about losing the SALT deduction because they think it incentivizes high taxes in the first place.  Their anger is directed at the liberal politicians and judges of NJ who have made the state a tax nightmare, not Congressional Republicans.


I don't think NJ conservative sites, like SaveJersey and AFP-NJ, have objected to losing the SALT deduction.  The Manhattan Institute (NYS) has written a few pieces recently talking about the unfair the SALT deduction. 

I know that some of these groups are Koch-funded, but a lot of high-tax state conservatives who aren't politicians and who don't get anything from the Koch brothers seem ambivalent about losing the deduction.

Stoughton said:

cramer said:

I'm hearing that the comprise on SALT is that there will be a choice whether to deduct state income taxes or local property taxes. 

The AMT will not be repealed but the exemption amount will be increased.

There is a $10,000 cap on the SALT deduction. 

I know some Trump supporters around here who pay several times more than this in property and state income taxes. It would be interesting to hear what they think as limiting the SALT deduction as a revenue enhancer almost seems specifically designed to punish blue states.

If Murphy does not allow the 2% arbitration cap to be renewed we will all now be extra screwed.

If a fair summary of your argument is "New Jersey has high taxes because New Jerseyans want better services are willing to pay for them" then I agree with you.

I think many people overstate structural explanations for our tax burden (ie, the governmental fragmentation theory) or special interest explanations (ie, the power of the NJEA), but I think, at a fundamental level, state and local electorates are responsible for the tax situation.  People get the government they vote for and New Jerseyans have been voting in tax-tolerant Democrats (and Republicans) for a long time.

After all, even after passing the biggest proportional tax increase in American history, Jim Florio almost won reelection.  The Democratic legislative majority that has existed since 2001 looks pretty much permanent, even though the Democrats don't purport to prioritize lowering taxes on the highest-taxed state in the US.

That being said, voters are fickle, moody, and self-contradictory.  I think if NJ allowed citizen initiatives at some point anti-tax voters would have been able to pass a law that would have restrained tax increases. 

Look at Massachusetts. It has the same governmental fragmentation NJ has, plus a strong Democratic orientation, plus strong unions, and yet it has much lower taxes.  I think part of the reason for that is Prop 2.5.  The same thing goes for California, whose property taxes, at least, are low due to Prop 13.  

Anyway, we could discuss this at length, but I shall stop now to avoid thread drift.

My initial point was just that the reason NJ's taxes are high isn't because of insufficient federal money. NJ's taxes are high because of higher public salaries, more governmental employees, and services that don't exist elsewhere. Whether or not NJ's level of spending improves quality of life is a personal values-based decision, but those are the predominant reasons NJ's taxes are high. 

ml1 said:

I did also write that we want good schools.  And we have good schools.  And while spending doesn't guarantee good schools, higher spending does correlate with better outcomes.

You call the salaries "disproportionate."  But that's because in many categories of state employee, New Jerseyans expect a higher level of professionalism than other states do. Our teachers tend to have higher standards they have to meet.  We tend to rely on professional firefighters and not volunteers in most communities.

We get what we pay for.  You seem to be implying that we waste money in NJ.  I would say we spend more for sure.  But we're spending it because our citizens want the things we're spending it on.

If we want to be South Dakota, where they don't even bother to pave the roads any more, we could have lower taxes.  

Bottom line, you and I are never going to agree on this issue.  I put quality of life and better outcomes above tax rate in my list of priorities.  It's why I live in Maplewood.  I could have found a lower tax town that cost me an extra 7-10 hours a week in commuting.  But I'm not doing that.  And I'm also not going to insist that the state lay off teachers or stop funding PreK.  I think those would be dumb ideas, and counterproductive in the long run.

cramer said:

mikescott said:

Does anyone know what they are doing with the estate tax?

They're keeping it but doubling the exemption to $11 million for an individual or $22 million for a married couple. This was in the Senate bill. The House bill eliminated it entirely.

I'm puzzled about the "married couple" provision. Does this apply only when they both die at the same time? Otherwise what does it mean?

even NY has much more reasonable property taxes