Trump "Angry" After Learning What State And Local Tax Repeal Really Means

In what may be the final nail in President Trump's tax reform proposal, months after the White House proposed ending a tax break for people in high-tax states - which would suggest Trump had more than enough time familiarize himself with how it all works -  Trump reportedly "grew angry" when he learned that the change would hurt some middle-income taxpayers, Bloomberg reports citing people familiar with his thinking.

As Bloomberg amusingly adds, "It’s not clear why the president didn’t know the implications of the SALT deduction for middle-class taxpayers when the plan was released."

Trump's confusion appears to have led to even more confusion everywhere else: according to Bloomberg, Trump’s concerns led him to say this week that “we’ll be adjusting” the tax-overhaul framework, but it’s not clear how he and congressional leaders would make up for the $1+ trillion in revenue that would be lost without ballooning the deficit or torpedoing support for the plan among hard-line conservative Republicans. Meanwhile, Trump’s top economic adviser Gary Cohn said Thursday morning that the president "is not rethinking his position on repealing the state and local tax deduction" contradicting what Trump himself said previously.

In any case, while the plan to eliminate State and Local tax deductions may have been prompted by an initial assumption that such a move would mostly hit blue states as shown below...

... the realization that it would have a dire impact on republican politicians in NY, NJ and CT may have given Trump reason to reevaluate.

The White House press office on Wednesday night declined to comment on internal deliberations, but released a general statement that said in part: “The president has made it unequivocally clear that a key priority for tax reform is to cut taxes for America’s hardworking middle class families.”

But Trump's chief economic advisor, Gary Cohn, said Thursday that the president is not rethinking his position on the state and local tax deduction, which allows households to deduct state and local taxes on their federal returns. Cohn declined to take other questions. Cohn had previously suggested that the White House was open to negotiation on the issue.

With many - among them Goldman - speculating that Trump's tax plan may be phased in (if it even passes) amid revenue offset concerns, the so-called SALT deduction has emerged as a key flash point in the tax debate, "one that could determine whether Trump has enough votes or will fail again on one of his top legislative priorities."

“This is probably the biggest obstacle they have to overcome to get to 218,” the number of votes needed to pass a tax bill in the House, said Representative Peter King, a Republican who represents Long Island. “Right now, they can’t get there without us.”

As Bloomberg put it, the numbers are daunting for Trump: Roughly two dozen House Republicans are concerned about eliminating the deduction - and he can’t afford to lose too many more votes than that in the House.

Predicably, republican lawmakers from the states that would be most impacted from the SALT deduction are worried, and are scheduled to meet Thursday with the House’s chief tax writer, Ways and Means Chairman Kevin Brady, to discuss the issue. Many come from the high-tax states that would be hardest hit, including New York and New Jersey.

King on Wednesday floated the idea of limiting the use of the deduction to people with incomes less than $400,000 -- a cap that that has drawn some support, including from New Jersey’s Tom MacArthur. MacArthur was one of the key Republicans who forged a compromise in the House over a bill to repeal Obamacare. That effort ended last month when the Senate failed to vote on its own repeal-and-replace legislation.

 

MacArthur said he’s taken his concerns to House leaders and the White House “because I think it’s important that everyone involved understands -- you can’t gloss over this, this is a big issue, and we can’t do tax reform on the backs of six or seven states. It’s just not fair.”

 

House Speaker Paul Ryan defended the repeal of state and local tax deductions at an event in Washington on Thursday, criticizing the break for “propping up profligate big government states.”
“People are going to be better off no matter what state you come from,” Ryan said, citing the tax plan’s call to double the standard deduction and increase the child tax credit.

Trump’s White House first proposed ending the SALT deduction in April, in a one-page outline of the president’s tax goals. Its repeal is estimated to generate about $1.3 trillion over 10 years, making it an important way to help pay for the business and individual tax-rate cuts Trump and congressional leaders propose.

Representative Chris Collins, a New York Republican who’s close to Trump said he thought the president has been more focused on cutting taxes for corporations and pass-through businesses to stimulate the economy. “And he’s left it to others for the details of how we get there” and “how we pay for it,” a confused Collins said.

At the same time, many conservatives argue that the tax break should be abolished because it subsidizes state and local governments that tax their citizens heavily - a view Trump echoed during an interview that Fox News aired Wednesday night. “It is finally time to say, ‘Make sure your politicians do a good job of running your state,”’ he told interviewer Sean Hannity.

* * *

Of course, should the SALT provision be amended, absent any additional government revenues, it would greatly increase the federal deficit that would result from Trump's tax bill - endangering the legislation’s support among some lawmakers or limiting the size and duration of its cuts.

In the White House, Trump’s point-person on tax policy, Shahira Knight, met Wednesday with representatives of groups that want to preserve the tax break, including the National Association of Realtors. But earlier in the day, Kevin Hassett, one of the president’s top economic advisers, said the administration still expects to see a tax bill with permanent rate cuts and no deduction for state and local taxes. The state and local tax deduction primarily benefits high-income people in high-tax states, including New York, New Jersey and California - i.e. largely blue states as shown in the chart above. But about 10 percent of tax filers with incomes less than $50,000 claimed the deduction in 2014, according to the Tax Policy Center, a Washington policy group. People who make more than $100,000 a year accounted for about two-thirds of the SALT deductions claimed that year.

Meanwhile, in its latest assessment of the Trump tax plan, Goldman said that "it seems likely that Congress will phase in the tax cut over time. Congressional Republicans are likely to try to provide some near-term tax benefit to individuals ahead of the midterm election, but the greater emphasis in our view will be to reduce statutory tax rates while keeping the overall cost within the parameters laid out in the pending budget resolution. This would argue for a somewhat backloaded tax cut."

In any case, judging by the market, and specifically the ratio of "High tax" corporates to the overall market, as of this moment, the market is once again convinced that Trump's tax reform is effectively dead.

Comments

JRobby 4shzl Thu, 10/12/2017 - 13:20 Permalink

These "deductions" are taxed at AMT (alternative minimum tax) rates up to 28% for certain higher earning taxpayers. So you are taxed at your taxable income level after all deductions and additional AMT taxes are due for a number of "preferred" deductions, state and local taxes being part of that AMT group.Supposedly, the AMT is going away in the "proposed bill". So in high income and property tax states it is an issue right now but if AMT goes away, it is no longer an issue for higher earners but it would no longer be a deduction at all for anyone.A sane compromise is phase outs of the deductions for state and local taxes at various stair stepped income levels. I did use the word "sane" so........

In reply to by 4shzl

Escrava Isaura Blue-Berry Thu, 10/12/2017 - 15:43 Permalink

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OneStinkyDinky: Trump 'Angry' After Reading Constitution  The issue with Trump is that running government is not suitable for him. Federal government, especially the US, is like being a captain of a supertanker, you can’t see everything, it’s complex, and it moves slowly. Trump wants to command the supertanker as if it was a speedboat. It ain’t gonna work.  

In reply to by Blue-Berry

jeff montanye bobcatz Thu, 10/12/2017 - 21:12 Permalink

same problem at the faa, norad, the passenger screening security firms, the federal judge that reviewed suits against same, the rabbi/pentagon controller that sold "antihijacking" instruments to the airlines, i think you see where this is going.  one more time.  bust 9-11 and change the world.  i'm throwing in russiagate and charlottesville because it shows a pattern of misbehavior.http://www.voltairenet.org/article179295.htmlhttp://www.whale.to/b/isra….   http://topdocumentaryfilms.com/everything-rich-man-trick/https://smile… http://g-2.space/sixmonths/https://www.truthdig.com/articles/time-to-re…’s-left-russiagate-–-are-we-down-1000-paid-trollshttp://archive.is/lD4BVhttp://www.theamericanconservative.com/articles/… http://www.whatdoesitmean.com/index2359.htmhttps://vultureofcritique.wo…    

In reply to by bobcatz

Vageling sickavme Fri, 10/13/2017 - 06:13 Permalink

It is what I like to believe too. If not... Well, the alternative is that Trump has someones hand shoved up his ass using him as sockpuppet. How can you not know with all these adviser muppets around you? If he really was pissed on the other hand he'd replace advisers. You're fired and shit...With all the fake news nowadays... Hard to tell. I already figured out that logic hardly applies to politics. Politics is a game of it's own. And it's not about the people. Not anymore anyway. It does fit the narrative. Trump is acting like this is one of his shows. But I find that hard to swallow. Sure... Entertaining, but behind the screens he must have something serious in him. 

In reply to by sickavme

Vageling fulliautomatix Fri, 10/13/2017 - 06:27 Permalink

That's a double edge blade. Why?The USA is not ready for that since everybody (majority anyway) is stuck in the stick it to the other modus. Deeply divided. Then your republic turns into a mob rule. Anyone with a brain can see where that will lead to. And we already saw how far they (politicians, especially D's but R's not excluded) are willing to go...Fraud, corruption, etc. Whatever it takes to win. At the same time you take accountability away from the politicians. They lie, lie some more, deceive you and you vote... To find out you've been had. And they simply say... "Hey the people voted, don't blame us"You need to think about this. I'm all for a form a direct democracy. An example that comes to mind is the EU constitution. I actually got to vote. But in a non binding referendum. And I rejected it. The overwhelming majority did. But non binding. Fuck the people... My point mentioning this is that we voted those cocksuckers in. Do your job. When legislation needs to be passed that deeply effect a nation (like the example I mentioned) I DO believe it's up to the people to decide. That simply effect every citizen. Also the implementation needs attention. People should have acces to the REAL documents! Something these assholes in Brussels want to keep from us and stash it in some dark room where no phones, computers or whatever is allowed. It can work. I know it does in Switzerland. But they thought about it. Not everything is asked to the public to decide. 

In reply to by fulliautomatix

Vageling Yog Soggoth Fri, 10/13/2017 - 06:38 Permalink

That's because the USA is a constitutional Republic. People forget that as it seems and talk about democracy as if, A) they have any clue what it really means and B) there is no room for democracy (The romantic version as I call it) in a Republic since the constitution decides and already determines who has what authority. It's why you guys have an electoral college. The people can express their preference, but do not decide on who actually gets elected President. Like every robbermint system there are pro's and cons. The real problem is corruption. Deep State... However even they know they are not invincible. Obstruct is what they do, manipulate... It's up the the branches of the USG to work around that. Which as we learned is not that simple. Too many conflict of interest. Too many regulation that ALLOW these conflict of interest. Corp should be excluded for example. Since it's not. It's just about the money. Meet the new boss, same or worse as the old. 

In reply to by Yog Soggoth

gmrpeabody OneStinkyDinky Thu, 10/12/2017 - 15:12 Permalink

" White House first proposed ending the SALT deduction in April, in a one-page outline of the president’s tax goals. Its repeal is estimated to generate about $1.3 trillion over 10 years, making it an important way to help pay for the business and individual tax-rate cuts"so.., first they have to raise the taxes so that thay can lower the taxes..., what's not to like?

In reply to by OneStinkyDinky

Endgame Napoleon JRobby Thu, 10/12/2017 - 14:25 Permalink

Trump is concerned with tax breaks for “hardworking families,” including no doubt the frequently absentee babyvacationers who do not work very hard at all, but they do dominate the many family-friendly jobs, never hesitating to leave work for protracted and frequent periods of time, even during the busiest times of the workday.

Nothing says it louder than the expansion of the child-tax-credit welfare system that grants the equivalent of 4 months of wages in a $9-per-hour job in a lump-sum, tax-time pay out. It is intended to coax more moms to chase the many part-time / temp jobs that this economy is pumping out. Pay their daycare so that moms can dilute the wage pool even more, working part time, rather than raising their children.

They just have to show a minor amount of childcare expense; it does not even come close to between $3,337 and $6,269 in most cases. That is one reason why so many moms brag about spending their child tax credits on trips to Florida with boyfriends. Another reason is that their mothers often do the childcare for them, enabling them to show an expense, and then they give the money back to them.

One reason “work”ing moms can use their child tax credits on master bedroom furniture is that their main living expenses — rent, groceries, heating — are covered by taxpayers, with monthly cash assistance added, too. This frees up their yearly, child-tax-credit cash assistance for mom pampering.

Trump is extending this lump-sum, tax-time freebie to the moms whose husbands cover their rent, groceries, etc.

It kicks people like me—single, childless women—who must cover all bills on earned-only income to the curb, making the job scene even harder, in that it already caters caters to 1) moms with spousal income, 2) moms with child support that covers rent and 3) moms with free rent and food for working the 20 hours per week required to get welfare.

They do not need higher pay or more hours. As explained by an employer, “they have somethin’ comin in.”

Politicians are constantly referring to these mythical, hardworking families at the top and the bottom of the wage pool. Where are these people? At the top and the bottom, a ton of excused babyvacationing is going on, with an elaborate welfare / taxfare system accommodating some of it at the bottom.

It is true that state and local taxes are high for property owners, and since back-watching parenting gangs dominate most jobs that pay anything, they are the property owners in most cases. Property owners are often taxed to support schools.

If dual, high-earner couples (often described as “middle class”) want to cut their state and local taxes, they should support a reduction in mass, welfare-reinforced immigration. Mass immigration requires billions in expenditures on schools, in addition to all of the monthly welfare and child-tax-credit welfare that enables a sole, male breadwinner in immigrant households, like the sole, female breadwinners in single-parent citizen households, to work part-time — NOT hard — and for very low wages, undercutting single, childless citizens who have no unearned income to pump up their wages.

Many of these dual high earners have little empathy for all of the American males who lack access to womb-based welfare. They must compete with all of these welfare-primed immigrants who can accept a pittance for pay due to their free food, free rent and child tax credits of up to $6,269.

In reply to by JRobby

Hata Mari JRobby Thu, 10/12/2017 - 19:32 Permalink

The thing about the deduction is this: first, you must itemize in order to be able to claim it. Second, most working people in America are W2 wage earners. For those who itemize, it's EITHER the sales tax OR the income tax you've had withheld from your paycheck. EITHER/OR .. not both. Claimed on Schedule A.Those who will be hurt by this will be primarily 1099 sub-contractors or the self-employed who are able to itemize their deductions. It's actually a much smaller pool of people than the reportage suggests. Also possibly some retirees.

In reply to by JRobby

Turquoise5 JRobby Thu, 10/12/2017 - 14:57 Permalink

A better solution is to CUT government spending.  Not "cut" government spending by increasing spending as they usually do, or let it increase 0% y/o/y, but actually cutting the amount government spends.  Easily several whole agencies and departments could be cut an nobody would even notice.  In fact, the taxpaying citizenry would actually rejoice.  But not one single word about doing a single cut. 

In reply to by JRobby

Manthong 4shzl Thu, 10/12/2017 - 13:28 Permalink

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  There is a simple solution… not easy, but simple. From Forbes, 2012: (Warren G.)“Harding cut spending about 50%, he cut taxes about 40%, and he started paying down the debt.  There were no bailouts, no "stimulus" programs, no entitlements, no government employee unions, none of the things that made it extremely difficult for later presidents to cut spending. Although FDR's New Deal was plagued by unemployment that averaged 17% throughout the 1930s, and now Obama is plagued by chronic 9% unemployment, Harding's policies helped turn around the American economy within 18 months.  The Roaring Twenties were underway in 1922.  Harding died in August 1923, but his successor Calvin Coolidge (1872-1933) continued his policies.  Consequently, during the 1920s, taxes and spending were cut 50%, and about 30% of the national debt was paid off.  There were budget surpluses every year during the 1920s.  Unemployment dropped to 1.8%, the lowest in more than a century.  There were plenty of jobs.” https://www.forbes.com/sites/realspin/2011/08/10/two-of-the-all-time-greatest-successes-in-cutting-taxes-and-spending/#517bc1d6799c

In reply to by 4shzl

Proofreder falconflight Thu, 10/12/2017 - 21:11 Permalink

Seems to be so for a lot of the low-life posts on any ZH thread - seems like three to five minutes is all a rational conversation lasts without a jew, joo, ju, whathefuckelseyougot comment.  To what advantage? Qui bono as some say.Probably simple jealously for not being born a member of a supposedly advantaged group with a lot of money - not a part of the club - just like the vast majority of ZH - doubt if billionaire-type folks ever read the comments here.  So, little scared minds must find a villain to blame for their poorness - start looking under their bed for CommieJews.Try making the Federal Reserve System the villain, the bad actor, the structure that must be declared bankrupt; called out in the Public Square, and abolished.  'Notes' must be replaced with Constitutional currency and the appropriate amendments repealed.Then this great Nation will prosper, peacefully.         ###END THE FED, NOW

In reply to by falconflight

Endgame Napoleon dizzyfingers Thu, 10/12/2017 - 14:37 Permalink

You could write a name in just as a civic gesture. One guy has a website, advocating for a return to the constitutional principle of one representative for every 30,000 citizens. He thinks that would make politicians more responsive to their constituents. I am not sure that modern politicians will ever represent individuals again. They represent groups: “working families,”
racial groups, etc.

In reply to by dizzyfingers