Editorial: Nevadans would benefit from Trump’s tax deduction change

So President Trump has finally decided to take our advice.

More than a year ago this newspaper noted in an editorial that then presidential candidates Ted Cruz, Marco Rubio, Chris Christie, Jeb Bush, John Kasich and Ben Carson all had proposed repealing the IRS deduction for state and local taxes, but Trump was still vague on the matter.

Nevada is one of only nine states with no state income tax to deduct. Since the creation of the federal income tax in 1913 the residents of states with income taxes have been allowed to deduct those taxes from their federal obligation. Only in recent years have Nevadans been permitted to deduct sales taxes, but this is subject to the whims of Congress because it must be renewed every year.

This past week Trump’s one page tax reform plan called for eliminating all deductions except for home mortgage interest and charitable contributions.

WSJ graphic

Predictably, the high-tax states are whining.

Nevadans — along with residents of New Hampshire, Florida, Wyoming, Texas, South Dakota and Alaska — get to deduct about 1 percent or less of our adjusted gross income, while those who live in New York, Maryland, D.C. and California deduct more than 5 percent. The federal government is effectively subsidizing the big spending in those states at the expense of the lower tax states.

As we pointed out a year ago, using 2010 statistical data from the IRS, the most recent available, you find Californians who filed for state and local income tax deductions claimed deductions of $10,700 per return. Nevadans who filed for the state and local sales tax deduction claimed only $1,430 in deductions per return.

Calculated on a per capita basis, Californians claimed $2,116 in federal income tax deductions, while Nevadans claimed only $166 per person for sales tax deductions.

Heritage Foundation researchers Rachel Greszler and Kevin D. Dayaratna have concluded that the state income tax deductions subject federal tax revenues to the whims of state lawmakers and largely benefit wealthy taxpayers and those in high-tax states.

“The rationale for it is that since state and local taxes reduce individuals’ after-tax income, the income used to pay those taxes should be excluded from federal taxation. …” the researchers wrote. “In practice, however, the deduction allows states to raise taxes higher than they otherwise would and has significant perverse distributional impacts, redistributing income from the poor to the rich and from people in low-tax states to people in high-tax states. Despite some efforts to eliminate it, the deduction for state and local taxes remains one of the largest deductions in the federal tax code.”

Pro-state-and-local-tax-deduction groups have been quoted as saying, “Any alterations to the deduction would upset the carefully balanced fiscal federalism that has existed since the permanent creation of the federal income tax over 100 years ago.”

It is long past time to upset this century-old unfair tax break for some and tax burden for others. Where do we go to get a rebate for being overtaxed all those years?

A version of this editorial appeared this week in some of the Battle Born Media newspapers — The Ely Times, the Mesquite Local News, the Mineral County Independent-News, the Eureka Sentinel,  Sparks Tribune and the Lincoln County Record.

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6 comments on “Editorial: Nevadans would benefit from Trump’s tax deduction change

  1. deleted says:

    Who is subsidizing who again?

    “There are various ways of thinking about what WalletHub’s “state dependency” map tells us. One approach is to shine light on the red-states-as takers paradox:

    Dominated by Republican voters who profess their distaste for the federal government and its social programs, these are the very states that rank highest on the dependency index. That, for example, is how Business Insider handled the story:

    [W]ho really benefits from government spending? If you listen to Rush Limbaugh, you might think it was those blue states, packed with damn hippie socialist liberals, sipping their lattes and providing free abortions for bored, horny teenagers. …

    As it turns out, it is red states that are overwhelmingly the Welfare Queen States. Yes, that’s right. Red States—the ones governed by folks who think government is too big and spending needs to be cut—are a net drain on the economy, taking in more federal spending than they pay out in federal taxes. They talk a good game, but stick Blue States with the bill.

    https://www.theatlantic.com/business/archive/2014/05/which-states-are-givers-and-which-are-takers/361668/

  2. Rincon says:

    Strangely quiet around here.

  3. deleted says:

    Yeah Rincon I doubt that we will be seeing much rational discussion of why blue states subsidizing red states with their tax dollars is appropriate but somehow claiming that blue states are being subsided is fodder.

    The way of the world I guess.

  4. Steve says:

    Patrick says Look!

  5. dave72 says:

    It’s not really surprising to hear a die-hard libertarian call for tax increases for states run by Democrats? That definition varies according to the circumstances. Remember the Bush tax breaks for the rich that were NOT extended during the Obama administration? All I heard was yelping about how those were in effect tax hikes. SInce we’re in an era when we shouldn’t havbe to pay for anything we don’t use (see health care reform) I don’t own a home so NO ONE should be able to write off his mortgage interest. I don’t have children so none of my taxes should pay for schools or my insurance premiums pay for pregnancies. Hey this is fun. I don’t use an ambulance or have ever had my house on fire, so don’t charge me. These are the Trump 2010s.Screw everyone but me and if we need the Russians to help us get the government we crave, don’t go yelling anything about treason. That’s so passe.

  6. […] not heed to the fact Nevada is in the bottom 10 of states for benefiting from local and state tax deductions, and that cutting the deductions could cut […]

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