The upper middle class got totally suckered by the Republican Party

By now, the whole country knows what a godawful mess Governor Sam Brownback has made out of the state of Kansas in his doomed experiment to prove that modern conservative economics make sense. (Pro tip: They don’t.) Brownback, of course, would rather that not have gotten out to the world at large, and he and his government have done their level best to make sure it didn’t, as The Kansas City Star tells us.

The series in the Star is worth reading in full, because what happened in Kansas is precisely what the Republican Party has in mind for the country. This will necessarily including burying the evidence the way Brownback and his government have in Kansas. What happened there was a pure experiment in the supply-side, laissez-faire economics that are the primary foundation of respectable conservative crazy. They don’t work. They never will work. Their impact on the lives of ordinary people is inevitably and profoundly destructive.

Sam Brownback is a devout Catholic, you know. The president has nominated him to be some sort of half-assed ambassador for religious liberty. The Democrats in the Congress have slow-walked this nomination, and various wingnut word mills are getting antsy about it.

At its heart, this tax plan is a giant giveaway to the super wealthy coupled with a cut in support for public schools and other services on which middle class and low-income families rely. Because a deficit blowing $1.5 trillion tax cut for corporations and billionaires like Betsy DeVos isn’t enough for Congressional Republicans, they’ve got to come up with additional offsets. One of the biggest on their list is ending the ability of middle class families to deduct state and local income and sales taxes that fund public schools.

According to the Department of Treasury, the state and local tax deduction is worth approximately $1.3 trillion over a ten-year period. An estimated $783 billion stems from state income and state sales tax deductions. Some $486 billion stems from property tax deductions. Undoubtedly part of the reason the state and local tax deduction is in the crosshairs of Republican tax cutters is because it’s large and benefits ‘blue’ states more than ‘red.’

Think about someone in the 28 percent tax bracket that pays $20,000 in state income and local property taxes each year. About half of that money goes to public schools either as a percentage of subsequent state budget outlays or passed through directly to schools from local governments and local school tax authorities. Ok. Consider the portion for public education, the $10,000 half.

When an individual in the 28 percent marginal tax bracket itemizes and deducts $10,000 worth of state income and local property taxes for schools, he or she reduces his or her federal tax bill by $2,800 ($10,000 * .28 = $2,800). Thus of the $10,000 that goes to pay for public education, the individual pays $7,200 and the federal government pays $2,800. In other words, the federal deduction makes using state and local taxes to fund education and other public goods or services more attractive, because it makes state and local taxes a cheaper source of revenue for regular people than they otherwise would be.

Eliminating the state and local tax deduction (SALT) would devastate the ability of state and local governments to raise funds for local schools. It would make current state and local taxes more expensive for regular taxpayers inevitably leading the conservative American Legislative Exchange Council (ALEC) and others later to call for reductions in state taxes to make up for the federal ‘tax increase’ — thus further starving public education. In other words, eliminating or significantly curbing SALT is the beginning of a cycle of disinvestment from public education.

Now Congressional Republicans want to call their SALT changes a compromise because they would retain a federal deduction for property taxes, but about 2/3rds of the current SALT deduction is for state income and state sales taxes (p 33). A little over one-third of state budgets go to fund public education. Elimination of the state and local income and sales tax deduction, the so-called House Republican compromise, would whack about $250-$300 billion in support for public education over the next ten years. That’s like eliminating the Title I program and IDEA special education program overnight.

Deus X wrote:Generation-skipping trusts have been used for at least a century to avoid estate tax and still leave control of the wealth transferred in the hands of the skipped generation.

Floridatexan wrote:It didn't happen that way for me, when my aunt insisted that she maintain control along with the trust company...except for some money that she completely controlled, although it was also deposited with them.  And her "management" ended up costing the beneficiaries around $90,000.  Don't get me started.