Down Goes The SALT Scam
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2018-08-24 07:00 by Karl Denninger
in States , 134 references Ignore this thread
Down Goes The SALT Scam
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I figured that wouldn't work, and now Treasury has confirmed it:

In response to the $10,000 cap imposed as part of the Tax Cuts and Jobs Act, a number of state governments have proposed or enacted legislation that would allow taxpayers to make charitable contributions to an established state fund in order to earn a credit. The goal would be to allow residents to take the full amount given as a deduction.

However, the IRS blocked that strategy through guidelines issued on Thursday, which require taxpayers to subtract the value of their state and local tax deductions from their charitable contributions.

There will be states that try to sue but it won't work, since Treasury drew no distinction between programs set up before the TCJA and after; it applies to everyone nationally.

If states want to implement high cost-of-living programs that require a metric crap-ton of funding, and stoke property bubbles (which also drive up taxes) then they're free to do it -- and people are free to give them the finger and move somewhere else. 

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Bodhi
Posts: 564
Incept: 2008-02-23

Georgia
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The high-tax states ploy to have the rest of the country subsidize their fiscal irresponsibility suffers a well-deserved death.
Benthere
Posts: 77
Incept: 2018-06-16

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When I moved out of Illinoyze my property taxes were 12 K on a small 4 bedroom split ranch and with the tri annual tax assessment due predictions were that the bill would go up 30 % . When the cash crunch hits pensions in the state, (3-5 years if that long) unless the feds backstop the shortfall, the state will throw the local pension obligations back to the municipalities. They will get creative at first on taxes,..... water, sewer, phone bill, electric bill etc I do applaud the elimination of this deduction, I voted with my feet!

A cap on mortgage interest should be next
Tickerguy
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The property taxes on my former house in IllNoize (Deerfield) have doubled since I sold it, and now total materially north of $20k/year (!!)

Yes, it was a nice place. No, it wasn't a mansion on 10 acres -- or anything like that. There's no ****ing way I'd have tolerated the current tax level; it was confiscatory in 2000 and now is utterly ridiculous.

This is BEFORE they actually try to "pay" said pensions! When they do the levy will *at least* double AGAIN. At that point it will exceed the gross of many middle-class families, and be utterly unpayable for damn near everyone. Yes, there will still be plenty of people who "can" afford it, but that's not the point -- the point is that property value properly discounts the carrying expenses involved in ownership, and this is going to utterly DECIMATE the value of said houses.

It gets even worse on a percentage basis among places with fewer square feet and such, since as a percentage of income that whack is materially larger -- and thus the impact on VALUE will be larger.

The real trouble comes when the NPV on half the houses in the general Chicagoland area have an effective NEGATIVE NPV as a result of the property tax ramps, and those that "escape" that are ALL underwater (and deeply so) on their mortgage valuations. When that happens they become unmarketable, since you can't sell for at least what you owe on the mortgage.

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Winding it down.
Bodhi
Posts: 564
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Georgia
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Quote:
When the cash crunch hits pensions in the state, (3-5 years if that long) unless the feds backstop the shortfall, the state will throw the local pension obligations back to the municipalities.


The crunch is already painfully real in Oregon: https://www.nytimes.com/2018/04/14/busin....

The bill is borne by taxpayers. Oregon's Public Employees Retirement System has told cities, counties, school districts and other local entities to contribute more to keep the system afloat. They can neither negotiate nor raise local taxes fast enough to keep up. As a result, pensions are crowding out other spending. Essential services are slashed.

"You get to the point where you can no longer do more with less - you just have to do less with less," said Nathan Cherpeski, the manager of Klamath Falls, a city of about 21,000 in south-central Oregon.

Klamath Falls's most recent biennial bill from the pension system, known as PERS, was $600,000 more than the one before. PERS has warned that the bills will keep rising. Mr. Cherpeski has had to cut back on repairing streets and bridges.


Gonewest
Posts: 49
Incept: 2015-02-26

PacificNW
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Pot calling the kettle black quote of the day from the linked article:
Quote:
I do hope that this sends a message to the state governments that, perhaps, they should try to get their budgets in line, Mnuchin said during a speech at the Economic Club of New York.


That takes some big balls coming from the head of Treasury with 1T+ of deficit spending per year.
Tickerguy
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Yeah, well, that one organization acts like a douche doesn't give license to another.

Frankly, all I see is a good argument for lots of flaming meteors of death rather than one.

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Winding it down.
Supertruckertom
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USA
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Preparing to go Hunting.
Fred_
Posts: 45
Incept: 2018-04-21

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I don't report charitable giving. I don't do it for the tax break. I do it because it honors our LORD.
Wa9jml
Posts: 215
Incept: 2017-04-29

DeKalb, Illinois
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A few years ago at a Christmas Party, one of my mentors who is an expert in public finance, and also a participant in the Illinois State University Retirement System, told me that he fully expects to get IOUs instead of pension payments eventually. I have a bunch of friends in that system and other Illinois pension funds. I took the self-managed fund option from SURS, so I get a modest payment from TIAA-CREF and not the State of Illinois.

The only solvent public pension fund in Illinois is the Illinois Municipal Retirement Fund. I get a modest payment from them each month, too. They have so far managed to fend off the state government's greedy clutches, but that may well change when the turds hit the pension impeller.

Illinois and most other states have not figured in the eventual pension costs of their buying peace from the public unions. Teachers in most parts of this benighted state, do not pay anything for their pensions. The state pays the employer part, and the district generally pays the employee part. Once you realize that the time horizon for those who supposedly represent the taxpayers, but seldom do, is a maximum of 4 years ahead, they all hope to be out of office and retired on their own underfunded pensions before the turds hit the pension impeller.

Actually, the taxpayers seldom have any real representation at any level of government. Jefferson realized this late in life, and came up with his concept of Ward Republics where direct democracy made all of the local government decisions. That is the only way where the people who bear the brunt of the taxes can actually vote on where their money is spent.

I expect the Democrats to sweep all of the state wide offices this fall, not that the Republicans here are any better, and then this state is really going to go to Hell, and very fast. I just hope I can get out of here in time!
Benthere
Posts: 77
Incept: 2018-06-16

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Get out ASAP In the onset of the GREAT RECESSION I have it on Very Good sources that GE was minutes way from a Bear Sterns moment. Couldn't roll their commercial paper over. I was close to people there. You/we wont see it coming Its the BANG moment and it wont be pretty. If you see your property as a place to live fine, if you have a big ass mortgage and have to sell for some reason good luck
Whitehat
Posts: 727
Incept: 2017-06-27

The People's Republic of New York
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fantasy moment: i would simply love it if state and city finances got so bad that the idea of public sector job seeker competition will be seriously considered. there are so many of such jobs where people like us would be very happy to do it better, cheaper and faster and love every minute of it. would be great if the city jobs introduced part-time positions. we would not need as much to live nicely. could easily do the same work in three days.

most city workers in my area have no idea how much a privately or corporately employed person has to beat his brains and body just to bring home the same 70K often less, not to mention not having a pension and job security. in times long past city workers lived in apartments or very modest down-rent houses and did not have much luxury. they are now quite the gilded class, even our garbage collectors. this is not sustainable.

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There are two ways to be rich: One is by acquiring much, and the other is by desiring little.
snow, seasons, distance and dirt roads: SSDD
"Be not deceived; God is not mocked; for whatsoever a man soweth, that shall he also reap" (Gal. 6:7)
Vernonb
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East of Sheol
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Quote:
I don't report charitable giving. I don't do it for the tax break. I do it because it honors our LORD.


That and the fact is really none of their damned business.
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Personally I think the tax situation has gotten bad enough here in parts of PA when the local governments put you on MONTHLY payment vouchers to be able to pay taxes because they are so outrageously high. Just another way to confiscate income from frogs boiling in water.


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Tickerguy
Posts: 154314
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Michigan has twice-yearly. EVERY state I've lived in has been ONCE yearly. Oh by the way, if you look up properties on Zillow for tax amounts they only show ONE of the two payments!

This leads you to believe the taxes are HALF what they really are. I found that out recently while poking around, and it's an outrageous act of fraud.

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Winding it down.
Whitehat
Posts: 727
Incept: 2017-06-27

The People's Republic of New York
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NYC has quarterly tax payments as an option for a very small fee, probably for this reason. our property taxes are much lower than our surrounding suburbs, but still quite high overall. it is only doable for a very low earning person if the property is paid for, thus much cheaper than the lowest rental. it is still not worth what one gets for it and property taxes should not exist. one does not own a thing if he must pay regularly to keep it. in old common law and i think still in Britain, they are referred to as rent. this is why you are a tenant on your deed. one should be able to own land and its improvements without paying anything. i mean full disconnect from water, sewer and utilities if one desires as long as not making a hazard or nuisance. this is true private property and freedom.

the debates over ending property taxes while a good idea also must address the notion of ownership as opposed to title and the differences in standing under the law. this is a real eye opener.

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There are two ways to be rich: One is by acquiring much, and the other is by desiring little.
snow, seasons, distance and dirt roads: SSDD
"Be not deceived; God is not mocked; for whatsoever a man soweth, that shall he also reap" (Gal. 6:7)
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