Right now the House and Senate are passing major tax legislation. Most middle class New Yorkers are opposed to it because it will probably result in higher taxes for New Yorkers, even if only slightly. And for some, maybe a lot.
One issue is state taxes. Until now, you could deduct them from your gross income. A person in Florida with the same income as a person in New York will pay higher Federal taxes because Florida - despite similar size and population to New York - has no state income tax. Now, if state income tax is not deductible, both New York and Florida residents will pay the same Federal tax. And that's why NY voters and politicians oppose the new tax bill. (I have not read the final bill... nor has most of Congress..)
"When you tax something you discourage it. When you subsidize something, you encourage it." The Federal government has been subsidizing New York state taxes. Let's look back at history.
Back in pre-1986 days, you could deduct interest on credit cards. The Federal government was - in effect - making credit card debt easier because of the tax write off. They were encouraging debt by subsidizing it. And that debt was 18% to 29.99%.
I was annoyed when I lost that deduction. It meant I was paying higher Federal taxes. But it also discouraged credit card behavior. I got rid of my credit card debt. So, while I opposed that provision at the time, I realize now they did me a favor.
So, am I happy they are cutting out the state tax deduction? Of course not? But I realize New York State politicians were thinking "every dollar we tax only costs the tax payers 67 cents." With my taxes going up, I want to see changed behavior... on the part of New York State government. I want them to learn from Florida and work to eliminate New York State income tax.
Will that happen? Probably not. More than likely it will encourage more people to relocate to tax friendly states like Florida, which will make the state tax burden even worse for those of us who remain. |
