Thursday, December 28, 2017

The effects of bad GOP policy-making- the mad dash to pay property taxes

Can't say this story surprises me in the least. The mad year-end dash to pay taxes is ON, folks!
In affluent states with high taxes and property values, local officials have been besieged in recent days by people trying to pay their 2018 property taxes early so they can deduct those payments before the cap takes effect.

However, the IRS said Wednesday that filers could only avoid the cap by paying property taxes that have been assessed in 2017. Many local governments, including most Washington-area jurisdictions, have not completed assessments for upcoming years....

In affluent Fairfax County, Va., more than 1,700 property owners came to the government center Tuesday to prepay their property taxes, while 750 people sent wire transfers and about 650 dropped off payments in a government lockbox that normally gets two or three pieces of correspondence a day, according to Scott Sizemore, director of the revenue collection division.

The county collected nearly $16 million in tax prepayments on Tuesday alone, county spokesman Jeremy Lasich said, with more money flowing in Wednesday. He said the county would devise a reimbursement plan if it cannot accept the prepayments. “We don’t know the full impact of that [IRS] statement yet,” he said. “We’re still studying that.”
I told you about this over a month ago, when I punched up the situation for me and my wife and noticed that it was better for us to NOT itemize under the GOP's Piece of Shit tax bill. Sure, we'd pay fewer federal income taxes, but we wouldn't get any write-offs for property taxes, mortgage interest, or state income taxes (SALT) starting on January 1, 2018, which meant that it was a rational decision to pay our taxes in 2017 (if possible) to cash in our deduction while we could.

Fortunately, I was working downtown on Tuesday, and I wandered over to the Madison City-County building in late morning, and there was very little line to be had. But you can see where many areas of the country that have high mortgages and/or property taxes like the DC area are paying up now as a result. Now add in the tax bill's limitations of SALT to $10,000 (a limit that is the same for single filers or married joint filers), and the fact that people that pay that much in taxes are also going to be people that have tax advisors and tax awareness, and this rush to City Hall to write their annual checks is multiplying on itself.

In looking at the IRS guidance that came out yesterday, what they basically said is that people can pay property taxes if the assessments were made in 2017. Apparently in other states, property taxes are assessed and paid on a different schedule than in Wisconsin, where your tax bill comes in December for 2017 and you can write off the payment on the taxes that you file in the coming months if you pay them in 2017.

But what you can't do in Wisconsin and the rest of the country is assume a certain amount of taxes for 2018 and "pay it forward", which apparently is what has been happening in a number of places. And watch for the stories in the coming weeks and months where these local governments have to tell these individuals that they paid future-year taxes for nothing, and either have to pay the money back or deal with a lot of pissed-off constituents.

Also in the coming months, let's see if the accelerated payments from this week mean that the US budget deficit rises more than expected due to the extra refunds that will result. And since there won't be a "snapback" of higher revenues in the following year (since people won't be taking the deduction anyway), that means it's a one-time bump in the debt. And if the extra refunds in 2018 don't translate into enough additional economic activity, then the price tag for this Piece of Shit goes higher.

And that's what's infuriating about the mad rush to pay property taxes. It was entirely avoidable, but the GOP was so busy trying to jam this through that they never tried to think through how humans might react to these tax changes. If there were actual committee hearings and honest discussion about how this bill would affect people, and then maybe these problems would have been identified and eliminated. Or at least some of the tax changes wouldn't take effect 9 DAYS after it was signed into law. Instead, people understandably act rashly and it leads to these disruptions.

If we also had hearings, perhaps we also would have recognized that it made no sense to make the standard deduction twice as large for married couples vs singles, but to keep SALT at the same $10,000 limit REGARDLESS OF WHETHER PEOPLE FILE SINGLE OR JOINTLY, which would inevitably make it less worthwhile for married couples that own houses to take the write offs associated with home ownership.

But bad policy-making leads to bad policy results, and it's been a GOP specialty in the 2000s. Since you can't vote these corrupted idiots out until several months from now, I'd recommend making the best of what you can today, and get yourself down to City Hall and pay those property taxes if you can, while you can still use the writeoff for it.

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