So let’s review why this has happened. The personal deduction of $4,150 per person was removed, which raised the amount of income that was taxed for individuals, and the standard deduction was nearly doubled, to $12,000 for individuals and $24,000 for married couples filing jointly. In addition, the deduction for State and Local Taxes (SALT) was limited to $10,000 per tax filer (whether single, or married filing jointly).
This meant that less money would be deducted from a person’s overall income when he/she/they filed taxes, and that many deductions for items such as SALT, mortgage interest, and charitable donations became worthless because the standard deduction was higher. But that reality was never revealed to most Americans, and no guidance was given as to what might need to be adjusted on an individual’s withholdings as a result. So many people didn’t change their W-4s, and took home too much in take home pay in 2018, which they now have to pay back.
I have little doubt Trump and other Republicans intended it that way, to give an inflated benefit before the 2018 elections without telling about what has to be paid back in early 2019 after the elections. And worse, the Tax Scam is hurting taxpayers in specific parts of the country over others.
As this article from WalletHub notes, some states have higher state and local taxes than others, The rankings are based as a percentage of total income in the state, and not surprisingly, blue states end up higher than red states.
Top state/local taxes as % of income,
1. New York
2. Hawaii
3. Maine
4. Vermont
5. Minnesota
6. Rhode Island
7. New Jersey
8. Connecticut
9. Illinois
10. Iowa
11. California
All of those states outside of Iowa voted for Hillary Clinton in 2016 and 21 Republicans were tossed out of the House in these states in 2018, even before many of those constituents had to write checks to the IRS due to the Tax Scam, which shows the GOP’s gambit of lower withholdings backfired.
Wisconsin ranks 16th for highest state/local taxes on this list, but it’s a mixed picture in that they have higher income and property taxes than most states, but lower sales taxes.
Wisconsin rankings, state/local taxes as % of income
Income tax 11th (2.73%)
Property tax 15th (3.42%)
Sales + Excise tax 38th (3.00%)
Income and property taxes are a big deal for this year’s tax bills, because that combination seems to be what bumps up against the $10,000 SALT limits for middle and upper-middle class people (it sure applied for us in Wisconsin). Keep that in your mind as you recognize that every Wisconsin Republican in Congress voted for a Tax Scam that is hurting Wisconsinites, led by this alleged Cheesehead.
Nice parting gift, jerk.
By comparison, look which states were at the bottom of the Wallethub list
Bottom 10 state/local taxes as % of income
41. Wyoming
42. Alabama
43. South Dakota
44. Montana
45. Oklahoma
46. New Hampshire
47. Florida
48. Tennessee
49. Delaware
50. Alaska
Not exactly a list of states that most of us think of when it comes to “quality of life”, and/or states that have major amounts of federal money directed to it in the form of National Parks, Defense and other protected areas.
It’s worth noting that 15 of the 19 states with the largest sales tax burden are states that voted for Donald Trump, including 5 of the 10 states on that “lowest overall taxes” list.
A big reason why Wisconsin has a smaller sales tax burden than many states is partly because of its relatively low statewide rate of 5% and limitations of 0.5% for most counties. Also, Wisconsin has a sizable exemption for food, as shown by our latest grocery bill. Granted it was heavy on one-time food items like Easter hams, but we paid a rate of less than 0.4% on Sunday.
By comparison, in a “low-tax” state like Alabama or Tennessee we would have likely paid an extra $15-$20 in sales tax for those same groceries.
Those Trump states tend to have those sales tax burdens fall more on poorer people, while many of those states also have its richer individuals avoid the limitations and surprise paychecks to the IRS due to the lower SALT caps. Take a look at the tax distributions in the annual “Who Pays?” survey from the Institute on Taxation and Economic Policy (ITEP) for the bottom 5 tax states of Tennessee and Florida, then compare it to Wisconsin.
Note that poorer people actually pay more in those “low tax” Southern states vs Wisconsin. Where the taxes are lower is for the rich, which sure seems a lot like feudalism to me.
And it is partly why I suspect the Tax Scam’s punishment of less regressive tax systems of states like Wisconsin was by design. This was passed by an increasingly Confederate and regressive GOP to push states like Wisconsin toward a red-state model of lower income and property taxes and higher sales taxes, and make it less likely for people in the middle and upper-middle clas to be hurt by the $10,000 SALT cap.
But to do so, it would make Wisconsin’s tax code more regressive, and given that our state heavily leans on property taxes to fund local government compared to other states (as the Wisconsin Policy Forum noted in February), it would cause a major redirection of how our state and local governments would provide money for schools, cops, fire fighters, street repair and other services.
AND FOR WHAT? To allow more corporations like Amazon, GM and oil companies to pay $0 to Uncle Sam? To let rich oligarchs get even more breaks while we have the largest income and wealth inequalities in 90 years? I guess the politicians don’t care what that means as long as campaign checks are kicked back from that extra money from the rich and corporate, eh?
This cannot continue, and anyone who voted for this garbage Tax Scam cannot be allowed to remain in power. Think about this if you’re writing a check to the IRS tonight. And if Dems have any competence, they won’t let anyone forget it for the next 19 months, especially in states that have been punished like Wisconsin
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