For the sliver of top earners who didn’t pay the AMT, the war cries of Cuomo and other Democratic politicians hit home. About one-fourth of taxpayers in Connecticut’s Fairfield County who earn more than $200,000 had an average SALT bill of $80,564 and weren’t subject to the AMT, so they could lose an average of $70,000 or more worth of deductions.
“For them it’s devastation. It feels like an earthquake to them,’’ Karen Brosi, a tax accountant in Palo Alto, California. “They’re already paying extraordinarily high state income taxes. Now, they very truly are not getting any federal tax benefit from those and in fact are finding that their federal bill is going up.’’
New York officials fear the state will bear the brunt of the SALT cap to the tune of some $14 billion annually. The tax plan’s harshest impact falls on the top 1 percent of earners, who account for 56 percent of the state’s revenue, said Robert Mujica, New York State budget director.
New York designed its tax code around state and local tax deductibility, which has been a feature of federal tax law since the income tax was introduced in 1913. It’s “unacceptable” for the federal government to target New York’s tax base, Mujica said in an interview.
“No other state is going to have as many people who pay more than New York,” he said. “That’s the fundamental issue.”
Senator Bob Menendez and Representative Bill Pascrell, both New Jersey Democrats, are pushing a bill to fully restore the SALT deduction and have proposed to pay for some of that by returning the top marginal tax rate to 39.6 percent.
But some of the complaining about the new tax law is just “crying wolf,” said Rossman.
“The politicians are leading their constituents, but the constituents are drawing conclusions without knowing what’s happening to themselves,’’ he said. “Some people will realize that under the old law they were actually paying more.”
This article provided by Bloomberg News.