President Joe Biden spent Thanksgiving in Nantucket last week at a time when he is pushing to give people who own homes on the island a sizable tax cut as a part of his Build Back Better Agenda.
One of the largest provisions of the government spending bill is a provision that would substantially raise the cap on the state and local tax deduction.
If you own a home on Nantucket, especially a summer home, that’s good news. For those budget hawks worried about the federal deficit and progressives who were hoping the social spending in the bill would all be for the working class, it’s unfortunate. It’s also the second-largest provision in the bill, accounting for $275 billion of the $1.75 trillion.
One provision of the Tax Cuts and Jobs Act of 2017 (also known as the Trump tax cut) capped the state and local federal income tax deduction at $10,000; it used to be unlimited. Recently, House Democrats, as a part of the Build Back Better agenda, voted in near unison (along with some Republicans who live in Democratic-leaning states) to raise the cap to $80,000 — not exactly a top priority for most of their voters. How many people pay $80,000 in state and local taxes?
While congressional Democrats railed against the Tax Cuts and Jobs Act for being a handout to the wealthy, that’s exactly what raising the State and Local Tax deduction this high is, even if they don’t care to admit it.
If the federal government were to make this change, 70 percent of the benefit would go to the top 5 percent of earners and 94 percent would go to the country’s top 20 percent of income earners. The bottom 40 percent of the country’s income earners would see 0.1 percent of the benefit, according to the left-leaning Tax Policy Center.
Does Main Street benefit from this?
No.
Does the middle class?
Not really.
Do people who own summer homes in Nantucket benefit?
Absolutely.
The average home value in Nantucket is $1,981,227, according to Zillow. In 2021, the owner of the average-assessed home on Nantucket paid $7,191.85 in property taxes for it. Nantucket has a much-lower-than-average property tax rate. However, that’s because 64 percent of houses on Nantucket are seasonal; the average Nantucket home owner doesn’t live in Nantucket year-round, according to the town’s web site. That means that home owner have another house elsewhere they pay property taxes on — or several. If the home owner lives or works in a state with state income tax, the home owner may also state income tax. (In Massachusetts, state income tax is currently a flat 5 percent.)
So if someone has a summer home on Nantucket, that person is probably paying more than $10,000 in state and local taxes already — and that person can probably afford it.
So why should owning a vacation home on Nantucket result in paying less in federal taxes? Even if you think the federal government is too big and bloated and should cut spending, the country has $29 trillion in debt, and the federal budget funds national defense and helps fund infrastructure.
It’s one thing to cut tax rates for everyone, allowing people across the country to keep more of the money that they earn. However, it’s something completely different to specifically cut taxes for higher-income earners in higher-tax areas. That’s done to help a specific constituency. In this case, that’s the Democratic Party’s donor class.
If politicians want people in higher-tax Democratic-leaning states to pay less in taxes, that’s a problem to solve at the state and local levels. If property taxes are too high, spend more effectively at the town level or attract businesses to an area to reduce the residential property tax rate. And if the problem is high state taxes, that’s a state government issue — not a federal government issue.
The broad Democratic support for this bill gives the impression that when Democrats talk about raising taxes on the rich, they only mean rich people in Republican-leaning states that don’t have a state income tax. Hopefully members of the U.S. Senate see this proposed giant State and Local Tax deduction as a sham.
If it takes Bernie Sanders to stop this, so be it. For once, the self-described democratic socialist could be the voice of reason in this country.
New to NewBostonPost? Conservative media is hard to find in Massachusetts. But you’ve found it. Now dip your toe in the water for two bucks — $2 for two months. And join the real revolution.
