Filing income taxes is a convoluted process, and politicians know it. There’s constant talk about reforming the tax code, which should refer to making the filing process easier. But most of the time, tax reform only ends up being a discussion of tax cuts.

That’s the case with President Donald Trump’s latest attempt to reform the United States’ tax system, which he unveiled last week. The Unified Framework for Fixing our Broken Code will lower overall tax rates for the middle class, including some Syracuse residents.

But this reform also closes a valuable loophole for low-income people in high-tax states like New York. By eliminating the state and local tax — or SALT — deduction used by 3.2 million New York residents, middle-class Syracuse residents will be left with a net loss, according to a letter by several lawmakers addressed to Secretary of Treasury Steven Mnuchin.

Every year, thousands of Syracuse residents file complicated income tax returns to pay off taxes they owe or to try a get a big refund. Organizations like H&R Block and TurboTax exist to make the process easier by asking simplified questions so you don’t have to know the difference between a standard or itemized deduction.

Trump’s new tax plan will supposedly simplify the tax code by getting rid of itemized costs and raising the standard deduction from $12,700 to $24,000 for married and joint filers. But when we already have tax software solutions, this will only make taxes more complicated.

In simple terms, a deduction is a way to lower your tax rate. For example, if you make $30,000 a year, you might pay 10 percent of your total income in federal taxes, or $3,000. But if you donate $1,000 dollars to charity, you can deduct that money from your income. Now, you only get taxed 10 percent on $29,000 worth of your income, so you’ll only have to pay $2,900 in taxes, saving $100.

Deductions are designed for more than just donations. A medical expense deduction aims to protect people from bankruptcy, a mortgage interest deduction encourages home buying and the SALT deduction prevents municipalities from double taxing income.

SALT is a huge advantage to people living in states with high income tax rates, said Leonard Burman, a professor of economics at Syracuse University and co-founder of the the Tax Policy Center.

“In New York, it’s very easy for an upper-middle-class family to have more than $24,000 of mortgage interest, property tax, income tax and charitable contributions,” Burman said. “Families don’t have to be that rich to have state and local taxes alone above that threshold.”

That means SALT deductions in place could easily bring these families’ itemized taxes below the new flat charge of $24,000.

“Raising the standard deduction will help people with modest incomes,” Burman said. “But those with high incomes will face substantial tax increase from repeal of SALT deduction.”

According to Census Reporter, the median income in Syracuse is $33,695, and more than 65 percent of residents make less than $50,000. This is good news for the average Syracuse resident, who might find it easier to file their taxes because they’ll no longer have to itemize every expense. But New Yorkers who make even slightly more than the median will have to pay more in taxes.

The new tax plan isn’t nailed down yet, but eliminating the SALT deduction is one of the pillars of its current framework. It’s considered such a critical issue that seven New York congressional representatives, including Rep. John Katko, R-N.Y., signed the letter warning of the consequences of repealing SALT.

“New York’s itemizers make up primarily lower- and middle-income households: 85 percent of those who claim the SALT deduction earn less than $200,000 in annual income … In fact, New York proudly pays more than its fair share to the federal government,” the letter states.

“The state has been a net payer to the federal government for decades, and while New York City residents pay $96 billion in personal income taxes, the city receives back only about $61 billion from the federal government.”

The downsides to this tax plan may not be felt immediately and could actually lead to a greater overall income for some lower-class and middle-class Americans. But its biggest cost is the up-to $5 trillion it could add to the already-mountainous U.S. debt, according to Time.

The Unified Framework for Fixing our Broken Code is technically an attempt at tax reform. But it overlooks simplifying taxes in favor of trying to cut taxes for everybody, which is a goal it also fails to achieve. Instead of shifting the burden of tax cuts onto the top one percent, who can afford to pay taxes, the country’s tax burden is piled on top of its enormous national debt.

Adam Friedman is junior broadcast digital journalism and economics dual major. His column appears biweekly. He can be reached at arfri100@syr.edu and followed on Twitter @friedmanadam5.

Published on October 11, 2017 at 10:38 pm