Trump Tax cuts Helped Rich People in GOP States More Than in Democrat States

President Donald Trump, left, speaks as Senate Majority Leader Mitch McConnell, a Republican from Kentucky, laughs during a news conference in the Rose Garden of the White House in Washington, D.C.
Al Drago | Bloomberg | Getty Images

President Donald Trump's milestone 2017 assessment enactment will profit rich family units in Republican states more than rich households in Democrat expresses, another examination paper says. 

The most extravagant 10% of households units in red states are estimate to see a 2% expansion in outstanding lifetime spending because of the president's Tax Cut and Jobs Act, as per the examination from the Federal Reserve Bank of Atlanta, University of California, Berkeley and Boston University.

The paper released Monday found rich blue-state households should see just a 1.2% increase.

The lopsided boost to those in Republican states over Democrat ones can be attributed to the legislation’s limitations on state and local property, income and sales tax deductions, according to research by Atlanta Fed economist David Altig, UC Berkeley professor Alan Auerbach et al.

Perhaps best known on Wall Street for lowering the corporate rate tax to 21%, the Trump administration’s Tax Cut and Jobs Act also made notable changes to personal taxation. Republican leadership cut the top individual income tax rate from 39.6% to 37% and modified the amount for a number of tax credits. It also nearly doubled the standard deduction to about $12,000 for singles and $24,000 for married joint filers.

But one of the most drastic changes included a $10,000 limitation on the amount of state and local taxes (SALT) that can be deducted. Since there was no prior cap on the amount taxpayers could deduct, states with high state and local taxes (which typically vote Democratic) are poised for less benefit.

[SEE: What Is The State Return Tax Requirements For Expats In The United States Of America]

“If changes to SALT had not occurred, the gains in spending would have been very similar for the top 10 percent regardless of state,” Altig wrote. “Excluding the SALT limitation from [the Tax Cut and Jobs Act], the average red-state spending gain is 1.9 percent versus 2.1 percent for blue states.”

As such, the president’s signature tax reforms have sparked debate in across the country, splitting Democrats and Republicans over the federal deficit and the distribution of the benefit.

Blue states including New York, New Jersey and Connecticut — among the states with the highest property taxes — sued the federal government and insist the SALT limit is unfair to their residents. Citizens of those states likely won’t see as much benefit from the Tax Cut and Jobs Act thanks to higher local taxes.

In 2015, the average SALT deduction for New Yorkers who claimed the tax break was more than $22,000.

On the other hand, Republicans assert that repealing the SALT deduction would disproportionately benefit high-income taxpayers. The nonpartisan Tax Policy Center estimates that about 9% of households would benefit from a repeal of the $10,000 cap on the SALT deduction and more than 96% of the cut would accrue to the top income quintile of households.

Source: CNBE