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Californians account for nearly 20% of all SALT deductions, tops in the nation, although the deduction shelters a larger percentage of income for taxpayers in New York, New Jersey and Connecticut-all Democratic states.Įven though partisan politics may have played a significant role in the GOP’s painting a bull’s-eye on the SALT deduction, the repeal may have even more to do with the legendary remark attributed to bank robber Willie Sutton when asked why he chose them as his target: “That’s where the money is.” The SALT deduction is estimated to cost federal coffers an average $130 billion a year over the next 10 years-more than any tax break except for the exemption for employer-sponsored health plan premiums and the capital gains tax rate. “We suspect that in the end, the wealthy and well-advised will benefit disproportionately from these errors of oversight and haste.”įor residents of California and other high-service, high-tax states, the big-ticket item in the tax proposals is the cutback on deductions for state and local taxes, known as SALT.

“Tax lawyers and accountants are already preparing to exploit ambiguous and poorly drafted provisions,” they wrote, predicting that the loopholes would drive up the 10-year cost of the bill far beyond projections exceeding $1 trillion. “The amount of ambiguity in this tax bill is amazing,” says Manoj Viswanathan of UC’s Hastings College of the Law.Ī digest of the opportunities for gaming the result prepared by 13 academic tax experts, including Viswanathan, hinted at who will benefit from the final legislation. But plenty of loopholes and ill-considered tax hikes remain. So were provisions taxing graduate-student tuition waivers, which would made graduate education unaffordable for thousands of students and repeals of deductions for student-loan interest and high medical expenses. A corporate alternative minimum tax that would have negated some favorite business tax breaks reportedly was removed.

In last-minute negotiations, some of the most glaring errors and petty cruelties in the original House and Senate bills have been corrected.

The measure, which Republicans hope to send to the White House for President Trump’s signature by Christmas, bristles with provisions likely to have unexpected or unexplained consequences-unexpected tax increases for some businesses and industries, unheralded tax cuts for favored taxpayers, loopholes begging to be exploited by smart tax lawyers. The chaotic gestation of what has been billed as the most significant tax legislation in a generation has left many tax experts appalled.

Click to open expanded view 2017 ezpaycheck payroll software for small businesses