Right On: Utah should love limiting these income tax deductions

Stock image, St. George News

OPINION — One person’s income tax deduction is someone else’s loophole.

Three particular tax deductions primarily benefit those with high incomes in high tax states. The rest of us subsidize them. I’m with congressional Republicans who think it’s time for a change.

Mortgage interest deduction

Should all taxpayers subsidize high-income homebuyers? If you think the obvious answer is no, then join me in supporting a reduction – not an elimination – of the mortgage interest deduction.

Today, interest is deductible on mortgage loans of up to $1 million. Have you taken out a million-dollar mortgage lately? House Republicans want to reduce that maximum amount to $500,000. Very few in Southern Utah have mortgages this large. Those who have them don’t need our help.

Republicans are also considering eliminating mortgage interest deductions for second homes. Those buying a second home don’t need our help either.

For the vast majority of homebuyers across the country, these changes would have no impact. They will bite on the left and right coasts where home prices – and the salaries that support them – are astronomical by Utah standards.

High-end real estate agents in these states oppose reducing this deduction. They, along with premium homebuilders, are howling to high heaven and Republican lawmakers from coastal states are wavering.

As for me, I can’t think of any reason for the rest of us to subsidize high-income folks. Can you?

State and local tax deduction

Republicans want to cap or eliminate the state and local tax deduction. This subsidy for state government spending works all too well.

Democratic-majority states find lots of reasons to tax and spend. Liberals in these states feel good about their favorite progressive programs and cherish their tax deduction as helping to cover the costs. Should Utah taxpayers be subsidizing their choices?

Unsurprisingly, some of these same states are now in dire financial straits: Illinois and Connecticut come to mind. All are hemorrhaging wealthy taxpayers who head for tax-friendly climes, leaving behind middle income folks holding the bag. Some reading this column are California tax refugees.

You and I subsidize this fiscal irresponsibility by allowing taxpayers in these states to reduce their federal taxes. High-tax California appreciates our contribution to its $70 billion bullet train to nowhere.

Some Utah taxpayers itemize deductions and benefit by avoiding federal taxation on state and local tax payments. Rest assured that with Utah’s 5 percent income tax rate, the subsidy they get is far less than “lucky” Californians who get to deduct their state’s 13.3 percent top tax rate.

I can’t think of a reason not to cap the deductible amount of state and local taxes. I’d gladly eliminate this deduction entirely in exchange for lower federal income tax rates for all of us.

Sports stadiums

Yes, sports stadiums.

Bidding to attract or retain professional sports teams, state and local governments use tax-exempt municipal bonds to build sports stadiums loaded with amenities.

So who benefits? Professional sports teams generate relatively few local jobs. Most of the financial benefits flow to highly paid athletes and to team owners who enjoy ever-increasing team values. The bonds are snapped up by wealthy investors, allowing them to reduce their income tax obligations.

Ticket prices are through the roof: Only upper-income fans can afford to go. Adding insult to injury, our tax laws subsidize the privileged few. Companies buy season tickets in stadium VIP boxes where they wine and dine clients. The cost of those season tickets is a business expense on which no taxes are due. Watched many NFL games from a VIP box lately?

Too many cities see a professional sports team as a sign they have arrived in the big leagues. Few benefits beyond civic pride flow to the taxpaying public.

Bucking this trend, three cheers for San Diego. The erstwhile San Diego Chargers are now the Los Angeles Chargers because voters refused to build a new football stadium for them. Heaven forbid the team’s wealthy owners should build their own stadium.

Who pays the interest on the bonds? Your widowed grandmother living on Social Security pays a share through sales and other taxes.

All three of these tax deductions are thinly-disguised handouts for the wealthy. Most of us would call them loopholes. I’d prefer lower tax rates for all of us instead of these three tax deductions for the rich.

I have mixed emotions about other parts of the Republicans’ tax proposals. But if they reduce or eliminate these three deductions, we can cheer loud enough to drown out the whining in California.

Howard Sierer is an opinion columnist for St. George News. The opinions stated in this article are his own and may not be representative of St. George News.

Email: hsierer@stgeorgeutah.com

Twitter: @STGnews

Copyright St. George News, SaintGeorgeUtah.com LLC, 2017, all rights reserved.

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3 Comments

  • jorge_enrique_1991 November 16, 2017 at 10:33 am

    Agree. Thank you for your pragmatic approach. I enjoy reading your opinions.

  • Travis November 16, 2017 at 12:15 pm

    All very good points. I would like to see a list of the various states that contribute more into the Fed bank account than they take and I would like to see a list of the various states that take more from the Fed bank account than they give. Can you provide those details?

  • bikeandfish November 16, 2017 at 12:27 pm

    I can get on board for much of that.

    There are benefits to some sports stadiums but definitely not professional football. Too few games that don’t employ enough locals in a meaningful way that offsets the tax loss. Baseball and a couple other sports with long seasons and a ton of home games can generate in-stadium revenue that offsets the tax loss and the amount of surge to local off-site businesses is substantial in such areas. That said, its time these wealthy teams and leagues started to pay their share so I am against revoking such tax benefits.

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