Let me clear. I fully support the notion that, in order to pay for important social programs such as universal health care, tax rates for the more fortunate need to increase. The magic number being batted around for (married joint) income is $250,000.
That's me (and my family), just about, although probably not this year because getting total income over $250,000 depends on a year-end bonus in excess of an amount that is not likely to occur this year. That said, I consider myself very fortunate. And, I'm more than willing to pay more in taxes in order for health care for all to be properly funded.
What I want however is for the tax increases to be imposed fairly (and I'm not talking about increasing taxes for people with lower incomes). Here's why.
I live in Westchester County, New York. I live with my family in a three bedroom home. It is not a small home. It most certainly is not a large home either. We have one car.
Everything in our area is expensive. Homes are expensive. Property taxes are high. Sales taxes are high. The cost of gasoline is relatively high. It goes on and on.
Just as a point of comparison, below I compare the cost of living in Westchester NY to Austin TX. (I've used Nassau County, NY as a substitute for Westchester in one instance because the data source gave me that option and Westchester was not an option.)
From www.Bankrate.com, a $250,000 salary in the NYC suburb area compared to $180,478 in Austin TX.
From CNN Money Cost of Living Index
http://cgi.money.cnn.com/...
Results [for a $250,000 salary in Nassau County, New York]:
Comparable salary in Austin, TX: $157,903
If you move from Nassau County, NY to Austin, TX
Groceries will cost: 20% less
Housing will cost: 62% less
Utilities will cost: 42% less
Transportation will cost: 7% less
Healthcare will cost: 14% less
Rough average between CNN Money and Bankrate: $250,000 salary in Westchester, New York corresponds to $170,000 in Austin, Texas.
Sales Tax:
Westchester County, New York sales tax: 7.375%
Austin Texas 8.25%
Income Tax:
New York (income range between $100,001 and $500,000): 7.375%.
Texas: None
Gasoline Tax
New York: 42.5 cents/gallon
Texas: 20 cents/gallon
I won't vouch for the accuracy of all the numbers above. I looked at a variety of sites. They are presented only to make a general point. A $250,000 income in one location clearly IS NOT the same as a $250,000 salary somewhere else.
Which brings me to the most unfair tax in existence in this country: The federal Alternative Minimum Tax. I get hit by the AMT. Not merely because I have the good fortune to have a good salary, but because I pay a lot in state income tax, and local real estate and school property taxes.
In other words, a person making the same salary and living in a state with relatively low state income and property taxes has a very good chance of paying no (or very little) AMT. Not so if you come from a state like New York. Here, you get to pay more federal tax because you pay more state and local taxes -- Does that make sense? As I understand it, people with incomes under $100,000 are now being hit by the AMT if they happen to have the "good fortune" to live in a state with high state income and property taxes. The AMT needs to be repealed and higher income tax brackets adjusted upward to make the impact revenue neutral. I doubt if I would benefit from such a change to any great degree (perhaps I'd end up paying more for all I know), but many other people would.
Which brings me to President Obama's tax proposal where apparently he intends to limit itemized deductions. As I understand it, any deductions claimed would be applied only against a 28% tax rate, even though they might be paying taxes at a 35% rate or, in 2011 or later, a 39.6% rate (when the Bush tax cuts expire).
By the way, I fully support the expiration of the Bush tax cuts on high brackets. That said, the proposal to limit itemized deductions as proposed bothers me. Why? Because it rings of the same unfairness that the AMT does. The deduction limitations hit people who live in high state income and property tax states far harder than those who live in other states.
Please understand. I am willing to take the tax hit, even as proposed.
I just want it to be fair. Why should someone making the same salary but living in another low tax state, in effect, get hit less? Doesn't make sense. There should some measure of equalization on how this proposal is implemented. I hope they take this into account.
UPDATE
I wish people would actually read the diary. Any impact of Obama's tax proposal will be minimal for me, so this is NOT, NOT a personal gripe. I am happy to pay more in taxes to see the progressive agenda advanced. What I want is fairness in taxation, even if I don't benefit one dime.