Unfair Taxation

[chequita guevara]

I discovered an instance of unfair taxation. The Federal tax codes were changed last year to allow people who live in states that don't have income taxes to deduct their sales tax. How is that fair to those of you who pay state income taxes?

If Florida doesn't tax me on my income, I get to keep that money (except for the portion that the Fed's take). Why should the Fed's then go ahead and give me an additional bonus? Now, not only do I get to keep the money that wasn't taxed, unlike those of you who are taxed, I get to declare the sales taxes I paid, while you don't, and you still had to pay sales taxes.

This isn't fair to the rest of you. Either you should be able to declare your sales taxes also, or we shouldn't be able to. Not that it benefited me, since I don't have enough itemized deductions for it to have made a difference.

[Kidlicious]

Flat Tax, not.

[Flubber]

Quick question - Does the federal tac code allow people in states with state inccome tax to deduct that income tax in calculating federal tax?? I'm just trying to understand the reasoning

[PLATO]

Unfair my azz! Before states with income taxes (and consequently low sales tax) were able to deduct that on their federal income taxes. States that only had a sales tax could deduct nothing...nada...zero. This new law FINALLY levels the playing field. The system before was the grossly unfair one.

[KrazyHorse]

How is that fair to those of you who pay state income taxes?

Che, you know that you deduct what you pay in state income tax on your federal income tax, right?

[PLATO]

Originally posted by Flubber
Quick question - Does the federal tac code allow people in states with state inccome tax to deduct that income tax in calculating federal tax?? I'm just trying to understand the reasoning

You bet it did. Now there is a choice. You can deduct eithier (in states with both) one and therefore choose which gives you the bigger deduction.

[KrazyHorse]

Although what Che is saying is true. If a state has both sales tax and income tax then you should be able to deduct both...

[PLATO]

Originally posted by KrazyHorse
Although what Che is saying is true. If a state has both sales tax and income tax then you should be able to deduct both...

I do agree with this statement, but calling the new arrangement unfair is way wrong. It is a HUGE step in the right direction.

[Harry Tuttle]

Che, you should ask your friend Polyton accountant first.


You're right, on a state by state basis the sales tax deduction is unfair. The people of your state, Florida, can benefit the most.

Though, here's the kicker. The deduction is such an outlandishly small percent that only on the occasion where you actually pay more in sales tax than in state tax will it really help. So if you're looking to buy a high ticket item nows the time.

If you are a real nut, you could always add up all of your receipts from the year, like they did in ancient times, and hope that it's more advantageous.

Anyways, to answer your question, the sales tax deduction isn't such a big advantage. In fact, it's probably a bigger pain in the ass than most people will stand to deal with.

[Flubber]

Originally posted by KrazyHorse
Although what Che is saying is true. If a state has both sales tax and income tax then you should be able to deduct both...

Thats what I was thinking. It seems unfair that a person can deduct all if his state uses one type of taxation but only a portion if his state uses two methods

[PLATO]

Originally posted by Flubber


Thats what I was thinking. It seems unfair that a person can deduct all if his state uses one type of taxation but only a portion if his state uses two methods

The table that you have to use to calculate your deduction way underestimates the amount of sales tax you actually pay...unless of course you want to keep all your reciepts for the whole year. It is NOT a boon, but rather a move in the correct direction.

[alva]

If you are a real nut, you could always add up all of your receipts from the year, like they did in ancient times, and hope that it's more advantageous.

Don' you guys do that anymore?

[Harry Tuttle]

Originally posted by alva

If you are a real nut, you could always add up all of your receipts from the year, like they did in ancient times, and hope that it's more advantageous.

Don' you guys do that anymore?

I think that deal was cut out of the tax code in the 80's. The IRS was probably sick of receiving shoe boxes in the mail.

[chequita guevara]

Originally posted by KrazyHorse
Che, you know that you deduct what you pay in state income tax on your federal income tax, right?

I'm aware of that, yes. But if I don't pay state income taxes, I'm not being penalized by the Feds. Let's try it like this.

I make 50,000 and pay no state income tax (for sake of argument). I get taxed on the whole amount.

PLATO makes 50,000 and has to pay a state income tax of 1%, so afterwards, the Fed's tax him on 49,500 of income. Even though I don't get a break on that 500, I still come out ahead of PLATO, since I have 500 more than him, before taxes.

Both of us pay sales tax, but only I get to deduct it. So now, not only does he have to pay a state income tax, but I get to declare a tax we both pay, but he doesn't get to declare it.

[KrazyHorse]

Originally posted by Harry Tuttle


I think that deal was cut out of the tax code in the 80's. The IRS was probably sick of receiving shoe boxes in the mail.

I have a way to figure it out. Reverse receipts. Send in how much you pay in rent (sales tax exempt), non-junk food groceries (ditto), medical care, tuition etc (all the sales tax exemptions). Call this A. Then send in your bank balance at the beginning of the year and the end of the year. B and C respectively. Then send in your income (D).

D - C + B - A is how much you spent on taxable goods and services. Multiply by your state's sales tax to get E, the amount you spent in sales tax during the year.