End of SALT Deduction Will Exacerbate U.S. Polarity, Dalio Says
Billionaire Ray Dalio said the expected elimination of state and local income tax deductibility proposed by lawmakers will take a toll on high-tax areas due to lower revenues as high-income earners move out of state.
That’s going to exacerbate the polarity and conflict that’s already prevalent among wealthy and lower-income taxpayers, who have “typically different values.” The proposed tax incentives will push the rich toward states with lower levies, like Florida, Texas, Nevada, Washington and Arizona, he wrote in a LinkedIn post Tuesday.
Those left behind in high-tax states will see a hit in their property values, while “the reduced population of higher income and higher spending folks leads to reduced spending in these locations,” further depressing their economies, said Dalio, who runs the world’s biggest hedge fund at Bridgewater Associates. The firm is based in Connecticut, one of the high-tax states cited in the post.
On its face, ending so-called SALT deductibility will increase the effective tax rate for high earners in high-tax states by 3 to 5 percent, with 1 percent to 2.5 percent of them migrating out of state, he said. State tax revenues will fall about 1 percent, he said. The estimates understate the impact from the changes as they don’t account for consequences on real-estate prices and living conditions, he said.
The House and Senate are poised to begin working this week on compromise tax-overhaul legislation. The Senate bill mirrors the House legislation by calling for the repeal of state and local tax deductions, while allowing up to $10,000 for property tax deductions.
— With assistance by Alexis Leondis, and Hema Parmar
December 5, 2017 at 09:14AM