Tax reform could spank feds in high-tax states

Active and retired feds in big tax states could take a financial hit if Congress passes the tax "reform" bill eliminating state, local and real estate taxes as ...

Active and retired feds in Maryland, California, Massachusetts, New York and New Jersey could take a financial hit if Congress passes the tax “reform” bill eliminating state, local and real estate taxes as federal tax deductions. It would raise the tax bills of all residents of high-tax states.

About one-third of Maryland taxpayers would wind up with a higher federal tax bill, according to the Institute on Taxation and Economic Policy. By some estimates, their 2018 federal tax bill would be more than $2,000 higher because of the lost state-local deductions.

Virtually all of the reforms contained in the two different packages from the House and Senate have been proposed — then rejected or dropped — before. Streamlining the tax system is complex, because everybody and every pressure group wants a break.

The president has said he wants a tax reform bill on his desk by Christmas. This late in the session, some politicians have joined the do-something-even-if-it’s-wrong club. Others worry that if they do almost anything — other than endorsing Mom’s apple pie — a large chunk of voters will take it badly. And react accordingly in the 2018 elections, which, for nervous incumbents, are right around the corner. The likely closeness of the vote in the Senate is one reason the White House and congressional Democrats have focused on the Alabama Senate vote coming up in early December.

Any changes in tax law — whether exemptions, ceilings or the number of tax brackets — would have a major impact on many individuals and the estates they leave behind. The Washington Post reports that congressional Republicans are considering “a dramatic reduction in taxing inheritances …progressive lawmakers in Maryland want to make sure the state does not follow suit.”

The Post said that Maryland Del. Jimmy Tarlau (D-Prince George’s County) plans to introduce a bill to exempt the first $4 million of the estate from Maryland state taxes, even if federal tax reform sets the cap at $11 million.

This week on Your Turn

Single, self-only or family health plan? Uncle Sam’s health plan long considered a family as two or more people. Now there is a self-plus-one option that, in some cases, lets that two-person family pay lower premiums than the traditional family plan. In many families, especially in the Washington area, both spouses work for the federal government. Many of them buy two single plans, rather than the family or self-plus-one option. So how does that work? When is it a good idea? And what, if any, are the drawbacks?

That’s one of the questions I’ll ask Walton Francis on Wednesday’s Your Turn radio show. It starts at 10 a.m. Francis literally wrote the book, Consumers’ Checkbook Guide to Health Plans for Federal Employees, on the Federal Employees Health Benefits Program. If you have a question, email it to me at before showtime. Listen a little, save a lot.

Nearly Useless Factoid

By Michael O’Connell

Troy Landwehr holds the world’s record for creating the largest cheese sculpture. On Sept. 18, 2015, he carved a cheeseburger out of a 2,000-pound block of aged Wisconsin cheddar in honor of National Cheeseburger Day.

Source: Guinness World Records

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