My boyhood home across the street from my elementary school.
The Thinker’s attention was called to a press release from the OCPA of a statement by former Senator Tom Coburn on Monday by which Dr. No fired a warning shot in advance of the Oklahoma House vote on HB 1011 which would cap itemized deductions for Oklahoma taxpayers at $17,000 and thus add $84 million to kitty needed for teacher pay raises. The good doctor was quite passionate saying, “…politicians have increased income taxes in a back-door manner on multiple occasions by eliminating broadly used deductions…” and that they need to “…make Oklahoma government work better without raising taxes on the most vulnerable, on working Oklahoma families, and on small businesses…”
His plea failed because HB 1011 passed the house and senate this week. So let’s think about who’s being affected here. Look at this from the Tax Foundation:
If Oklahomans’ itemized deductions follow this same pattern you see clearly that the top three—State & Local Taxes, Interest Paid and Charitable Contributions–dwarf all the others. Oklahomans can no longer deduct state income taxes, that is one of those “back-door” changes previously made, so the largest component of “State & Local Taxes” for us is our local property taxes which primarily impacts homeowners. “Charitable Contributions” and “Medical & Dental Expenses” are specifically excluded from the $17,000 cap under HB 1011. So that makes the “Interest Paid” as the 800-pound gorilla that’s ruining Dr. No’s holiday.
Between the interest paid and local property taxes it seems clear that this burden will fall most heavily on Oklahomans who own real property. A house in Tulsa County with a market value of $300,000 will cost its homeowner no more than $3,840 in taxes; the mortgage interest each year, at my credit union’s 30 year fixed rate of 4.5%, will decline from a maximum of under $13,500. Together that’s $17,340 in itemized deductions. So it seems pretty clear to me that the “most vulnerable” and “working families” affected by HB 1011 for whom Dr. No has such passionate concern are to be found among Oklahomans living in houses worth more than $300,000–or maybe among those who also have a holiday (vacation) home. I guess if you don’t have a house worth more than $300,000 you aren’t “working” enough, nor can you be “vulnerable” when you have nothing much to lose.
Here’s a very insightful comment from my friend Kevin Berry:
Good points. Add to this that with the new federal tax changes and the federal standard deduction being raised to $24k for married people filing jointly and the fact that if you don’t itemize on your federal taxes, you can’t itemize on your state taxes, there won’t be many low income and middle income people itemizing their deductions any longer. Those low and middle class filers who would still itemize would most likely have medical bills which cause them to, not due to mortgage interest, state taxes or property taxes Medical bills don’t count toward the state itemized deduction cap.
Post script: my thanks to Dr. No for causing me to review my 2017 Oklahoma return finding a $150 error in my favor, and for his daughter Sarah Coburn whose magical voice gave us great pleasure Saturday evening with the Tulsa Symphony.
Also thanks to my friends at http://www.nondoc.com for co-publishing this article. As always lunch is on me for the first to ID the photo location.