We estimate that the percentage of taxpayers who itemize deductions will fall by more than half in Colorado, Missouri, and Utah, states that use the federal standard deduction; by about 40% in the District of Columbia, a jurisdiction that also uses the federal standard deduction but one in which average itemized deductions are much higher than the national average; and by about 25% in New York, a state that has its own relatively generous standard deduction and therefore has a lower initial level of itemizers
Charitable donations are a well-known tax deduction for itemizers
, but if this year's higher standard deduction gets you a bigger tax break, the tax-deductibility of your gifts may be a moot point, says Kasey Pittman, a CPA at Newport News, Virginia-based accounting firm PBMares.
Even when adjusting for relative incomes, the fraction of total income donated by non-itemizers is lower than that of itemizers
Note that in all cases, the unconditional tax price elasticities for all categories are higher for nonitemizers than for itemizers
. This is consistent with Peloza and Steel (2005) whose meta-analysis tests the usual claim that tax price elasticities will be higher for itemizers
than for nonitemizers and finds the exact opposite.
lost ground to those who could donate nothing at all
to this observer, can easily be raised through limiting the SALT deduction available for itemizers
either directly or through the AMT or Code section 68.
Rather than take away housing deductions from itemizers
, they would seek increases in the standard deduction that effectively extended similar tax savings to nonitemizers.
Price of donating The price of cash donations equals 1 -- marginal tax rate for itemizers
. Family variables Number of children Number of children in household Preschool children A (0, 1) variable equal to one if the household includes a youngest child under the age of 6.
APPENDIX TABLE A2 Aggregate Comparison Between Simulations and Actual Individual Income Items(*) Items Simulation Statistics of lncome (in billions) (in billions) Deductions: Mortgage 115 115 Health 22 23 S&L income tax 60 66 Sales taxes 15 16 Miscellaneous 31 32 Interest Paid 52 64 Real Estate Tax 40 36 Personal Property 3 2 Gifts 29 48 Total Itemized Deductions 367 405 Percentage of Itemizers
44 39 Exemptions 243 253 AGI 1980 2300 Taxable Income 1500 1800 Taxes 306 326 * Simulation data are from the 1985 Consumer Expenditure Survey.
Those States with relatively higher per capita incomes are also the States in which the proportion of itemizers
is relatively the highest.
For the approximately 32 million itemizers
, the flat tax offers a clearly simpler system.
Charitable deduction for itemizers
. The relative value of the charitable contribution income tax deduction will increase as other deductions are further curtailed or eliminated.