With House Budget Vote, Calif. Republicans Put Calif. Tax Break In Crosshairs

We asked all 14 House Republicans from California whether they support or oppose the elimination or reduction of the state and local tax deduction. See the graphic below with their responses. We'll update the graphic if additional responses come in.

All 14 California Republican members of Congress voted for the budget bill that narrowly passed the House of Representatives Thursday.

That paves the way for the GOP effort to overhaul the federal tax code – which for now, at least, includes the elimination of a tax break that disproportionately benefits Californians.

Right now, taxpayers who itemize their deductions can deduct state and local property, real estate, and either income or sales tax payments on their federal income tax returns.

That comes in handy for Californians, who have one of the highest state income tax rates in the nation – along with high property values.

But this “state and local tax deduction” – known as SALT – is a huge pot of money: well over $1 trillion over the next decade.

That puts it in the crosshairs of Republican leaders searching for money to offset new tax breaks in the tax overhaul package they hope to pass by the end of the year.

Even Republican leaders from California.

“You know how you get to deduct where California continues to raise their rates? I don’t think it’s fair that somebody else subsidize poor management of California or New York policies,” House Majority Leader Kevin McCarthy (R-Bakersfield) told the California Republican Party convention last weekend.

“No longer can Sacramento say, I’m gonna raise the rates, just cause I’ll have the federal government subsidize it,“ McCarthy added as the crowd of conservative activists cheered him on. “They will have to be held accountable for when they want to raise taxes higher.“

House Minority Leader Nancy Pelosi, a San Francisco Democrat, says California Republicans who vote to eliminate the SALT deduction will be raising taxes on the middle class.

“In California alone, there are six million households that use the deduction with an average of more than $18,000,“ Pelosi said Wednesday at a news conference on Capitol Hill.

Studies, however, suggest the SALT deduction largely benefits wealthy taxpayers in high-tax states.

“About 10 percent of tax filers with income under $50,000 claimed the SALT deduction in 2014, compared with about 81 percent of tax filers with income over $100,000,“ reads a March 2017 report from the left-leaning Tax Policy Center. “The latter group—about 16 percent of tax filers—accounted for about 75 percent of the total dollar amount of SALT deductions claimed.“

The right-leaning Tax Foundation came to a similar conclusion, albeit with slightly different numbers.

“The state and local tax deduction disproportionately benefits high-income taxpayers, with more than 88 percent of the benefit flowing to those with incomes in excess of $100,000,“ according its report, also from March of this year. “The deduction favors high-income, high-tax states like California and New York, which together receive nearly one-third of the deduction’s total value nationwide.“ 

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