The Coast News: Levin talks solutions to tax deduction cap
OCEANSIDE — U.S. Rep. Mike Levin (D-San Juan Capistrano) met with realtors and taxpayer representatives from San Diego and Orange counties on Aug. 20 at the Chamber of Commerce to discuss how the state and local tax (SALT) deduction cap has harmed his constituents and possible solutions.
The SALT deduction is what allows taxpayers in high-tax states to deduct local taxpayers on their federal tax returns. Taxpayers who don’t take the standard deduction can deduct what they have paid in state and local taxes, which includes property, income and sales taxes.
In December 2017, President Donald Trump signed the Tax Cuts and Jobs Act, a new Republican-led tax bill that instituted a cap on the SALT deduction. This established a maximum deduction of $10,000 for both individual filers and married couples filing jointly; there was no limit prior to Trump signing the bill.
Tax deductions tend to be more valuable to those with higher incomes because they are taxed at a higher rate. With the $10,000 limit, those high-income filers saw higher tax bills.
Several bills have been introduced by Democrats to raise the deduction cap.
Lawmakers in Illinois introduced a bill that would change the cap to $15,000 for individual filers and $30,000 for married couples. In New Jersey, a bill was introduced to raise the caps to $18,000 per individual and $24,000 for married couples.
Levin is co-sponsoring a bill called the SALT Deductibility Act that would fully repeal the deduction cap. A full repeal of the bill would cost about $200 billion in lost revenue.
Levin also signed onto the Congressional Review Act, a resolution that would prevent Internal Revenue Service regulations from blocking state laws that provided “relief” to the SALT deduction cap.
Though Levin is supporting a full repeal, he is also partial to compromise.
“I’m interested in working on a resolution or working across the aisle to negotiate to try to get something done that would benefit my constituents here,” he said.
Michael Roberts, an Orange County realtor, told Levin at the Aug. 20 roundtable discussion that he thinks the $15,000/$30,000 split would make at least three-fourths of his clients happy.
“The full repeal is going to get shot down dramatically,” he said. “Something in the middle would be great.”
Levin told The Coast News he also thinks the $15,000/$30,000 split would please many of his constituents.
Carolyn Cavecche, president and chief executive officer of the Orange County Taxpayers Association, said she personally would like to see a flat tax but doesn’t think that will happen. Instead, her taxpayer association supports a full repeal of the SALT deduction cap.
“We haven’t analyzed a lot of the alternatives right now,” she said. “We’d like to see a full repeal.”
Cavecche also said she would leave it to Congress to figure out where they would get $200 billion to cover lost revenue.
“Congress can come up with $200 billion in savings,” she told Levin. “I hate to say that’s not a lot of money because that’s a massive amount of money, but in the money that you deal with on a daily basis there you would be able to find it.”
According to the Committee for a Responsible Federal Budget, Trump will have added $4.1 trillion to the national debt through 2029. The biggest contributor, according to the committee, is the Tax Cuts and Jobs Act, which increased the debt by $1.8 trillion.
The national debt surpassed $22 trillion in February.
Katie Williams, a tax specialist who works for the IRS, said although the IRS doesn’t have an opinion on the SALT deduction cap, she does.
“I am a taxpayer,” she said.
Williams personally likes the $15,000/$30,000 split, which she thinks would provide her as well as other middle class families some relief.
Haney Hong, president and CEO of the San Diego County Taxpayers Association, recommended that residents should also pay attention to what is happening at the state and local levels regarding taxes.
For example, both Hong and Cavecche warned panelists and audience members about “threats” against Proposition 13, which caps property taxes and requires a two-thirds majority both state legislative houses for any increases to state tax rates.
Hong also cautioned residents about CCE, which several cities in San Diego County are researching.
“What I get worried about is without the right kind of taxpayer protections, this is going to become ultimately a different kind of tax or fee that won’t even get counted in the SALT deduction because you’re paying for your energy in theory,” Hong said about CCE. “If it’s not built with the right protections, it’s going to pay for other general fund activities that the cities can’t pay for through other activities.”
Oceanside is also exploring its options for CCE. According to Principal Planner Russ Cunningham, the city is looking “at a range of possible partnerships,” which includes potentially partnering with other cities along the state Route 78 corridor.
“We recognize that we will inevitably have to find an alternative to the status quo, given that (San Diego Gas & Electric) has stated its intention to get out of the power procurement business,” Cunningham said via email in May. “That said, we have to continue to do our homework and provide our decision makers with all of the information and objective analysis they need to make an informed and responsible decision.”
By: Samantha Taylor
Source: The Coast News