House Bill Would Increase Taxes on Many Middle Class California Families

Today, U.S. Senator Kamala D. Harris applauded a bipartisan group of 24 California mayors who oppose the House tax proposal that would partially repeal the state and local tax (SALT) deduction. The mayors outlined their opposition in a letter to their Members of Congress.

The State and Local Tax Deduction (SALT) is an important federal tax provision that allows taxpayers to reduce the amount of federal taxes they owe.  Under the federal tax code, taxpayers are allowed to subtract from their taxable income their state and local taxes. The deduction prevents the federal government from double taxing taxpayers on money they have already paid in state and local taxes. Over 6 million Californian households rely on this deduction. California has a comparatively high state income tax making the SALT deduction vital for many Californians.

“I oppose the House tax bill because it will result in higher taxes for many middle-class California families,” Harris said. “Republicans in the House have proposed gutting a key tax deduction that is used by California families to pay for tax breaks for corporations and the top percent of Americans. We must not allow this proposal to become a law and I will work with local leaders and members of the delegation to stand up for families across our state.”

The Senator’s statement comes in response to the House Republican tax plan that would partially eliminate SALT in an effort to pay for tax cuts for the rich. A middle-class family owning a home in California would see an average tax increase of over 26 percent.

The signatories of the letter are: Mayors Trish Herrera Spencer (City of Alameda), Tom Tait (City of Anaheim), Jose Gurrola (City of Arvin), Raymond Lerma (City of Corcoran) Liz Morris (City of Delano), Rey León (City of Huron), Michelle Roman (City of Kingsburg), Mayor R. Rex Parris (City of Lancaster), Robert Garcia (City of Long Beach), Eric Garcetti (City of Los Angeles), Mike Murphy (City of Merced), Alan Nagy (City of Newark), Libby Schaaf (City of Oakland), Alma Beltran (City of Parlier), Robert McBain (City of Piedmont), Darrell Steinberg (City of Sacramento), Edwin Lee (City of San Francisco), Sam Liccardo (City of San Jose), Miguel Pulido (City of Santa Ana), Ted Winterer (City of Santa Monica), Michael Tubbs (City of Stockton), Bill Nelson (City of Villa Park), and Tilo Cortez (City of Wasco).



November 7, 2017

To the California Delegation:

As mayors from cities across the State of California, we write to urge you to oppose any House legislative tax proposal that would eliminate or reduce the state and local tax (SALT) deduction. Any repeal or reduction of this deduction will hit middle-class taxpayers in California particularly hard. The SALT deduction has been part of the federal tax code as long as it has existed to guard against double taxation, to encourage home ownership, and to protect state and local fiscal systems. Repealing or reducing this important middle-class deduction would raise taxes on Californians, diminish home values, and take away sorely needed revenues for state and local budgets. California is a net payer state.  We already pay more in federal taxes to the federal government than we receive in benefits. We urge you to protect Californians from yet another tax grab from Washington.

The SALT deduction makes the cost of living more affordable in states like California. For example, the average SALT deduction in our state was $18,438.00 in 2015 — the third highest of any state.  The deduction was claimed by 6.1 million California households, which represents 34% of all tax filers. According to the Institute for Taxation Economic Policy, under the House tax framework, nearly 40% of California families making between $75,500 and $129,500 would see an average tax increase of $2,260.00.  Moreover, 58% of families with incomes between $129,500 and $303,200 would see an average tax increase of $3,980.00. Middle-class families in our cities have not seen real income gains since the Great Recession. They deserve a tax break, not a tax increase.

We understand that California members of Congress are discussing limiting the SALT deduction instead of full repeal. We urge you to reject this approach. Limiting the SALT deduction would reduce federal tax incentives for home ownership; it would reduce tax deductions for real estate taxes (part of SALT) and reduce itemized deductions, including the value of the mortgage interest deduction. For these reasons, professional services firm PricewaterhouseCoopers found that SALT repeal would decrease home values by 10 percent nationally. California would be hit particularly hard given that we have the second highest average mortgage interest deduction of any state according to the leading independent tax policy nonprofit, Tax Foundation.

Additionally, reducing the value of SALT deduction could force cuts in services that our cities provide to our residents. States, cities, counties and school districts have all established tax rates that operate under the assumption of federal tax deductibility. Limiting the deductibility of state and local taxes and hiking taxes on California families would place pressure on state and local governments to cut budgets that pay our teachers, our firefighters and rebuild our infrastructure.

The state and local deduction is a bipartisan issue as seen in the New York delegation, where Democrats and Republican Congressmen are working for their constituents by threatening to block the passage of the House budget legislation if the repeal of the SALT deduction is part of the House tax legislation being proposed next week. We urge our California members to join them in this effort. Please help our state by ensuring that Congress does not repeal or reduce our state and local tax deductions.