As many of you know, Tax Reform Legislation in working its way through Congress.
While the idea of simplifying our tax code is a great thing, what is currently being considered is particularly dangerous to middle class California and the cause of homeownership.
On the table is cutting out the mortgage interest deduction, the state and local tax deduction, and putting more limits on the capital gains exemption. Unfortunately there is a lot of misinformation going around.
One common misconception is that the rest of the country is subsidizing California through the state and local tax deduction.
California, however, actually gets less back in federal spending than all but 9 other states.
If you live in Mississippi for instance, you get back $2.50 for every tax dollar your give to the federal government. In California you only get $0.78 of that dollar back.
The State and Local Tax deduction is meant to level the playing field.
For instance, If you make eighty thousand dollars a year, you are taxed at the same rate no matter where in the country you live. In California, this is barely middle class.
The state government also taxes you on that same eighty thousand, even though you have already paid a chunk to the federal government. You are double taxed.
The State and Local Tax Deduction and the Mortgage Interest Deduction are not special interest giveaways. These deductions make it possible for many in California to move up the economic ladder, and become homeowners.
Making our businesses environment competitive with the rest of the world is of course important, but so is making it easier for families to generate wealth for their kids.
Current legislation, however, keeps benefits like the State and local tax deduction for corporations, but not for individuals. This is wrong.
Our homeownership rate is near an all-time low of 46% here in Orange County. If this trend continues, our local communities will suffer.
As the former National Association of REALTORS® President Bill Brown says, Homeownership is not a special interest, it’s a common interest.
The numbers being promoted by supporters don’t even take into account simple things like inflation, and/or a rise in prices and interest rates.
If interest rates go up by as little as .5%, on a median priced home in Orange County you would be paying an extra 100 thousand in interest on the life of the loan.
This is why you don’t rush tax reform. There is simply too much at stake. Again, simplifying the tax code can be a great thing, so let’s do it right.
Please be sure and send this message to your member of congress. Thank you.