Trump tax plan trumps Californians
President Trump’s surrogates and economists espouse that helping the rich will increase salaries and create jobs, but history proves otherwise
Rep. Maxine Waters (D-CA) addresses a rally against the Republican tax plan outside the U.S. Capitol November 1, 2017 in Washington, DC. The rally was organized by Patriotic Millionaires, left-wing group of weathy people who support political representation for all citizens and believe that the rich should shoulder a greater burden of taxes. Photo: Chip Somodevilla/Getty Images embed
‘California’s middle-class taxpayers … will continue to be the proverbial turnip from whom President Trump seeks to squeeze tax blood’
By JEROME HORTONThe Republicans’ “Tax Cuts and Jobs Act” will be devastating to California’s poor to middle-income families because they pay the highest income and sales taxes in the nation (in proportion to their income), the second highest gas tax, and their property tax assessments have doubled – and none of these will be deductible.
The more than eight million individuals living below the poverty line in California – the highest poverty rate in the nation – will initially benefit from the Republican tax plan, which doubles the standard deduction, maintains the federal and state “Earned Income Tax Credits,” and reduces the tax rate from 15-12 percent for those who earn under $77,400.
However, if you take into consideration the Republicans’ proposed cuts in health care, the cost of living tax adjustments, and the fact that these proposed tax benefits are temporary (expiring in 2025), by 2027 most Californians earning $75,000 a year or less will pay more taxes. On the other hand, California’s ultra-rich, who earn $480,050 to $1 million and over, will benefit from the plan because it lowers their tax rate and maintains the majority of their tax-reducing loopholes.
California’s middle-class taxpayers who itemize their deductions will continue to be the proverbial turnip from whom President Trump seeks to squeeze tax blood.
This is especially troubling because the Republican tax plans proposed by the Senate and/or House would eliminate deductions for dependents, state and local taxes (including property taxes), medical expenses, non-reimbursed employee expenses, and tax preparation fees, as well as California’s personal casualty losses, such as losses resulting from California’s wildfires.
Families considering purchasing a home or an equity loan should note that California is proposing an increase in home financing fees from $75-255 per transaction and the Senate Republicans’ tax plan limits mortgage interest deductions (MID) for interest paid on new home mortgages greater than $1 million and denies mortgage interest deductions on home equity loans.
Seniors looking to sell their homes and relocate out of California or downsize will face new limits on the capital gain tax exemption of $250,000 for single filers or $500,000 for married filers on the sale of their personal residence. Given that inflation is out of control in California, with an average home listing price in Los Angeles of $745,000, these combined proposals will make affordable housing nearly unattainable for middle-income families.
The benefits in the proposed tax plan include maintaining the earned income tax credits and deductions for medical expenses and interest on student loans, protecting 401(k) retirement investments, and increasing the child tax credit from $1,000 to $1,650. It also provides for a $300 “Family Flexibility” credit allowed for each spouse and an increase on the income limits on Child Care Tax credits from $75,000 to $115,000 for single taxpayers and $110,000 to $230,000 for married taxpayers, and doubling the standard deduction to $24,000 for married couples and $12,000 for singles.
However, the positive benefits are not enough to offset the negatives in this tax plan.
California has over 772,555 millionaires and more billionaires than any state in the nation, who will disproportionately benefit from the Republican tax plan. President Trump’s surrogates and economists espouse that, based on “trickle-down economics,” helping the rich will increase salaries and create jobs, but history proves otherwise – profits that result from tax savings generally benefit the shareholders and do little to add new jobs or generate an increase in employee compensation.
If the president wants to help working families prosper and stimulate our economy, it’s simple: Lower their taxes, eliminate unwarranted loopholes, and incentivize California’s millionaires and billionaires to invest in education, innovation, environmental justice, affordable housing, and hire 1.5 people each at $50,000 a year. This plan would end unemployment in California and stimulate more than $57.9 billion in new salaries and corresponding state and federal taxes.
Board of Equalization Member Jerome Horton has 37 years of experience in public and tax policy as a member of the Inglewood City Council, California State Legislature, California Workforce Investment and Cultural Endowment Board, and the California Medical Commission.