California Democrats: Protect SALT Deduction in Tax Plan

WASHINGTON, Oct. 23 -- Rep. Mike Thompson, D-Calif., issued the following news release:

Today, 36 members of the California Delegation sent a letter to Rep. Kevin Brady and Sen. Orrin Hatch, the chairmen of the House Ways and Means and Senate Finance committees, respectively, expressing deep concern about any proposed changes to the state and local tax (SALT) deduction as indicated in the "Big Six" framework. The SALT deduction allows taxpayers to deduct state and local taxes from their federal taxable income, and was written into the federal tax code since the inception of the income tax in 1913.

The Representatives, in the letter, state, "The average value of the SALT deduction for a California household is $18,438. The vast majority of these filers are homeowners, many of whom counted on the deductibility of state and local taxes when determining the affordability of their homes. Our constituents made these purchasing decisions with the understanding that their property taxes would be deductible. Repealing SALT could endanger their financial security and make California homes less affordable for current homeowners and for prospective buyers."

The letter, pasted below and available online here, was led by Reps. Mike Thompson (CA-05), Judy Chu (CA-27), and Linda Sanchez (CA-38) who released the following statement:

"Californians already pay more to the Federal government than we receive in federal spending, paying about $17 billion more than we received in 2015 alone. Now, we're being asked to increase our tax burden simply so corporations and the wealthiest few can receive tax cuts. Additionally, this extra tax would cripple families in our districts who bought their homes with the SALT deduction built into their financial planning. These families should not have the ground knocked out from under their feet now just for the sake of a tax plan that already favors the wealthy over the middle class. It's not just the families who would be hurt by this, it's communities as well. These local taxes pay for things like better schools and fire departments, and the SALT deduction allows our state and local communities to provide these types of services that benefit those of all incomes. It's our goal to help more families afford the American Dream, and the SALT deduction plays an important role in helping them achieve that goal."

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October 23, 2017

The Honorable Kevin Brady

Chairman

Committee on Ways and Means

U.S. House of Representatives

Washington, DC 20515

The Honorable Orrin Hatch

Committee on Finance

U.S. Senate

Washington, D.C. 20510

Dear Chairman Brady and Chairman Hatch:

As members of the California Congressional Delegation, we write to express our deepest concerns about any proposed changes to the state and local tax (SALT) deduction, as indicated in the "Big Six" framework. The SALT deduction allows taxpayers to deduct state and local taxes from their federal taxable income, and was written into the federal tax code since the inception of the income tax in 1913. It has fostered a strong partnership between federal and state and local governments, and we oppose any change that would damage this cultivated relationship.

SALT ensures that the income of our residents is not taxed twice - once by the state or local entity, and again by the federal government. In 2015, over 6.1 million California households claimed the SALT deduction. Of those claimants, 82.57% were families earning less than $200,000 in household income.

The average value of the SALT deduction for a California household is $18,438. The vast majority of these filers are homeowners, many of whom counted on the deductibility of state and local taxes when determining the affordability of their homes. Our constituents made these purchasing decisions with the understanding that their property taxes would be deductible. Repealing SALT could endanger their financial security and make California homes less affordable for current homeowners and for prospective buyers.

At the same time, California has a negative balance of payments to the federal government, meaning the state pays more in taxes to the federal government than it receives in federal spending. In 2015, Californians paid approximately $17 billion more in taxes than they received in federal investment. Elimination of SALT would unfairly penalize a state that contributes more than it receives in assistance.

It is important to note that elimination of this deduction would also have an impact on those in our state who do not claim the deduction. SALT supports a strong partnership between the federal government and state and local entities, allowing them to use tax dollars to fund critical public expenditures. Local taxes fund infrastructure, teachers, fire fighters, police officers, and more. According to 2014 Census data, almost 80% state and local expenditures went to public services including education, public welfare, hospitals, transportation, and public safety. The elimination of SALT would pressure state and local governments to make cuts and take in less revenue, resulting in the elimination of projects and services at the local level that benefit those of all incomes.

The California Association of Counties, the Office of the Governor, and numerous local mayors have all expressed strong concerns about the elimination of SALT. Any change or modification to this deduction would increase the burden on middle class families and hurt our local economies. We urge you to reconsider this decision, and we appreciate your consideration of our request.

Sincerely,

Judy Chu

Mike Thompson

Linda Sanchez

Pete Aguilar

Nanette Diaz Barragan

Karen Bass

Ami Bera

Julia Brownley

Salud O. Carbajal

Tony Cardenas

J. Louis Correa

Jim Costa

Susan Davis

Mark DeSaulnier

Anna G. Eshoo

John Garamendi

Jimmy Gomez

Jared Huffman

Ro Khanna

Ted Lieu

Zoe Lofgren

Alan Lowenthal

Doris Matsui

Grace Napolitano

Jimmy Panetta

Lucille Roybal-Allard

Raul Ruiz

Adam Schiff

Brad Sherman

Jackie Speier

Eric Swalwell

Mark Takano

Norma J. Torres

Juan Vargas

Maxine Waters

Barbara Lee