The San Diego Union-Tribune Trump tax reform eliminates local tax deductions, but is it a good thing? column

May 05--This week's question is inspired by the Trump administration's tax reform proposal that included deductibility of state and local taxes.

QUESTION: Should state and local taxes no longer be deductible on federal income tax returns, as the Trump administration proposes?

Phil BlairPhil Blair

Phil Blair, Manpower

YES: To balance the playing field until all states either do have fairly equal state income taxes or all do not then for fairness and consistency they should continue to be deductible.

Kelly CunninghamKelly Cunningham

Kelly Cunningham, National University System

NO: Eliminating tax breaks or deductions "allowing" workers to keep more of their hard-earned money is not a subsidy in any true sense. Such deductions are simply a means of being fleeced less intensely than otherwise. If a robber commits highway robbery, and the victim persuades the robber to allow him to keep something for bus fare, this is scarcely a subsidy or allowance to one's own earnings, particularly in an already high-tax state like California.

David ElyDavid Ely

David Ely, San Diego State University

YES: The federal tax code is overly complex and the task of filing returns is an unnecessary burden on taxpayers. Eliminating a wide range of deductions, in exchange for lower rates and a higher standard deduction, could make filing returns simpler without raising taxes for middle-income households. However, California taxpayers should insist that the adjusted tax rates and standard deduction in any adopted plan be sufficient to offset the loss of the state/local tax deduction.

Gina Champion-CainGina Champion-Cain

Gina Champion-Cain, American National Investments

NO: Not if unaccompanied by a reciprocal tax reduction. High state tax states, like California, are subsidized by low state tax states. Removing the deduction would end this inequity but be considered as a massive federal tax increase. Additionally, income taxed by the state would then be taxed again federally, a classic example of double taxation. Tax law is intertwined across seemingly unrelated regulations and cannot be viewed without broad context.

Alan GinAlan Gin

Alan Gin, University of San Diego

NO: Eliminating the deductibility would increase the federal tax burden on states like California and on regions like San Diego. Because California has a relatively high state income tax, its deductibility eases the burden on the state's residents. Eliminating the deductibility would raise the Federal tax burden on Californians. The same is true if the deduction for local property taxes is eliminated. Residents of regions with high property values like San Diego would be hurt more than lower priced areas.

James HamiltonJames Hamilton

James Hamilton, UC San Diego

YES: Taxes have become way too complicated. We supposedly get to deduct state taxes and other items. But then when you go through the various worksheet and alternative minimum tax calculations you find those deductions partly taken away. Deductibility of state taxes primarily benefits higher-income taxpayers and can be viewed as a form of subsidy. Rather than add various gimmicks to try to benefit one group or another, a simpler, cleaner tax code would be better.

Gary LondonGary London

Gary London, London Moeder Advisors

NO: If deductibility is eliminated, there will follow a movement to reduce state taxes, because the tax burden would likely be claimed as too heavy for California residents. That would normally be a good thing. Trouble is, California needs a lot of things including improvements in education, infrastructure (like roads, dams and schools), better medical and social programs to help alleviate the homeless problem, just to name a few.

Norm MillerNorm Miller

Norm Miller, University of San Diego

NO: My answer would be "Yes" only if we go to a flatter and simpler tax system with no deductions for anything. But right now California income tax rates go to 13.3 percent, the highest in the United States. Not allowing deductions for this hits California residents harder than states like Texas or Nevada. When we bring in property taxes as a percentage of income, California would still be hit pretty hard for newer residents.

Jamie MoragaJamie Moraga

Jamie Moraga, IntelliSolutions

Not participating this week.

Austin NeudeckerAustin Neudecker

Austin Neudecker, Rev

NO: The tax code should be simplified, however. Eliminating state and local tax deductions from federal taxes would effectively hinder the ability of local government to raise the money needed to run. Power would further consolidate to the federal level and we may risk losing our "laboratories of democracy," where states have the freedom and means to experiment with policies and compete to attract businesses and individuals. Focus on reducing targeted, special-interest deductions and loopholes.

Bob Rauch, R.A. Rauch & Associates

NO: There will need to be compromise on this issue as there is a huge disparity between California and the rest of the nation. President Donald Trump's goals are to simplify the tax code, provide tax relief to the middle-class and lower the business tax rates. Repealing the Obamacare tax, offering businesses to bring overseas dollars back on a one-time basis, eliminating the alternative minimum tax and the estate tax are all worthy goals.

Lynn ReaserLynn Reaser

Lynn Reaser, Point Loma Nazarene University

YES: Although California, as a high-tax state, would be hurt, the deduction is hardly defensible on equity or economic grounds. The deduction means that residents of other states without a similar tax advantage are subsidizing those states with the deduction. Individuals in those states with the deduction are ostensibly already receiving benefits of the services financed by their higher state and local taxes. Additionally, the deduction favors high-income households, who typically itemize their expenses and for whom the deduction is more valuable.

John Sarkisian, SKLZ

YES: As part of a complete overall of the tax code I would support eliminating the deduction of state and local taxes. If the administration is only proposing rate reductions and does not overhaul the tax code to a simple low tax structure then leave the exemption in place. The current complexity of the code makes it nearly impossible for the average person or small business to prepare their tax returns and pay a fair tax.

Chris Van GorderChris Van Gorder

Chris Van Gorder, Scripps Health

NO: The problem with tax reform based on picking and choosing different deductibles is someone we don't want to hurt will get hurt. I've always been in favor of a flat tax on everyone based on income. The more you make, the more you pay; that's not unfair to anyone. But I don't believe anyone should be taxed twice on the same income. States should permit federal tax deductions and the federal government should deduct state taxes paid.

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UPDATES:

4:13 p.m.: Updated with Lynn Reaser's answer.

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