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Trump v. California

In this corner: Economy

For basic background, start with The Weigh-in: The Economy.

issue
Dollars from Feds
Infrastructure
Retirement
Taxes
Trade
status
All talk, no action—yet
It's on!
Punch
Counter-punch
On the ropes
Draw!
California wins!
Trump wins!
Counter-punch

California taxpayers could see as much as a 22-percent increase in personal income taxes.

Eliminating the state and local tax deduction forces Californians to pay taxes on taxes they have already paid.

And capping property-tax deductions effectively raises the property tax for California homeowners, while reducing the mortgage deduction will make it harder for middle-class families to buy homes.

These are among a bevy of concerns Democrats are taking to their congressional delegates, saying the Republican tax plan would hurt the middle class in California—a state with high property values and scarce housing stock.

State Assembly Speaker Anthony Rendon of Paramount announced Thursday that he and 53 other Assembly Democrats signed a letter urging representatives to take their time on tax legislation rather than aim to pass a measure by the end of the year.

Assembly Speaker Anthony Rendon. Photo by Max Whittaker for CALmatters

“There should be no rush,” they wrote. “Better to give Californians legislation they can be thankful for than to rush to pass legislation by Thanksgiving.”

Assembly Republicans were invited to sign the letter, which was addressed to House Majority Leader Kevin McCarthy and Minority Leader Nancy Pelosi. None did.

Senate Democrats also chimed in, asking Congress not to exacerbate California’s housing crisis. In a letter being prepared for McCarthy and Pelosi, President Pro Tem Kevin de Leon of Los Angeles led his caucus in seeking to preserve a 4-percent low-income housing tax credit and a tax exemption for the private activity bond program, which they say are critical to the affordable housing package California passed this year.

Senate President Pro Tem Kevin de Leon. Photo by Rich Pedroncelli/AP

“We approved this robust bipartisan package because we recognized that the housing shortage is hamstringing our state’s economy and threatening our long-term prosperity. Our investments in housing are estimated to generate more than 70,000 units and over 190,000 jobs in the next five years,” Senate Democrats wrote.

The fretting doesn’t stop there.

Following Gov. Jerry Brown’s plea for GOP delegates not to support the tax proposal, his finance director, Michael Cohen, outlined Thursday many other ways the GOP measure would harm middle-class Californians.

Specifically, he wrote that the plan takes away a deduction for personal loss, which would harm thousands of victims of last month’s Northern California wildfires. And it would make college less affordable by eliminating the deduction for student loan debt and and imposing a new tax on tuition waivers.

As the state’s chief fiscal advisor, he questioned taking on a $1.7 trillion deficit over the next 10 years in order to stimulate the economy when unemployment is low and corporate earnings are at all-time highs.

“Deficit-financed tax cuts are not likely to lead to significant growth because the negative economic effects of the debt would crowd out investment,” Cohen wrote.

Punch

All 14 California House delegates voted today to back a budget blueprint that could eliminate state and local tax deductions, a move that would be costly for many California taxpayers.

Some members in vulnerable districts immediately sought to downplay the vote, saying they have been assured the Republican tax overhaul will tackle or offset the potential tax hit from the loss of those deductions. The vote clears the way for House leaders to unveil their tax plan next week.

“I am confident (it will be fixed), but I’ve also said that is my number one priority, so if we can’t get it fixed then we’re going to have problems,” said Rep. Steve Knight of Palmdale.

A day earlier, Gov. Brown had pleaded with GOP members not to support the budget. About one in three California taxpayers claim the deduction. If it were repealed, filers would see an average increase of $3,290.

“Getting rid of an individual’s ability to deduct his or her California taxes is a horrible idea, but it is made far worse when you preserve—at the same time—the right of corporations to take those same deductions,” he wrote.

The Republican plan calls for steep tax cuts for corporations and promised reductions for middle-income taxpayers, a doubling of the standard deduction used by most Americans, shrinking the number of tax brackets from seven to three or four, and the repeal of inheritance taxes on multimillion-dollar estates. The child tax credit would be increased and the tax system would be simplified.

Already, House Minority Leader Nancy Pelosi of San Francisco is vowing to label Republicans “accomplices” in eliminating the state and local tax deduction. As soon as President Trump unveiled his budget framework that would eliminate the write-off, state Democrats condemned the move for targeting taxpayers in high-tax, high-cost states such as California.

But California Republicans remain committed to overhauling the tax code. Prior to the vote, House Majority Leader Kevin McCarthy of Bakersfield said, “A vote for the budget is a vote to move tax reform forward.”

McCarthy Talks Tax Cuts, New Iran Sanctions | Fox News

House Majority Leader Kevin McCarthy (CA-23) appeared on Fox News this morning to discuss the latest on tax reform and key votes in the House this week on Iran and North Korea sanctions.

It's on!

President Trump today unveiled his proposal to revamp the federal tax code, and state Democrats swiftly pointed out that it could hit Californians particularly hard by revoking a deduction that disproportionately benefits the Golden State.

Short on detail, Trump’s framework calls for the elimination of “most itemized deductions” with the exception of the write-off on mortgage interest payments and charitable giving.

Getting rid of the deduction on state and local tax payments—a tax break that allows taxpayers to write off some of their non-federal taxes—would have little consequence for Red states that have low local taxes. But it would have a major impact on Californians, both because of our higher-than-average state and local tax rates and our sizable population of millionaires (lower earners tend not to take the standard deduction). In 2015, Californians used the deduction to write off nearly $113 billion in earnings.

Photo by Michael Vadon

“Elimination of the state and local tax deduction could lead to an economic downward spiral in California, including the loss of good-paying jobs and cuts to critical public safety and social service programs,” Democratic State Controller Betty Yee said in a statement.

State Senate President Pro Tem Kevin de León also chastised the president for possibly eliminating state and local deductions. “President Trump and Republicans in Congress again show where their true priorities lie: making the lives of the rich easier and the lives of working Americans dramatically tougher,” he said in his own statement.

Under Trump’s proposal, however, the standard deduction available to all taxpayers would be nearly doubled. The plan also envisions cutting income taxes on corporations and pass-through businesses, allowing more families to take advantage of the Child Tax Credit, and repealing both the Alternative Minimum Tax and the Estate tax.

That last proposal earned a special call out from Democratic State Sen. Scott Wiener of San Francisco.

“California does not have to follow Washington down this foolish path” he said, “but instead we can enact our own estate tax.” Last year Wiener proposed putting a measure on the 2018 ballot that would amend the state constitution to allow a state tax on inheritances over a multimillion-dollar value.

For now, Trump’s proposal is just that—a proposal. Any reforms to the tax code will have to be voted into law by Congress.

Counter-punch

Another day, another lawsuit over the federal government’s immigration policy.

This morning the state’s top prosecutor, Xavier Becerra, and San Francisco City Attorney Dennis Herrera announced that they are filing side-by-side law suits against the Trump administration, an effort to protect federal funding for designated “sanctuary jurisdictions.”

“It’s a low blow to our men and women who wear that badge for the federal government to threaten their crime fighting resources in order to force them to do the work of the federal government when it comes to immigration enforcement,” Becerra said at a San Francisco press conference this morning. “We’re in the public safety business; we’re not in the deportation business.”

These two lawsuits come as a response to an announcement from the federal Department of Justice last July that cities must cooperate with federal immigration authorities in order to receive funding through the Edward Byrne Memorial Justice Assistance grant program. Specifically, cities must grant federal immigration authorities access to local detention facilities and give them 48 hours notice before the release of a suspected undocumented immigrant from local custody.

In a similar vein, Justice Department also sent letters earlier this month to the police chiefs of Stockton and San Bernardino, warning them that funding from a new federal grant program aimed at reducing violent crime could be made conditional on scrapping local sanctuary city policies.

SF City Attorney Press Conference – 8/14/17

Uploaded by SFGovTV on 2017-08-11.

California cities, counties, and state agencies receive over $28 million from the federal government in law enforcement grants.

Today’s announcement follows a similar bit of litigation filed by the City of Chicago earlier this month. In response to that lawsuit, Attorney General Jeff Sessions said that the administration refused to “simply give away grant dollars to city governments that proudly violate the rule of law and protect criminal aliens.”

“So it’s this simple: Comply with the law or forego taxpayer dollars,” Sessions said in a statement.

Because the Trump administration is attempting to place restrictions on police officers and sheriff’s deputies, opponents have argued that it amounts to the commandeering of state and local officers by the federal government, a violation of the 10th Amendment of the Bill of Rights.

“Immigration enforcement is the federal government’s job,” Herrera said. “Our police and deputies are focused on fighting crime, not breaking up hardworking families.”

While Governor Brown has expressed some skepticism about Senate Bill 54, the so-called “sanctuary state” bill currently before the state Assembly, earlier this month on NBC’s Meet The Press he said that it might be more productive to “resolve this in a judicial form rather than in the rhetoric of politicians talking past one another.”

The battle between California and the Trump administration dates back to the first days of the administration. In late January, the president signed an executive order deeming designated sanctuary jurisdictions “not eligible to receive Federal grants, except as deemed necessary for law enforcement purposes.” That order has since been successfully held up in court by cities, counties, and states across the country—including California and San Francisco.

Punch

Two California cities in the running for a new federal aid program aimed at fighting violent crime received an ominous message today from the Trump Department of Justice: sanctuary cities need not apply.

In a letter sent to the police chiefs of San Bernardino and Stockton, the administration made it clear that participation in the newly created National Public Safety Partnership Program—which will train local police departments on how to better fight violent crime—may be conditional on cooperating with federal immigration authorities.

Your jurisdiction has expressed interest in receiving assistance through the PSP program,” wrote acting Assistant Attorney General Alan Hanson.The Department is reviewing your jurisdiction’s commitment to reducing violent crime stemming from illegal immigration.” 

The chiefs were asked to demonstrate that the laws of their cities require local police to allow federal immigration agents into city jails, provide federal authorities with advanced notice before releasing an undocumented immigrant from custody, and honor federal requests to detain an undocumented immigrant beyond his or her release date.

The California Trust Act prevents state and local law enforcement officers from keeping non-felons behind bars solely at the request of federal immigration authorities. The Justice Department has deemed this, and related state and local restrictions, to be unlawful “sanctuary” policies.

President Trump has threatened to revoke funding from designated “sanctuary cities” since the first days of his administration. Earlier this year, the Department of Homeland Security began issuing weekly reports identifying cities, counties, and states considered to be out of compliance with federal immigration law. San Bernardino, though not Stockton, made the list. That program has since been suspended.

Last week, the Department of Justice announced that cities failing to cooperate with federal immigration authorities would no longer be eligible for the Byrne Justice Assistance Grant program, which provides state and local law enforcement agencies with funding for personnel, training, and equipment to fight crime.

Michael Tubbs, the mayor of Stockton, responded with a statement saying that while he looked forward to a “fair and equitable” review of the police department’s application, the city would not be changing any of its law enforcement policies. “Our police will continue the department policy to not stop, question, detain or place an immigration hold on any individual solely on the grounds that he or she may be a deportable alien,” said Tubbs. “This practice is consistent with law enforcement policy throughout the United States.”

Between January and July of this year, 2,158 violent crimes were committed in Stockton, making it the most violent city in the state per capita, according to FBI statistics. San Bernardino came in third after Oakland.

The police chiefs were given until August 18 to respond.

California’s most violent cities

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