Gov. Jerry Brown’s chief fiscal advisor says the Republican tax plan will raise the cost of homeownership by scaling back the mortgage interest deduction, making it harder to buy property in California given the state’s high cost of housing.
Gov. Jerry Brown’s chief fiscal advisor says the Republican tax plan will raise the cost of homeownership by scaling back the mortgage interest deduction, making it harder to buy property in pricey California.
Finance Director Michael Cohen sent a letter this morning to members of California’s congressional delegation with a long list of concerns under the versions being considered by a conference committee. At the same time, House and Senate GOP leaders announced they had reached an agreement expanding tax cuts for the wealthy, but few details were immediately released.
A vote is expected next week. Republicans control 52 seats in the Senate but only need 50 votes to pass their plan since Vice President Mike Pence could break a tie. Their advantage will shrink by one seat once newly elected Democrat Doug Jones is sworn as a senator from Alabama.
The House bill would reduce the amount a homeowner can deduct to the first $500,000 of a new mortgage, while the Senate bill would keep the current $1 million limit. It’s been reported that negotiators have split the difference at $750,000.
“Given the high cost of housing in the state, mortgages for many mid-level homes are significantly above this cap,” Cohen wrote—noting that more than 4 million California tax returns claim the mortgage interest deduction at an average of over $12,000.
This was Cohen’s second letter to congressional delegates. As with the first, he expressed concerns about deficit-financed tax cuts at a time when the economy is at full employment and corporate profits are at all-time highs. He warned again how removing the state and local tax deduction while capping property tax deductions hurts a low-property-tax and high-income-tax state such as California.
Starting in 2018, the GOP plan would take away a deduction for personal loss, such as those experienced by victims of California’s 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.