GOP tax plan would hit hard in California
Republican plans to eliminate the state and local tax deduction as part of federal tax reform has put California’s GOP legislators in a tight spot.
This deduction disproportionately helps high-tax states, especially California, which has the nation’s highest maximum state income tax rate of 13.3 percent. Republicans who toe the party line risk alienating constituents.
“California will be the biggest problem state for Republicans if they want to do this particular reform,” said Alan Cole, an economist with the Tax Foundation, an independent think tank.
Today, people who itemize deductions on their federal return can write off state income or sales tax, along with property taxes.
President Trump’s onepage tax proposal, issued last month, would wipe out this deduction. So would the Republican tax-reform blueprint put out by House Speaker Paul Ryan last summer. (All tax bills originate in the House.)
Both plans would compensate for the loss of itemized deductions (except charitable donations and mortgage interest) by doubling the standard deduction.
Only 30 percent of federal tax filers itemize, but almost all who do deduct state and local taxes. In terms of forgone revenues, it’s the largest itemized deduction and one of the biggest tax breaks of any kind.
The deduction disproportionately benefits high-income taxpayers, with more than 88 percent of tax savings flowing