California Association of Realtors, OPPOSES the Tax Cut and Jobs Act Because:
We must reverse the decline in California’s homeownership rate. For over 100 years Congress has incentivized homeownership with the tax code; currently through the mortgage interest deduction. Any effort at reforming the tax code should maintain and prioritize this incentive. The current proposal only pays lip service to incentivizing homeownership. The proposed changes will result in only top earners itemizing their deductions. Therefore, the vast majority of people will no longer receive any tax incentive to purchase a home. So, while the proposal keeps the mortgage interest deduction, the incentive effect of the deduction for Americans to become homeowners disappears.
It weakens the mortgage interest deduction!!
Last Thursday House GOP leaders unveiled the Tax Cuts and Jobs Act (TCJA), a tax plan that proposes a broad overhaul to the corporate and individual tax system, building from the framework announced in September by the White House and House GOP leaders. The TCJA proposes to create more jobs, grow paychecks and bring fairer taxes to American families.
After the release of the TCJA, President Trump called the Act “an important step toward providing massive tax relief for the American people.”
Led by the House Ways and Means Committee Chairman Kevin Brady (R-Tex) and Speaker of the House Paul Ryan (R-Wis), the TCJA proposes to be the biggest rewrite of the tax code since 1986 and may allow an individual or family to file their taxes on a form as simple as a postcard.
Here are some of the TCJA’s key proposals for individuals and corporations:
• Reduce individual tax brackets from seven to four: 12%, 25%, 35% and 39.6%
• Increase the standard deduction from $6,350 to $12,000 for individuals and from $12,700 to $24,000 for married couples
• Eliminate estate taxes for estates of decedents dying after December 31, 2023
• Limits home mortgage interest deduction to loans of up to $500,000, down from $1 million
• Elimination of most personal itemized deductions and many credits, including:Student-loan interest deduction
• Medical-expense deduction
• Moving deduction
• Alimony-payment deduction
• Repeal of the Alternative Minimum Tax
• Establishes a new Family Credit, which includes expanding the Child Tax Credit to $1,600 and provides a credit of $300 for each parent and non-child dependent
• Reduces the deduction of state and local property taxes to $10,000
• Corporate tax rate cut to 20% from 35%
• Creates a one-time repatriation tax, designed to incentivize U.S.-based companies that do business overseas to bring those profits back to the States
• Notably, the TCJA does not make any changes to 401(k) and charitable deductions, something that had been rumored to be included in the initial proposal but for the time being is not on the chopping block.
There has been a mixed reaction to the TCJA as details continue to trickle out. By slashing the corporate tax rate from 35% to 20%, big corporations would get a substantial tax reduction. And those corporations with cash from profits overseas and avoiding the 35% corporate tax rate could bring that money back to the U.S. and pay one-time repatriation taxes at a 12% rate. Some middle-class families will also benefit from the increased standard deductions. However, families who live in high-tax states and itemize their deductions could pay more because of the proposed limitations on the state and local tax deduction.
How to pay for the tax cuts in the TCJA will be a hotly debated issue in the coming weeks. Representative Brady has said the bill will add $1.51 trillion to the federal deficit over the next 10 years. However, along with House Speaker Ryan, GOP leaders claim the TCJA will save a typical family of four as much as $1,182 a year.
The Ways and Means Committee plans to revise the TCJA next week with the goal of moving towards producing a final bill for the House of Representatives to consider later this month. The Senate is working on its own bill, which will need to be reconciled with the House version before a final piece of legislation will reach President Trump’s desk for his signature.
While the Tax Cuts and Jobs Act could turn out to be the biggest tax cut and reform since 1986, it is a long way from becoming a reality, especially considering the Tax Reform Act of 1986 took months to crawl through the legislative process. We will continue to keep you updated as the TCJA moves its way through Congress.