In 2017, many families in the North County San Diego and South Orange County communities I represent took an unexpected, unfair tax hit. The financial plans they had made — like whether to buy a new home — were upturned when Washington Republicans passed a tax bill that capped the State and Local Tax deduction, known informally as SALT.
Suddenly, these families lost out on thousands of dollars in savings on federal taxes that they used to receive before the SALT cap went into effect, effectively paying a massive penalty simply because they live and work in a high-cost area with higher taxes.
For married couples, the Republican tax bill is even more burdensome because it caps the SALT deduction at $10,000 for both individuals and married couples filing jointly, effectively creating a marriage penalty.
Many of the families in California’s 49th District made serious long-term financial decisions in recent years based on the expectation that they could take advantage of significant deductions. Now, because of the Republican tax bill and the SALT cap that placed new limits on those deductions, their financial plans were turned upside down.
This hits middle class families, too. More than 58,000 people who make less than $100,000 per year in the 49th District claimed SALT deductions in 2017, saving $6,328 on average. One local accountant told the Orange County Register, “I have a lot of ordinary, middle-class clients with modest homes in ordinary areas who were hurt by this limitation.”
A report by Moody’s Analytics also shows that the SALT cap has significantly hampered home values since some buyers can’t purchase homes that they could otherwise afford if they were still able to claim deductions for mortgage interest and real estate taxes.
Instead of prioritizing the middle class, the Republican tax bill ripped away a crucial tax benefit that they depended on. That’s simply not fair.
I’m glad to say that there’s good news for every family who has been hurt: The House of Representatives just passed the Restoring Tax Fairness For States and Localities Act, a bipartisan bill I helped introduce to eliminate the SALT cap. This legislation would eliminate the marriage penalty by doubling the cap to $20,000 for joint filers for 2019 and would restore the full state and local tax deduction for 2020 and 2021.
The House has done its part. Now Senate Majority Leader Mitch McConnell needs to do what’s right and bring this bipartisan bill up for hearings and a vote.
Ultimately, the 2017 Republican tax bill was a scam that was designed to benefit the extremely wealthy and massive corporations at the expense of the middle class. In California, the top five percent of earners took home nearly 50 percent of the money included in the bill.
If the authors of this bill hadn’t rushed it through the legislative process and instead taken time to hear from folks in my district, then they would have known how much harm the bill would do to families across the country.
There are a lot of provisions in the Republican tax bill that must be changed or undone in order to help working families, and I will continue to work across the aisle to make those much-needed changes. In the meantime, the House-passed legislation to repeal the SALT cap is a significant step to restore basic fairness for Californians.