GOP Plan To End State, Local Tax Deductions Could Hit Bay Area Taxpayers Hard

(KPIX 5) — Republicans in Washington are pushing ahead with a tax plan which includes an end to state and local tax deductions.

On Thursday, the U.S. House narrowly passed a $4 trillion budget that paves the way for the GOP to pass a tax overhaul – including a $1.5 trillion tax cut – without Democratic support in the Senate.

All 14 California Republicans supported it.

The tax reform plan could cost people in the Bay Area a lot of money. “In the Bay Area … in particular we have … high wage earners and high state, local tax rates,” said tax lawyer Michael Bernick.

The Bay Area is one of the regions in the country where people use the state and local deduction (SALT) the most.  39 percent of Bay Area taxpayers take the SALT deduction.

The Government Finance Officers Association estimates without it, people with an adjusted gross income of $75-100,000 would see a tax increase of $1,800.

Those earning between $100,000 and $200,000 would pay $2,800 more.

However, Republicans say there’s more to the plan, including a proposal to nearly double the standard deduction to $12,000 for individuals, $24,000 for married couples filing jointly.

Still, the GFOA analysis says even tripling the deduction wouldn’t offset the increase that would result from eliminating SALT.

Republicans have also been talking about reducing the tax breaks given to people who use 401(k) plans to save for retirement, and reducing the number of tax brackets from seven to three or four.

Taxpayers may not be paying attention just yet to these proposed changes, but Bernick says they should.

“Any of these impacts are more significant the lower you go on the economic scale.”

On Friday, Gov. Jerry Brown bashed the plan to eliminate SALT, and said Republican lawmakers “were like a herd of sheep” for acceding to President Donald Trump’s wishes on the tax plan.

Brown said he believed the GOP wants to eliminate the write-off for individuals, but allow corporations to continue to use it.

More from Melissa Caen
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