WASHINGTON – The U.S. Conference of Mayors has begun using zip code data to show that elimination the federal tax deduction for state and local taxes would be harmful to middle-class families.
The new data is being used to persuade congressional Republicans that elimination of the so-called SALT deduction would raise taxes for families in some localities with average adjusted household incomes under $50,000.
Several mayors who participated Monday in a conference call with reporters gave examples from their cities.
The nonpartisan Government Finance Officers Association, which developed the zip code calculator, has posted the national zip code calculator on the website of Americans Against Double Taxation, a coalition of state and local government groups, school district groups and educators, public sector labor unions and the National Association of Realtors.
The analysis uses 2015 Internal Revenue Service data from the Statistics of Income for homeowners.
Elimination of SALT would raise $1.3 trillion over 10 years to finance proposals for reducing the number of tax brackets and lower personal income tax rates as well as a reduction of the corporate tax rate to 20% from 35%.
The Trump administration released an analysis Monday by the White House Council of Economic Advisers that found a reduction in the corporate tax rate to 20% would “increase average household income in the United States by, very conservatively, $4,000 annually.” The report points to higher wage growth in countries with lower corporate tax rates as evidence of the connection.
Congressional Democrats, however, were critical of the report, noting that the U.S. Treasury Department during the Obama administration found only a small connection between wage growth and corporate profits.
Senate Minority Leader Chuck Schumer, D-N.Y., said, "History shows tax cuts like these benefit the wealthy and the powerful to the exclusion of the middle class.”
"As the president likes to point out, the stock market is at record highs and companies are raking in unprecedented profits, yet wages have remained relatively flat,” Schumer said. “That's proof positive that companies already have a cash windfall, but they're not using it to boost wages.”
Congressional Republican leaders and the Trump administration say they would offset the elimination of SALT and personal deductions for family members by doubling the standard deduction.
But the real-life examples developed by GFOA shows that, for instance, an average family of four in the Columbia, S.C., zip code of 29204 shows a tax increase. The average adjusted gross income in that zip code was $48,432 in 2015. And that average family would face a $1,566 tax increase if they lost the SALT deduction.
The analysis took into account the cumulative tax impact of SALT when it’s included with deductions for mortgage interest and charitable donations along with personal exemptions for four family members.
“Nearly 86% of the taxpayers who claim SALT have adjusted gross incomes under $200,000,” Columbia Mayor Steve Benjamin told reporters on a conference call Monday.
State and local taxes pay for three quarters of the nation’s infrastructure, Benjamin added.
Mayors Elizabeth Kautz of Burnsville, Minn., and Tom Tait of Anaheim, Calif. gave similar zip code examples for their cities.
Kautz, a past president of the U.S. Conference of Mayors, predicted that repeal of SALT would lead to over time to an erosion of public services.
“We are hearing this tax cut will make the deficit trillions of dollars worse,” Kautz said. “The first objective of Congress should be to do no harm. I am here to protect my citizens from double taxation.”
Tait said that California is already “a major donor state” where residents pay more to the federal government that we receive back.
Tom Cochran, CEO and executive director of the U.S. Conference of Mayors said the new analysis shows that repeal of SALT is not a blue state, red state battle.
Republican members of Congress have assumed that repeal of SALT would hurt residents mostly in Democratic-dominated states that have high state and local taxes.
The zip code data shows repeal of SALT will have an adverse impact on middle class throughout the nation.
“We are going to have a fierce political battle and we are not going to slow down,” Cochran said. “We say put an infrastructure bill on the floor of the House and the Senate. That’s economic development.”