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Tax policy experts weigh in on nixing federal deduction for state and local taxes and potential effect on CA

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Thanks to a federal tax deduction to state and local taxes that allows for deducting what you pay in personal property, real estate and income taxes Californians were able to pare down their taxable income in 2014 by $101 billion.

However, the rule that makes that possible is under threat of being axed as part of Republicans in the House of Representatives, who are moving forward with the GOP’s plan to turn its focus toward tax reform after their health care legislation failed last month.

The federal government say this year they’ll lose out on almost $100 billion in federal revenue thanks to the rule, and they say that getting rid of it will not only make the filing process easier but also backfill the revenue that would be lost to raising the standard deduction and lowering rates. Here in California, which benefitted financially more than any other states from the rule according to a study from the Tax Policy foundation, state and local officials worry that the burden of cost may be passed on to the average taxpayer.

What do you think of House Republicans’ proposal?


Alan Viard, resident scholar on federal tax and budget policy at the American Enterprise Institute

Edward Kleinbard, professor of law at the Gould School of Law at USC and former chief of staff of the U.S. Congress Joint Committee on Taxation from 2007-2009