A House of Representatives tax-reform bill was passed by a 227 to 205 vote on Nov. 16, paving the way for high-tax suburban regions like Long Island to be hit hard as the legislation would limit or eliminate deductions for property taxes, mortgage interest and state and local taxes, while much of the rest of the country could see at least modest cuts in their federal tax bills, according to elected local leaders.
The House bill passed with a provision repealing most of the state and local tax deductions, but retain a limited deduction of $10,000 for property taxes. The Senate bill would scrap the deductions entirely. The House bill would impose new caps on mortgage interest deductions, while the Senate bill would end them. The House bill would end the deduction for medical expenses, while the Senate bill would retain it, Howard Gleckman, a senior fellow a the Tax Policy Center at the Urban Institute and Brookings Institution, a Washington, D.C.-based think tank, said.
For Long Islanders, who pay among the highest local taxes in the nation, nixing the federal deduction for property taxes could mean higher income tax bills, while much of the rest of the country could see at least modest cuts in their federal tax bills.
According to data provided by Andy Yakubovsky, a real estate agent for Century 21 Homes in Oceanside, 73 percent of the Oceanside homes sold in 2017 so far carry tax amounts above the $10,000 cap, compared to 68 percent over the same period last year.
The deduction cap would have a significantly reduced impact in Island Park, where only 18 percent of the homes sold this year would reach the cutoff point.
In other communities, like Rockville Centre, realtors speculated that the higher taxes that residents pay might lower the area’s overall property values, as sellers begin to factor the extra tax expense into their listing price to keep their property competitive. Yakubovsky said that, “With inventory so low,” he expects Oceanside to remain a seller’s market, and that the Republican tax plan, “shouldn’t have too much of an adverse effect,” on property value.
All 192 Democrats in the House of Representatives opposed the measure. Kathleen Rice, a democrat, who represents Oceanside and Island Park in the House called it a “GOP tax scam” on Twitter, and wrote, “We know how these trickle-down fantasies play out in the real world: same Republicans adding trillions to deficit will soon demand cuts to health care, education, etc. Tax cuts for the rich, paid for by the middle class.”
State Senator Todd Kaminsky weighed in on how the measure could impact his constituents. “The Long Islanders I represent feel completely sold out by this tax plan,” Kaminsky said. “Hardworking middle class families are at the brink and I fear that any additional tax increase will push them over the edge. I have communicated my very strong thoughts to our representatives in Washington that this plan is unacceptable.”
The U.S. Senate last Friday released its own set of tax-reform measures following a week of debate over a House of Representatives bill that would, local elected leaders said, hit high-tax suburban regions like Long Island hard by limiting or eliminating deductions for property taxes, mortgage interest, and state and local taxes.
Both bills would keep tax exemptions for employer-sponsored health plans and retirement savings accounts, Gleckman said.
The nonpartisan Congressional Budget Office last week released its analysis of tax-reform legislation now under consideration in Congress. According to the CBO, the House plan would add roughly $1.7 trillion to the U.S. debt over 10 years. The Senate plan was still being analyzed at press time.
The decade-long spike in annual deficits would increase the national debt by 6 percent over a decade, after which debt would nearly equal the nation’s gross domestic product, according to a letter to Congress by CBO Director Keith Hall.
Both bills would cut corporate income tax rates and tax rates on pass-through businesses, such as partnerships, from 35 percent to as low as 20 percent.
The standard deduction for average tax filers would be doubled, but itemized deductions, such as those for property taxes and mortgage interest, would be limited or eliminated, Gleckman noted.
The tax cuts “would primarily benefit businesses and high-income households,” he said.
The two tax plans will be debated and modified in the coming weeks, before a unified bill can be agreed on and sent to President Trump’s desk for signing. Trump made tax reform, in particular simplifying the tax code, a centerpiece of his 2016 campaign and is banking on passing legislation this year to bolster his declining poll numbers, according to a number of pundits.