The House of Representatives’ tax bill 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 by tax increases while much of the rest of the country could see at least modest cuts in federal tax bills, according to local elected leaders. The legislation would limit or eliminate deductions for property taxes, mortgage interest, and state and local taxes,.
The House bill passed with a provision repealing most of the state and local tax deductions, but it retains 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. It would also 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.
Edward Oppenheimer, a Rockville Centre’s Village Board trustee and a certified public accountant, said that it doesn’t make sense to look in-depth at what the proposed changes would mean for Rockville Centre residents until further along in the process. “I haven’t gone through the numbers because it’s changing every day,” he said. “It doesn’t make sense to get our knickers in a twist until it defines itself a little better.”
Carol O’Leary, a real estate agent with Coach Realtors, said that the proposed legislation, if passed, could push more prospective first-time homebuyers to remain renters for longer, which she called “a big concern.”
According to real estate data provided by O’Leary, the median property taxes on Rockville Centre homes that sold in 2017 are roughly $14,000. If the deduction cap were to pass, half of the village would add $4,000 or more to their taxable income. Only four of the 202 homes that closed this year would pay less than $10,000 in taxes on their homes.
All 192 Democrats in the House of Representatives opposed the measure.
U.S. Rep. Kathleen Rice, A Democrat from Garden City, called the Republicans’ attempts at tax reform a “GOP tax scam” on Twitter, adding, “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 Sen. Todd Kaminsky, a Democrat from Long Beach, also opposed the plan. “The Long Islanders I represent feel completely sold out by this tax plan,” he said in a statement. “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.”
Long Island Republicans Peter King, of Seaford, and Lee Zeldin, of Shirley, were among the 13 GOP members who voted against the bill. Before the vote, King, who has supported President Trump on a number of fronts, said he would not support tax reform legislation that eliminated deductions for property taxes and state and local taxes, noting that the deductions have been in place since 1913.
“While I strongly believe our tax code needs to be reformed and simplified,” King said, “everything must be done to ensure property tax and state income tax deductions are preserved. No one should be taxed again on money you have already been taxed on at the state level.”
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.