Poloncarz, Higgins Sound Alarm on Federal Budget Plan to Eliminate State, Local Tax Deductions

Modified: September 22, 2017 12:40pm

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Date: 
9/22/17

SALT Deduction Table for 8 WNY Counties (same information below)

SALT Deduction Table for 8 WNY Counties

Federal “reform” would cost Erie County over $1.6 billion in deductions, an average of $12,866 per household, and raise average homeowners taxes by $815

More than $2 billion in deductions would be lost from WNY region; officials urge public to contact Congressional representatives to reject proposal

ERIE COUNTY, NY- Today, Erie County Executive Mark C. Poloncarz joined Congressman Brian Higgins (NY-26), Buffalo Niagara Association of Realtors ("BNAR") CEO John Leonardi, Erie County Director of Budget and Management Robert Keating, and Erie County Director of Real Property Tax Joseph Maciejewski to call attention to a potentially disastrous proposal being discussed by Republican congressional leaders as part of a federal tax "reform" plan. The proposal would eliminate the state and local property & sales tax ("SALT") deduction, which has been in place since 1913 and was claimed by over 125,000 households in Erie County alone in 2015, in order to generate revenue for tax cuts for the wealthy and corporations. Over 89% of middle-income households in the county claimed the SALT deduction in 2015, deducting $1.62 billion in already-paid state and local taxes from their federal tax returns. The average SALT deduction in Erie County in 2015 was $12,866.

"Elimination of the SALT deduction would be a devastating blow to individual households countywide and to the county overall, and would strike at the American tradition of federalism. This is a horrible and unconscionable idea that steals from the many to give to the few and we are urging the public to contact their congressional representative to stop this in its tracks," said Erie County Executive Mark C. Poloncarz. "This is not tax reform, it is a theft from every hard-working household in WNY, one that reaches directly into their pockets to double-tax them and then redistributes that money to the very wealthy and corporations. It's a brazen and unethical federal overreach, without logic or reason, and it clearly and demonstrably hurts working families and individuals."

"In NY-26, about a quarter of all filers claim SALT. Tax reform proposals scheduled to be unveiled next week may propose the elimination of the State and Local Tax Deduction, taking aim at hardworking Americans, cutting off the ability for many middle class families to achieve the 'American Dream' of homeownership," said Congressman Higgins, who serves on the House of Representatives Committee on Ways & Means. "With 85% of those claiming the deduction falling in a household income range below $200,000, this and other tax reform measures proposed would only grow the widening gap in income inequality that must be reversed."

The SALT deduction is one of the six deductions originally codified in the first federal tax code in 1913, and is claimed by households in all 50 states. In 2015, over 38 million individuals and families earning less than $200,000 annually claimed the deduction, which supports and makes possible local school funding, lower middle-income taxes, law enforcement, health services, infrastructure development and local job creation efforts, among other items. It also makes home ownership possible for thousands of county residents and millions of Americans, who would simultaneously lose a substantial deduction and be forced to bear a new tax burden if this "reform" becomes law.

A recent study performed by PwC and commissioned by the National Association of Realtors found that homeowners with an adjusted gross income (AGI) between $50,000 and $200,000 would see an average tax increase of $815 if the SALT deduction were eliminated even if the standard deduction was doubled.1 Additionally, the PwC report found that eliminating the SALT deduction will diminish the value of the mortgage interest deduction, resulting in a ten percent (10%) decrease in home values in the immediate term.2 A ten percent reduction in the value of homes would have a significant detrimental impact on all local governments, like counties, cities, towns, villages and school districts that derive revenue from assessment based property taxes.

BNAR CEO John Leonardi added, "Western New York Realtors urge Congress to do no harm to housing and the nation's 75 million current and countless future homeowners by maintaining current longstanding tax treatment for homeownership and real estate investment as it pursues comprehensive tax reform. According to the IRS, nearly 80 percent of the mortgage interest payments claimed as deductions is on returns filed by people with incomes under $200,000. And eliminating the deduction for state and local taxes flies in the face of a fundamental tax policy principle: avoiding double taxation."

"Eliminating the state and local tax deduction would not only hurt local homeowners through the payment of higher federal income taxes, it would negatively impact local governments as well. As one of only six deductions that were included in the original 1913 federal tax code, the SALT deduction has been helping working families and building communities for over a century," said County Executive Poloncarz. "We are calling on our local Congressional delegation to reject this proposal and protect taxpayers across western New York. Eliminating this deduction would hurt hundreds of thousands of western New York residents and millions of Americans. Please contact your Congressman and tell him you do not support the elimination of the SALT deduction."

A national coalition of state and local government organizations, education and other public service providers, and housing organizations has also formed Americans Against Double Taxation (AADT) to advocate for preservation of the SALT deduction and to educate the public on its importance.3 AADT on Thursday sent letters to leadership in the U.S. House Ways and Means Committee as well as the Senate Finance Committee to urge preservation of the deduction.4

2015 Impacts of State and Local Tax (SALT) DEDUCTIONS in 8 WNY COUNTIES

COUNTY NUMBER OF HOUSEHOLDS CLAIMING SALT % OF MIDDLE INCOME SALT BENEFICIARIES TOTAL AMT. DEDUCTED BY HOUSEHOLDS THROUGH SALT % OF SALT DEDUCTIONS BENEFITING MIDDLE INCOME HOUSEHOLDS AVERAGE SALT DEDUCTION
ALLEGANY 3,170 94.01% $32.97 MILLION 76.45% $10,399
CATTARAUGUS 5,840 92.12% $62.58 MILLION 69.50% $10,715
CHAUTAUQUA 10,060 92.84% $103.80 MILLION 74.07% $10,318
ERIE 125,970 89.29% $1.62 BILLION 63.98% $12,866
GENESEE 6,710 94.93% $65.48 MILLION 81.66% $9,759
NIAGARA 25,980 93.88% $277.18 MILLION 79.37% $10,669
ORLEANS 3,860 95.85% $34.92 MILLION 88.35% $9,047
WYOMING 4,010 95.26% $38.17 MILLION 83.21% $9,518

1 Impact of Tax Reform Options on Owner-Occupied Housing, PwC, May 15, 2017, http://narfocus.com/billdatabase/clientfiles/172/21/2888.pdf.

2 Id.

3 Americans Against Double Taxation coalition partners include the National Governors Association, National Association of Counties, National League of Cities, U.S. Conference of Mayors, International City/County Management Association, Government Finance Officers Association, Council of State Governments, National Conference of State Legislatures, National Association of REALTORS, AASA, The School Superintendents Association, National School Boards Association, Association of Educational Service Agencies, Association of School Business Officials, International, National Rural Education Association, National Rural Education Advocacy Consortium, National Education Association, American Federation of State, County and Municipal Employees, International Association of Fire Fighters, American Federation of Teachers, National Sheriffs' Association, and National Association of Towns and Townships. The coalition's website can be found at http://www.americansagainstdoubletaxation.org.

4 A copy of the letter can be found at http://www.americansagainstdoubletaxation.org.