A Republican federal tax reform plan would be disastrous to homeowners, and to the local economy. That's the assessment of two local Democrats who joined with the representative of a local realtors' group to reject a proposal eliminating a tax deduction that's been in place for more than a century.
The State and Local Tax deduction, or SALT, has been in place since 1913. It would be removed under a tax reform plan under consideration in Washington.
Erie County Executive Mark Poloncarz speaks in his office about a federal tax reform plan that would eliminate state and local tax deductions (SALT). Listening from left to right are John Leonardi, chief executive officer of the Buffalo Niagara Association of Realtors, and Congressman Brian Higgins. Credit Michael Mroziak, WBFO
Congressman Brian Higgins says what the proposal amounts to is a break for the nation's wealthiest people, but not so much for millions more Americans.
"The proposed tax reform that the Trump Administration is pushing, and that the leadership in the House and Senate are supporting, would give three million very wealthy Americans a tax cut each year of over $220,000," Higgins said. "That same plan that they're pushing would give 250 million Americans, the people that you & I know, a tax cut of about $200."
But Erie County Executive Mark Poloncarz says those same people would also see tax increases with no more state or local levies for which they may claim a deduction. He estimates the net result as an $815 increase for homeowners.
"If there's $815 more dollars that have to be paid by the average homeowner on an annual basis, that's $815 they won't have in their pockets to go shopping, to go to Bills games, to go to stores, to go to entertainment, which means that's a loss of sales tax," Poloncarz said.
The home selling industry warns that the elimination of SALT would also deal an economic blow to the housing market. The National Association of Realtors commissioned Price Waterhouse Coopers to conduct a study on just how much losing SALT would impact real estate. The report suggests average home values would quickly drop 10 percent because the loss of SALT would take many would-be home buyers off the market.
Information provided by Erie County Executive Mark Poloncarz's office lists the most recent numbers available showing the economic impact of state and local tax (SALT) deductions on the eight counties of Western New York. Credit Office of Erie County Executive
"According to the IRS, nearly 80 percent of the mortgage interest payments claimed on deductions are from incomes of $200,000 or less," said John Leonardi, chief executive officer of the Buffalo Niagara Association of Realtors. "Eliminating the deduction for state and local taxes flies in the fact of fundamental tax policy principle, avoiding double taxation."
Poloncarz added that if there's a value decrease in the housing market, Erie County loses funds from another important revenue source. Like Higgins, the county executive considers the Trump tax reform plan one designed to benefit the rich at the expense of working class Americans.
"That is unethical. It is uncalled for and something that cannot happen," he said.
Congressman Higgins has vowed to oppose any effort to eliminate SALT. He sits on the House Ways and Means Committee. So, too, does Republican Congressman Tom Reed. Poloncarz is urging those represented by Reed and Republican Chris Collins to urge their opposition to eliminating the state and local deduction.