Average middle-class homeowner with two children would see increase of 15.8%
Taxpayers in all 50 states would see tax increases, with California, New York, Utah, Maryland, New Jersey and Virginia among the hardest hit
WASHINGTON – Americans Against Double Taxation (AADT) today released new data from the Government Finance Officers Association (GFOA) that finds Ways and Means Chairman Kevin Brady’s expected proposal, which eliminates income and sales tax (SALT) deductions, would raise taxes on middle-class homeowners by as much as 26 percent. Data shows an average middle-class family of four with incomes between $50,000 and $200,000 who own a home will see a tax increase in every state in the country, with California, New York, Utah, Maryland, New Jersey and Virginia among the hardest hit.
Recently, Chairman Brady said congressional tax writers are eyeing a partial elimination of the SALT deduction, eliminating the deductibility for income and sales taxes while preserving the property tax deduction. GFOA modeled Chairman Brady’s latest proposal along with other expected features of the tax reform plan.
“Middle-class homeowners expecting a pro-growth tax plan will be surprised to find it is their own tax bills that will grow,” said Andrew Koneschusky, Co-Director of AADT. “If congressional leaders want to truly help the middle class, they can’t achieve that by eliminating state and local tax deductions that millions of households depend on. Nothing short of full preservation of SALT is fair to middle-class taxpayers.”
GFOA modeled the impacts of the Brady plan on an average family of four who owns a home and earns between $50,000 and $200,000. A full, state-by-state breakdown can be found below. Among the findings:
- Middle-class homeowners in all 50 states would see a tax increase ranging from 3.7% to 26.4%. More than half of all states will experience double digit percentage increases.
- California is the hardest hit state, with an average tax increase for a middle-class family owning a home of 26.4 percent.
- New York is the second hardest hit An average middle-class family of four who owns a home in New York would see a 26.3% tax increase.
- Middle-class homeowners in several other states will see substantial tax increases, including Utah (21.7%), Maryland (20.1%), New Jersey (19.3%), Virginia (14.3%), Illinois (11.8%) and Pennsylvania (10.7%).
In addition to direct tax increases on middle-class homeowners, AADT also highlighted the potential impact of the Brady proposal on essential public services that are funded through state revenues.
“The Brady proposal not only raises taxes on middle-class homeowners, it could also have an adverse impact on education and health funding since those services rely on state funding from state income and sales taxes that would no longer be deductible,” said Koneschusky. “Partial elimination of SALT not only has a direct hit on middle-class homeowners but also a backdoor hit from reductions in funding for public services that communities around the country depend on.”
- States on average finance 46% of public elementary and secondary education, and that number is even higher in some states – for instance, California 57%, Connecticut 61%, Minnesota and New Mexico 70%.
- In New York, for example, 3% of state revenues come from the two taxes where deductibility would be lost (income and sales) under the Brady proposal.
The GFOA analysis is based on 2015 IRS SOI data that modeled the impact of Brady’s plan on an average family of four who owns a home and earns between $50,000 and $200,000 on a state-by-state basis. The analysis assumes the new plan will have three tax brackets (a potential fourth bracket would be unlikely to affect taxpayers in this income range), doubles the standard deduction, eliminates personal exemptions, and includes the property tax deduction without limitation. It also keeps the mortgage interest and charitable deductions intact and maintains a $1,000 child tax credit.
The analysis underlying these conclusions is available upon request.
Comparison of Current Law to Brady Plan
Homeowners Between $50,000 and $200,000 AGI
|State||Percent Tax Increase||$ Amount of Tax Increase|
|District of Columbia||28.0%||$1,422.39|
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About Americans Against Double Taxation
Americans Against Double Taxation is a coalition of state and local government organizations, service providers and other stakeholders dedicated to protecting the state and local tax deduction (SALT), a federal tax deduction claimed by 44 million American taxpayers that supports vital investments in infrastructure, public safety, home ownership and education. For more information, visit AmericansAgainstDoubleTaxation.org.