Federal Tax Overhaul: Heavy Local Impact

With an overhaul of federal tax laws headed for a vote in Congress next week, local government leaders say the changes could have a heavy impact on cities, counties and many taxpayers.

Four "high-tax" states -- California, New York, New Jersey and Maryland -- will feel most of the financial brunt.

County leaders warn that the tax-reform negotiations in Congress are creating a "double-taxation" setup by eliminating state and local tax deductions.

Here in San Diego County, estimates are that it would affect as many as half a million households -- some losing up to $16,500 in deductions.

Nationwide, it’s projected that 30 percent of the taxpayers could see higher taxes.

"Ironically, in the tax bills that are being considered right now, you as an individual would not be able to deduct your state and local taxes,” says San Diego County Supervisor Greg Cox, who becomes president of the National Association of Counties next July. 

“But a corporation would be able to deduct not only their state and local taxes domestically,” Cox continued, “but offshore taxes that they may pay on income that they are driving offshore." 

Also eliminated would be the tax-exempt status for refinancing municipal bonds at lower interest rates -- meaning higher costs for borrowing to build schools, housing and other infrastructure projects. 

The counties oppose taxing healthcare insurance for 3.5 million county employees, saying the benefits help attract and maintain their workforces. 

Employee expense deductions would be eliminated, too. 

Republican lawmakers are aiming to reconcile the differences in Senate and House versions of the reform measures by Friday, then deliver the corporate tax cuts package to President Trump by Christmas.

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