Skip to main content

tv   House Ways Means Hearing on State Local Tax Deduction Limits  CSPAN  July 19, 2019 11:32am-2:05pm EDT

11:32 am
a hearing from a house ways and means subcommittee about how last year's tax law increased taxes on many people because of the cap on deductions for state and local taxes. local officials from new york, ohio, pennsylvania and virginia testified at the hearing. >> subcommittee will come to order. subcommittee on select revenue measures is gathered today to hear testimony in how recent limitations to the s.a.l.t. deduction armed communities, schools, first responders and housing values. before i begin my opening statement, i would like to yield to the chairman of the full ways and means committee, richard neil for his opening remarks. >> thank you, chairman thompson. i want to acknowledge you for indumpinging me with time to speak. your leadership on this committee and the s.a.l.t. working group is invaluable to
11:33 am
congress. i want to express my appreciation to the witnesses who have come to share testimony today. it's a rare occasion that we can get to hear from the hard working folks who make up our state and local governments. former mayor of springfield i can tell you my experience as to how important the work all of you do is. it is from that lens that i view the issue of state and local tax deductions as s.a.l.t. i view it from the vantage point of someone whose life experience has been a testament to the impact and investments made and services provided by local governments and what those investments can mean in terms of the lives of our citizenry. >> over xi be that choeinsuring maintaining roads, bridges and tunnels, so people can get to where they need to be is part of our challenge. responding emergencies, providing services for low income family, elderly and the
11:34 am
others rely on the safety net is our obligation. that is precisely what local government does. >> mr. thompson, that's why the work that you and mr. pasquerel do on s.a.l.t. cap is so important. folks come to testify, mayors, superintende superintendents, first responders, you understand what it means for the federal government to undercut the good work that you do by imposing a cap on that deduction. it's the wrong policy and we need to find a workable solution. >> tick it from me, take it from alexander hamilton, who wrote in federalist paper 31, revenue is a requisite to the purposes of local administrations as it is to those of union. >> the former are at least of equal importance. we warned against the risk that
11:35 am
in order to give efficacy to national revenues all the resources of taxation might become the subjects of federal monopoly to the exclusion and destruction of state governments. we must insure that state and local governments thrive and prosper. i want to thank all of you on the committee, particularly mr. thompson for living up the promise you made to hold hearing on this legislation. >> with that welcome to today's hearing on how the recently enacted cap on state and local tax deduction is affecting communities. schools. first responders. and housing values. the cap on the s.a.l.t. deduction was one of the most divisive and controversial provisions arising from the deeply flawed and sloppy tax cuts and job act. the process that brought us the tax law written behind closed doors and hastily passed a mere 51 days after its introduction
11:36 am
cut corners and skipped important fact-finding hearings like this one today. state and local governmenters and community members were silenced in 2017 and forced to deal with the fallout of the s.a.l.t. cap since then. today's hearing should have taken place. two years ago. but it didn't. so it falls on us today to hear from state and local government leaders, education experts. and first responders. about how the salt cap is affecting their communities. their work and their decision making. the salt cap raises a host of issues that delivered to be fully deserve to be fully explored. first the cap questions, the concept of federalism that underpins our government. the united states we have a system which critical public services and responsibilities are allocated among federal, state and local governments, the
11:37 am
federal government doesn't aim to meet all of society's needs. in its taxing capacity is significant. for a creptry our federal income tax has recognized this threat and has used the salt deduction to provide flexibility to state and local governments. second, the s.a.l.t. cap enacts a massive marriage penalty. the $10,000 cap applies per tax filer. whether a single individual or two married taxpayers file jointly. third, the salt cap creates disincentives for home ownership and charitable giving. the 2017 tax law increased the standard deduction to $12,000 for a single filer and $24,000 for a couple. the increased standard deduction plus the $10,000 s.a.l.t. cap means that a married couple would need $14,000 in mortgage interest, charitable donations or other itemized deductions for
11:38 am
itemizing to be worthwhile. as moips more families switch over to the standard deduction, they will lose most of the tax incentives for home ownership and charitable contributions. we all know that home ownership is a crucial way for middle class families to build wealth. furthermore, charities are extremely concerned about the potential future impact on their giving. fourth. although the direct benefit of s.a.l.t. deduction primarily fall to upper income taxpayers, the deduction supports state and local government budgets. those expenditures support programs with widely shared benefits like public schools, infrastructure, first responders, sand health care programs. as states try to balance their budgets with less revenue, local leaders likely will make cuts to those very programs. concerns about the
11:39 am
distributional effect of the salt cap certainly didn't apply when republicans were looking at other tax deductions, and can be alleviated by adjusting tax rates, not uprooting a century-old bedrock aspect of public finance in our country. >> finally, the s.a.l.t. cap punishes high cost of living areas. we we've heard a lot of talk about the sins of state and local government that will be pinched by the s.a.l.t. cap. the charge was made repeatedly that these states and localities, were somehow, profliga profligate. the cost of living varies so tremendously from one corner of this nation to another that the comparison is truly apples to oranges. every school district in america employs kindergarten teachers. and every law enforcement system pays its police officers. they need to be able to pay rent
11:40 am
or mortgage wherever they live. it's not reasonable to expect to pay a teacher in new york what a teacher in mississippi earns. the gross income of the average mississippi teacher is about the same as a median price of rent in new york. you can't pay them the same amount. i'm pleased that today's panel is a bipartisan one with elected leaders from across the political spectrum. thank you for taking the time away from your heavy responsibilities elsewhere, to help us better understand this issue. with that i'll recognize the ranging member, mr. smith of nebraska for an opening statement. >> thank you to our witnesses as well. let me begin by saying this, property taxes and other high state and local taxes are a problem. not just on the coast but all across our country. in nebraska, the problem with property taxes is acute in rufrl agricultural districts that i represent.
11:41 am
flawed state school funding formula lead to a massive property tax burden on agricultural producers. regardless of commodity prices. while the nebraska legislature hasn't found a solution, we can be thankful that a question for the senators and governor is how can we reduce the tax burden on nebraskans and make our state a more attractive place to live? instead of how can we just generate more revenue? as we review the impact tax cuts and job act on americans and our economy, it is important to consider provisions and changes within the context of the law. the s.a.l.t. cap must be view the through the prism of lower overall tax rates. s.a.l.t. cap in place, most families have lower overall federal tax bill now. before tcja, the deductibility of state and local taxes were r was limited through amt and the paez limitation.
11:42 am
the s.a.l.t. deduction is only useful if your itemized deductions exceed the standard. in tcja we doubled the standard deduction for $12,000 for individuals and $24,000 for married. even with a $10,000 cap on s.a.l.t. deductions a married couple could spend $24,000 on state and local taxes before they were guaranteed to be affected by this cap. for example, a married couple with no children in california i'm just picking on california because of the high income high state income tax rates, if we look at a married couple with no children in california in which rents its home wouldn't pay more in state income taxes than the value of their standard federal deduction until, until their income exceeds 300,000 dollars. per year. 300,000 per year. this highlights one of the
11:43 am
biggest problems with proposals to repeal or increase the s.a.l.t. caps. we know the benefit of such repeal. estimated to cost $673 billion over the next eight years would accrue largely to the highest income taxpayers in high tax states. more fundamentally the s.a.l.t. deduction is a matter of fairness to taxpayers across the country. tax reform aims to achieve a principle which is straightforward. those with similar levels of income have a similar federal income tax bill. we haven't have one tax rate for the wealthiest portions of california and new york and another much higher rate for nebraska or south carolina. if some communities want to have high levels of government spending in their community. that's fine. s.a.l.t. deduction would tell communities to spend more because they can shift those costs to the rest of the country. such policy is inefficient and unfair. we also know the largest
11:44 am
benefits of s.a.l.t. repeal would go to the highest earners with the average family making $1 million or more per year, seeing a tax cut of $67,000, and the average family over $3 million per year receiving a tax cut of $1 40,000 under such a proposal. contrast it with our approach when we crafted the s.a.l.t. limitation, under tcja, a single mom making $50,000 with two kids has no federal income tax liability and the s.a.l.t. cap was designed to insure a typical family earning up to $200,000 per year would be held harmless.
11:45 am
>> expand proikss like the eitc and the deductibility of the child tax credit. push to enact a give-away like expanding or repealing s.a.l.t. caps is baffling. there are many ways we could work on bipartisan basis to improve the irs code. while i hope we can engage in constructive conversation today, i struggle to think that this might be one of them. but i will certainly listen and participate. without objection all members opening statements will be part of the record. >> i would like a point of order real quick. >> pardon me? >> i would like to make a point of order. i really object to the timing of this hearing. in that there are two very important subcommittee hearings in ways and means scheduled simultaneously at 9:30. one on the usmca, horribly important to our economy and the other on s.a.l.t. and you're
11:46 am
requiring us to decide which of these is more important to our constituents. and i just strongly object to it. it should be administered better and we should be allowed to participate in both of these matters. >> i yield back. >> thank you. we have a distinguished panel of witnesses here today with us to discuss the important issue of how recent limitations on the s.a.l.t. deduction harm communities, schools, first responders and housing values. first i would like to welcome the honorable david tarter, mayor of falls church, virginia. next is the honorable bob dinatali, mayor of bayville, new york. we have kristen linebach, the commissioner from berks county, pennsylvania. dr. paul imhof, the
11:47 am
superintendent of upper arlington school district in ohio. lieutenant maitland mitchell, a firefighter and president of the professional firefighters of wisconsin. and finally, we have nicole kating, the vice president of federal and special projects, tax foundation. each of your statements will be made part of the record in its entirety. i would ask that you summarize your testimony in five minutes or less. to help you, there's a timing light at your table. when you have one minute left, the light will switch from green to yellow and then finally to red when your five minutes are up. >> mayor tarter. chairman thompson, ranking member smith, members of the subcommittee. my name is david tarter and i'm proud to serve as mayor of falls church, virginia. falls church is a small independent city of about 14,000
11:48 am
citizens. located on the outskirts of washington, our local elections are nonpart san and i was elected as an independent. i come here today without a political axe to grind. that being said, let me be clear about the issue at hand. i believe it is a poor idea to cap the s.a.l.t. deduction. it only hurts hard-working families and municipalities like mine. in falls church we ask a lot of our taxpayers -- we have to. as a city in virginia we're independent of a county. yet must provide the same full range of municipal services, excellent skoop schools, a trustworthy police force, well maintained parks and clean streets. lacking the economies of scale of our larger neighbors, our property taxes are formidable. people choose to live in falls church, anyway because i'm proud to say that our town values the right things. our award-winning school system.
11:49 am
recent years we built a new middle school. expanded elementary schools and broke ground on a new high school. all that plus renovating our city hall and library. these capital investments are expensive. but our citizens view them as necessary to maintain the falls church way of life and investments in our community's future. the median cost of a single family home in our town is $825,000. that doesn't buy awe mansion. more likely a modest brick rambler built in the 1950s. for that our median city mortgage payer lays out more than $36,000 a year. so while our house of income may appear high, when stacked against the imposing cost of living, many of our residents struggle to make house payments, pay taxes and make ents meet. there are no yachts in falls church, just lots of hard-working families trying to get by in the high-rent
11:50 am
district. most of our families are two-income family who is serve their government or the military. i'm not a wealthy man, i've discovered that being in a locally elected official is not a locally elected official is not a financially lucrative contemporacareer. like you, i care about the tax burden of my constituents. even before this cap i felt our community was at the top end of the taxing capacity. the number one issue i hear about when campaigning are tax, property taxes. indeed they are burdens ome. the owner will pay over $11,000 in property taxes this year alo alone. when you add in virginia, income taxes, it far exceeds the $10,000 cap. what does that mean? it means that thax dollars that could have gone to the city are
11:51 am
going to the federal government. there's less money for schools, police and fire protection. the new cap on the salt deduction double tax the citizens of these payments and penalizes workers in high cost areas like my city where wages and income are high but are fully matched by the cost of living. to us in local government, the recent salt limitation has the look and field of another unfunded mandate where by higher levels of government can claim they are reduced taxes but in reality they are shifting the burden downstream. that high school mingsi mention earlier was built in the 1950s. today we're on our own. our local taxpayers are getting no assistance from the federal government and worse, with the limitation of salt deduction taxes have been effeiv effectiv raised. back home we agree that the
11:52 am
government closest to the people, serves the people best. we balance our budget and provide necessary services in the most cost effective manner. we should not be at odds with the government but working in close partnership to create better outcomes from our citizen. repealing the cap would be a step in the right direction. thank you. >> mr. de natale. >> i'm mayor of a small village on long island. i serve as a volunteer. it's not a paid position. we are also not elected by political parties. although i must admit to being a republican. i'd like to thank the chairman thompson, rank member smith, members of the subcommittee and
11:53 am
congressman for the opportunity to share with the committee the hardship caused by the limitation on salt deductions. congress's decision in 2017 to limit taxpayers state and local tax deduction has hit millions of families in new york with a one-two punch of higher taxes and lower home values. this is harming village bottom lines and hurting our ability to provide key services. perception that salt deduction cap is only affecting wealthy families is false. the village on long island has 7,000 residents that are mostly middle class, hard working people. they chose to live because of the proximity to long island sound and beautiful oyster bay. summer home of our 26th
11:54 am
president, teddy roosevelt. it's a three mile peninsula that's home to average citizens. the vast majority of homeowners need two household incomes to afford to live here. it's not a haven for the wealthy. another huge attraction is our well regarded school district. it cost the average taxpayer over $10,000 a year. we may soon be faced with red e reducing local taxes to make up for federal tax increase caused by the salt deduction limitation which would have a devastating impact on the services our constituents depend upon. combined with county and village taxes the average modest home has a total tax bill of $20,000. great many of our residents live in a flood zone that requires
11:55 am
flood insurance in order to obtain a mortgage. cost of flood insurance averages $2,000 annually. the immediamedium income for a person in our village is 68,500. the median income for family is 77,8 77,800. the salt deduction limitation has caused many residents to rethink staying in the village where they grew up or have raised their children. as a result, we have over 60 homes listed as for sale on multiple listing services of long islanisland. that's a 30% increase since 2017. the typical residents is having a difficult time balancing personal budgets, maintaining s
11:56 am
their future. most young people are being forced to relocate. the inability of residents to fully deduct all property taxes is certainly something we've been grappling with since the change was made. limiting the salt deduction will have long term consequences for economic health and vitality of my village. state and local tax deduction along with the mortgage interest deduction are vital for homeowners to maintain a solid financial foundation. limiting those deductions has hurt homeowners finally and it may now be negatively impacting the housing market. home sales now stand at a chance of declining and home values may soon follow.
11:57 am
only further reroeroding our ta base and reduces the ablility o the many families in my community to meet their daily day-to-day basic needs. restoring the program to its previous standards would be a huge help to our residents. i urge the subcommittee to restore the previous provisions of the previous program. i ei wanted to show you the few homes in our village listed at like $900,000. these are nowhere near palatial residents. these are typical residents. this is what we must pay to live in this community. it's not a question of republican or democrat. it's a question of fairness. i'm a register republican and i voted for president trump. this salt cap limit is totally
11:58 am
unfair to villages like mine and others throughout this country. i thank you. >> thank you very much. >> commissioner. >> thank you for inviting me to testify before this committee today. my name is christian leinbach. i'm here today representing the national association of counties and 3,069 counties across the country. it's an integral part of the tax code and i'm glad to be here today to urge congress to fully restore it. the history of the salt deduction establishes a clear precedent for the necessity of the deduction and it dates back to the principles set down by the nation's founders. in federalist paper 31 alexander hamilton argued the taxization
11:59 am
pow over the federal government should not intrude on state and local taxing decisions. to ensure local autonomy and state and local decisions would be protected, the first federal income taxes included salt deductions. this was true both of the civil war income tax in 1862 and when the 16th amendment was passed in 1913 establishing the original tax code. in both cases there was a fundamental understanding that taxing dollars already paid was double taxization including the salt deduction in these tax codes was the practical application of federalist paper number 31. local authority over our own taxing system is vital for counties given the wide variety of services we provide to our constituents. we support local law enforcement and fire departments who put their lives on the line for our
12:00 pm
communities every day. counties also own and maintain a wide variety of public safety infrastructure and we are the first responders when disasters hit. we're also major stake holders in infrastructure development across the country. collectively we own 45% of american roads and nearly 40% of bridges. the federal government's decision to cap or eliminate the salt deduction could prevent another unwarranted strain on county resources forcing us to eliminate some of these vital services we provide. counties operate on balanced
12:01 pm
budgets. any reduction in tax revenue must be offset by an equal reduction in services. at the local level this can mean real consequences. reductions in political or fire personnel. a dollared infrastructure project or a postponed affordable housing project. this is particularly true for public education as the majority of our property tax dollars are earmarked directly for k through 12th education. i'd like to make one final note. capping the salt deduction will have a particular impact on the middle class and homeowners in particular. when an individual or family is unable to fully deduct their state and local taxes from their federally taxable income, the result is an exposure to double taxization. this adviser to be most true for homeowners who must pay property taxes on top of their state income sttaxes. this is true in burks county.
12:02 pm
in 2016, the latest year for which data is available, over 60,000 individuals and families in our county filed tax returns yutilizining state and local ta deductions. 91% made less than $200,000. according to an evaluation of irs data, the average salt deduction in 2016 was above the $10,000 salt cap set by the recently enacted tax cuts and jobs act. this means that many of these filers were potentially exposed to double taxization during the 2018 filing season. to add insult to injury to thiez midd these middle class families, businesses and landlords can still deduct all of their taxes as business expenses. middle class families must face down double taxization. they turn to the level of
12:03 pm
government closest to the people for leaf as they do with other issues in the community. under this new pressure, counties are having to reconsider many of the vital services we provide. i appreciate your attention to this issue today. this is not a blue state or a red state issue. rather the salt deduction is an integral part of our governmental system and counties ask congress to restore the full deduction as soon as possible. thank you and i will be happy to take questions at the right time. >> thank you very much. dr. imhoff you may begin. >> it's an honor to be here in support of removing the cap on the state and local tax deduction. i'm the superintendent of the upper arlington school district in suburban, columbus, ohio. i've been an educator for 29
12:04 pm
years. our district serves over 6,000 students in a community of over 30,000 residents. we're widely considered one of the finest school districts in the state of ohio and even though we are a built out community, enrollment projections call for growth of almost 20% in the next decade. we're attracting families due to the quality and reputation of our public schools. i'm here today because my district is beginning to see how the salt d cap threatens our ability to maintain local autonomy over how we raise local revenue. a major source of our funding. over 80% comes from local property tax levees. our school district like many in ohio relies upon property taxes to fund our schools. we find we need to ask for a new property tax lehe levy every tho
12:05 pm
four years because it's fixed and now allowed to glow with inflation. the full deductibility of property taxes has long been a key factor passing these levees and funding our schools. deducting state and local taxes was an original component of the first federal tax code. that directly impacts how willing and able local taxpayers are to support changes in local taxes. without the ability to deduct and avoid paying double taxes, an increase at the local level is felt twice. that's not something our taxpayers will readily support. i and many of my colleagues have followed there debate and heard the narrative that salt d is a blue state issue or an issue that only impacts states on the coasts. i'm here from ohio to stress that this issue is not a red state or a blue state issue. it's a public education issue. public education is the foundation of our republic and the overwhelming majority of
12:06 pm
funding for public schools comes from state and local sources. the salt d cap threatens to erode our ability to raise those funds at the local level that could debride local districts of the resources needed to educate our students. i'm concerned that the unattended consequence of this change will be to provide additional revenue to the federal government aft tt the expense of local school districts. you cannot allow this to happen to our students. the other argument i've heard is this issue only impacts wealthy people and they can afford a tax increase. again, this is not correct. the median home value in our district is $357,000 and the property taxes on this medium home value are almost $10,000. meaning that property taxes take the average resident of our community to the new salt d cap before even factoring in state taxes and local income and earnings taxes.
12:07 pm
this change is significant for average families in my district and in districts across the state of ohio. if you visited my community you'd find beautiful tree lined streets filled with families who care deeply about one another and invest heavily in public education. if you heard of upper arlington you may know we are considered an affluent community. you may think someone who owns a 357,000 there are home can afford a tax increase but again this is not correct. our community is not one dimensional and we have more and more families making financial sacrifices to move to our city to place their students in our schools. these are families living paycheck to paycheck with less flexibility in their household budget to absorb tax increases. this change in tax law has been an increase in federal taxes when they do not have the margin to pay for such an increase. i'm concerned that these families will not be able to
12:08 pm
afford future school tax levees because of this increase in federal taxes. i urge the committee to restore the full deductibility for state and local taxes and avoid the negative consequences for average americans and their children. thank you very much. >> thank you. lieutenant mitchell, you may begin. >> thank you. i'm state president of professional firefighters of wisconsin. also a 22 year active duty firefighter where i'm a lieutenant with the city of madison. i appreciate the opportunity to appear before you today on behalf of the international association of firefighters. our general president and i have 316,000 firefighters and ems and she will -- personnel. i offer my testimony on the impact on fire departments and public safety. this hearing is about fairness.
12:09 pm
fairness for local public service agencies like fire departments and schools to deliver the best possible services to the citizens they serve. fairness to decide how best to fund and deliver local services and fairness for taxpayer who is will being double taxed. as lunieutenant with the city o madison i see how local governments have been forced to tighten their belts and the impact on safety services. i hear about how they are being forced to do more with less. shackled by inadequate staff, insufficient training and lacks health and safety measures. by capping the tax deduction at $10,000, the 2018 tax law threatens the livelihoods of not only men and women of the fire community but lives that we serve as well. fire departments as you're well aware of and the services are drawn from state and local property income taxes. investments that give our first responders the tools we need to get the jobs done.
12:10 pm
in wisconsin we are experiencing significant revenue limb titati. this has been due to reduction in our state revenue system. just last year, in 2017, the city of milwaukee had to close down six fire stations across the city to fund the fire department. two weeks ago a small city north of milwaukee they had zero working fire engines in the city. imagine that. you call 911 and you get crickets or a neighboring community has to come and help you. as a result in both milwaukee, response times rised putting citizens health and lives at risk. this is not unusual in wisconsin. it's not unusual across the country. we're asked to respond to folks on the worst days of their lives. when people are at their worst, we have to be at our best.
12:11 pm
we cannot be at our best without adequate staffing, equipment and training to do so. when ever you testify or you make it personal. it is personal because what if it were your family needing help, your mother, your daughter, your brother, your sister. you get my point. it is personal. we're always asked to do more with less which is impossible to do more with less. the federal cap puts even more financial stress charged for providing critical public safety services will further exacerbate these services. this is not a political game. the firefighters and citizens of the state of wisconsin, this is a matter of life or death. it not only harms, but unfairly penl sizes harr tax families.
12:12 pm
it's deeply harmful to many families. this is not solely a problem on the coast either or high cost living states. taxpayers in all 50 states benefit and middle class workers made up the majority of filers who benefit from this deduction. it clearly hurts public services. the damage is already done but there's an opportunity to mitigation the situation. by passing this critical bill, congress would restore the full ability as well as eliminate a double taxization of firefighters and other middle class americans. there's no doubt that the
12:13 pm
current cap on salt deductions impairs the ability of local governments to well fund fire departments and other services. it will make my job to protect the city of madison , wisconsin. i urge congress to do its job and restore the full deductibility of state and local taxes. i would like to thank the subcommittee for the opportunity to testify and i'm happy to answer any questions. thank you. >> thank you for your system and your services of first responders. many kaeding, you may begin. >> thank you for the opportunity to speak to you today about the recent changes to the state and local taxes pay deduction and its impact on communities. the tax foundation is the nation's oldest organization dedicating to promeoting economically sound policy at the
12:14 pm
federal, state and lowbaglobal . we're a nonpartisan 503 c organization. taxes should be neutral to economic decision making. they should be simple, transparent and they should be stable. today i've been asked to discuss recent changes made to the salt deduction within public law 115.97 known as the tax cuts and jobs act. the tcga passed in 2017 overhauled the tax code p it lowered tax rates. it expanded the standard deduction in child credit. it helped maintain progressivety within the tax code. more than 90% of the benefits
12:15 pm
accrue to those making more than 100,000 there are a year. the analysis obscures the real impact of the salt deduction. it's better understood as benefitting high income individuals living in expensive housing, in high tax jurisdictions within high tax states. the benefits are not monolithic across the states. the main deduction in we westchester county, new york is seven times that of st. lawrence. the deductions benefits are focussed in areas of high levels of income and well being not just high tax states. the tcga limited the salt deduction and the joint committee on taxization
12:16 pm
estimated it would raise $668 billion over the next decade. 65% of americans were projected to have lower taxes in 2018. some quit itemizing and switched to the standard deduction. to the small group of individuals, an estimated 6.5% in 2018. it's unlikely that was solely due to the salt cap. very few had a tax increase only due to the salt cap and those that did were at the high end of the income spectrum.
12:17 pm
with that benefit going almost exclusively to the top 20%. the tax could would be less progressive. the deduction cap is frequently sided as impacting state budgets. that impact is overstated. states saw an increase in revenue from reform. the impact on housing values is not due to salt cap and isolation. limits are rolled here too. the limits are progressive.
12:18 pm
only high income individuals can purchase homes that cost more than $750,000. second, it's impact would then be limited to expensive areas in the country. less than 1% of counties in the united states have median home prices exceeding $750,000. third, any impact on housing values would actually be beneficial to many. particularly first time home buyers. tax reform is a difficult task. limiting deductions and exemptions burdens those that benefit from their existence. limiting the salt deduction was a desirable and strong policy choice. >> thank you very much. we'll now proceed under the five minute rule with questions for the witnesses. i'll begin by recognizing myself for five minutes.
12:19 pm
lun lieutenant mitchell, state and local governments were forced to make difficult choices about which government services to fund and at what levels to fund them. many of these governments are still operate under those restrictions. can you speak to how pressure to reduce state and local budgets affect first responders and their ability to adequately provide critical services to the public especially with the new salt cap in place in. >> it greatly affects any state or municipal budget. majority of municipal budget, about 50 to 60% on average is police and fire and public safety and keeping the citizens of a particular community safe. we have seen that a lot in state of wisconsin. the first thing to cut is staffing. we have right now, at least in the city of madison pretty much standard in wisconsin, we try to have four people on the fire engine or fire truck because
12:20 pm
that's what's needed in order to do our job safely and efficiently. in order for us to keep others safe we have to keep ourselves safe. when we go from three or four to three on a fire truck which normally happens, we're putting our lives of not just our community at risk but us as well. we're seeing that a lot in wisconsin where we have zero percent levee increases where a city is not able to raise its levee. shared re knew being cut and hasn't been raised in decades. i've been unfortunately, been on job 22 years but unfortunately i've been part of pulling four civilians out of burning buildings. i can tell you that we cannot do that and not have done it effect effectively if we had three people as opposed to four. it's detrimental to our staffing and the safety of citizens and us as well. >> thank you very much.
12:21 pm
the salt cap harms middle class communities that make substantial investments in infrastructure and schools. may mayor, you noted the middle income for a family in78,800. >> that's correct. >> more than half of the tax returns are likely to be harmed by the salt cap. in your opening statement you noted that bayville school system cost the average taxpayer over $10,000 a year. can you expand on some of the other important services funded by your local tax system? >> we have a number of facilities, sport facilities, auditoriums.
12:22 pm
some beaches and first rate police department in the county. the village itself, we run just simply a department of public works, water department. we have public beaches for residents. we have a senior community center and probably that's about it that i can think of at the moment, sir. >> commissioner, you mentioned that 70% of counties are considered rural. in a state like california with large cities and rural areas, state funding is critical to all counties whether urban or rural. can you discuss on the salt cap
12:23 pm
impacts rule counties. >> thank you. the impact is only now just being felt because it only impacted the 2018 taxes. the core issue though for us is the federalism case that when you look at the issue of salt, it goes back to the respect that federal government should not have tax policy that ignores the states and local government. that's why i cite d federalist paper number 31. our county is rural and urban. 61% of our filers, 90,000 people
12:24 pm
and i'm forgetting about the number here, filed for state and local tax deduction of over $10,000 in 2016. that's the latest year we have data. our number one industry is agriculture in our county. we're concerned about the impact of our county and other rural counties are saying the same things. schools are the number one source of property tax funding is going to our k through 12 schools. >> do you think the middle class customer who is were accustomed were surprised the find in 2018 their charitable deduction was limited due to the limits on other itemized deductions and the increased standard deduction? >> i think many taxpayers are uncertain about all the components of the federal tax code and while they might have
12:25 pm
been limited slightly in their ability to deduct charitable giving, that's largely because they were taking the new standards expanded deduction. they were better off than under previous tax law. >> what do you think happens to charitable giving in 2019 for middle class taxpayers that have experienced the limitation for this year? >> i think it will be interesting to watch. we saw a slight increase in 2018 that could be related to incomes increase. for lower and middle income individuals, their charitable giving is not motivated by tax policy but a desire to help their churches and local communities. >> do you have the same feeling on the impact of charitable giving? >> i think that's a real possible but again until we see the actual data we're not going to know that. >> you think that the actual loss of the salt deductibility will impact it? >> i believe that it can. >> thank you. now i recognize ranking member smith for five minutes.
12:26 pm
>> thank you to our entire panel. i appreciate your service and certainly your sharing your perspective. may mayor, thank you for your service. prior to coming here, i served on the city council in my hometown of a similar size community in nebraska. no public beaches but appreciate the challenges of operating a village and a small community such as bayville. the median income is 68,500 and a family is 77,800. yet the combined village and county taxes on average is $20,000. >> doesn't leave you too much left over, does it? >> i hear you. >> for families with these income levels we would expect the federal income tax liability to be minimal. for example, a two parent
12:27 pm
household with three kids with an income of 77,800 would have federal income tax liability of about $75. can you help me square those numbers of how there seems to -- how can someone -- >> i'm not in a position but i can get the information for you. i don't have an accounting background. i come from a retail background. i can't answer that question. >> okay. i look forward to more information because struggle to think how someone making $78,000 could afford a home, mortgage, not to mention the taxes of $20,000 per year given that's the middle point. does that strike you as a little bit -- >> the numbers i'm giving you i've gotten right off the internet as published numbers. further than that i really
12:28 pm
couldn't comment. >> okay. miss kaeding, i thank you for your testimony. you've processed the bigger picture of the tax policy and where we were before, where we are now and what you think is good tax policy. i would share many of the same observations. you address the way in which various states conform with their rules and that federal tax policy. it's lead to a broadening of the base in those states thanks to the tcja and the revenue increase resulted from that base broad ping. new york estimated an increase in revenue of about 1.1 billion. that's billion with a b for 2019 thanks to the broadening. you noticed conformity was not
12:29 pm
impa impacted by salt deduction. can you elaborate? >> it makes it easier for filers when filing their tax returns. they can copy numbers from their federal 1040 to their state return. it makes it easier for the states to add minister the tax code as well because they with rely upon federal def in additions -- definition definit. states don't conform to the tax rate. they only conform to the tax base. what's happened because of the federal actions under the tcja. state tax bases have become broader meaning they are generating more in revenue. many states have forecasted increased revenue. you mentioned minnesota, many, many of these states have said they will be better off on a revenue picture.
12:30 pm
what some of those states have decided to do is to actually reform their state level taxes. my current state of virginia has cut taktxes for individuals witn the commonwealth. >> will the gentleman yield? >> my time is limited. i apologize. go ahead, briefly. >> i want to point out the property taxes in new york state especially on long island are some of the highest. when that tax bill was pointed out, that's a real number. that's what's happening. that's why this such a crushing blow to places like bayville and other places in down state new york. >> thank you. i just hope that we can continue to focus on these issues. the standard deduction, any show of hands oi among our witnesses, those posed to the standard
12:31 pm
deduction. anyone in opposition to the standard deduction? thank you. i yield back. >> thank you. >> thank you for conducting this hearing. look, i don't know anybody that i've met in a lifetime in public service who didn't like a tax cut. the truth of the matter was that president obama had proposed major tax cut to 28% overall and 25% for manufacturers. my colleagues on the other side take justifiable pride in the fact they passed an enormous tax cut. what they are not prideful of is the fact they did it without any kind of public hearing. dave camp whose picture is on the wall over there did just the opposite. we met in groups and were able to talk this through so we would not end up in the god awful situation that we find ourselves today. i say, god awful depending upon the state you live in and the
12:32 pm
ramifications that the tax code has had on you. in my state of connecticut, 750,000 people avail themselves to deductions. the average deduction is $19,000. the $10,000 cap is a little help. it's not much of a consolation for them to understand that their taxes went to pay for 83% of the tax cut going to 1% of the nation. you can certainly appreciate and understand how perplexed they are as witnessed by the number of letters. i'd like to submit several letters i have from citizens who feel they have been unfairly treated as something pointed out by our witnesses that's been in
12:33 pm
effect since the civil war and amounts to double taxization but the rub is, not only is it double taxization but when you're barely holding on in what you're doing is augmenting a tax cut for major corporations that is permanent while individuals expire, this is where the problem lies and why your testimony today is so vitally important. we can't continue down this path especially with states that take the responsibility to deliver education and public services whether it's firefighters and police and emergency medical teams to across the board what individuals have needed to make their states continue to grow and operate.
12:34 pm
would you agree that this has min mus impact in your state? >> yes. again i think we're arguing personally the wrong issue. it's not about winners and losers. it's about the fundamental principle of the salt deduction. the salt deduction is not something that was created 10, 20, 30, 40 years ago. the salt deduction goes back to the foundation of our country. it goes back to the foundation of federalism that respects the taxing authority of states and local governments. it was reenforced in 1862 by lincoln civil war tax. it was reenforced again in 1913 by the 16th amendment. if we didn't have the salt deduction in place during world war two and during the end of the 1970s when we had an
12:35 pm
extremely high federal tax rate, we would have effectively people paying in excess of 100% of their income and taxes. the issue isn't about red and blue. it isn't about winners and losers. it's about whether or not the foundation of our country relative to the salt deduction and respect of state and local government -- >> would you characterize as double taxization? >> absolutely. >> when you get double taxed, you take it very personal. if you're tudouble taxed and in blue state -- i agree with you. this isn't about red states or blue states. this is about what's fair for the country. what's fair in terms of the load that people are carrying in terms of taxization at the local and state level. aka, that's why we have the provision to begin with.
12:36 pm
what kind of income a schoolteacher and a firefighter and my district make well over $100,000 when you combine their incomes together and then they end up having to pay additional federal taxes, let alone not even see a tax break. they pay additional taxes and that goes to helping out major corporations. i yields back. >> time has expired. go to mr. rice. >> i think this hearing today is astounding. we spent the last year and a half with my friends on the other side of the aisle pulling their hair and mashing their teeth about how the tax cut and jobs act so much of the benefit went to the people who are wealthy. 44% of it went to people in the
12:37 pm
top 10%. there's an article in bloomberg yesterday, just yesterday, 52% of the benefit would go to top 1%. i represent eight counties. in three of my counties are very rural. they are majority african-american population. >> excuse me. >> marion county, south carolina is 57% african-american, immediamedian wage is about 30%. what you're presenting is a false narrative. you're saying you're raising taxes on folks that live in these wealthy communities. the truth is, somebody's got to pay the taxes. you don't apply to this person, you apply it to that person.
12:38 pm
if you restore this salt deduction, my folks in marion county aren't getting any salt deduction. they'll have to pay more taxes. you live in this bubble of federal employees that average income is $120,000 a year. four times that of marion county. your average house coassts as much. how do i explain to my rural african-american folks that they should subsidize housing in fairfax, virginia? how do i do that? >> this is a high rent district. it's an expensive place to live like your staffers. >> they already subsidize that by paying taxes. tax dollars go to pay these people that live in your community. now you want them to subsidize their cost of living. >> it's an expensive place to live. >> you said in your testimony that people move to your community because of the beautiful area and lives right
12:39 pm
next to oyster bay. that's wonderful. i live in a beautiful area too. what you're asking me to do is go back and tell my folks, the poor rural black folks of south carolina that they need to because we're going to restore this tax deduction, they have to pay more taxes. they will be subsidizing these people because you don't want them to pay. we want the federal government to subsidize that. how do i explain to somebody's whose income is one fourth. how do i explain to them they should subsidize part of the cost of living in long island. >> i only know what my own community is suffering. i realize you've got your own issues in south carolina.
12:40 pm
these folks that i represent and trying to protect, i only know them and i know them to be hard working people. i don't believe they are getting fair shake. >> thank you, sir. i've only got a minute left. it's fascinating to me that the folks on the other side of the aisle try to paint this picture of for the working guy. they are for the downtrodden when what they do is put their boots on their neck. it's ridiculous. mr. mitchell. do your firefighters understand -- what is your average firefighter make? how much money? >> about 45, $50,000. >> he ain't going to get one dime of benefit from the salt deduction. does he understand he'll have to pay more taxes to give this tax break back to rich people? do they understand, 99% of your firefighters are going to get not one benefit. they will pay more taxes and rich people will pay less. they understand that? >> every situation is different.
12:41 pm
we don't become firefighters to become rich. we do it for the love and sense of duty that we have to our community. we don't ever profess to be tax professionals. we want to get paid for our work but when you're married and you have two incomes, you're doing okay but i would say -- >> i've got 13 seconds. >> i yields my time back to you. >> i don't think they understand that this hurts them. they have to pay more taxes and wealthy people pay less because of this bill. i yield back. >> thanks to all of you, our state and local officials for coming forward today. when it comes to providing resource sources to do your job, they take a rather different point of view.
12:42 pm
i don't believe there's any doubt that the salt deduction cap was a political attack on states controlled by democrats. it's had the impact of attacking state and local governments that believe democrat or republican in being responsible in delivering a reasonable level of public services to ensure quality public action. the republicans were sure that the salt deduction for state and local taxes was maintain ed for the multi-national corporations who got many of the benefits and that were provided under this law. i spoke out against this salt provision when it was considered though i come from the state of texas. even there there's some impact from very high and regressive
12:43 pm
property taxes but texas is state that doesn't believe in providing a responsible level of education and public services. i understand when you make these kinds of investments you have to pay for them and have this problem. this question is what we're going to do to fix it. i am concerned that as i understand from the testimony this morning and the reports that full repeal of the salt deduction would cost about $670 billion, is that right? >> yes. >> we already had republicans add $2.3 trillion. we're looking at about a trillion dollars a year of additional debt every year for the foreseeable future. last week these guys suggested that the way to deal with this problem in the amendments they offered to a bill we had was to add about another three or four trillion dollars to our national
12:44 pm
debt. i believe every economist believes it will slow our growth. it was not paid for and it cost a fraction of what it cost to restore this provision. at the same time, with all the basic se excesses of the republican tax law, there's a wide range of provisions that could be altered in order to compensate for restoring some or all of the salt deduction. we've got the corporate tax rate which was lowered more than corporations ask for. we've got a provision that was added after the conference committee that lowered the taxes
12:45 pm
for the wealthiest people in our country. we've got the foreign out sourcing provisions. we have the donald trump provision that was added after the conference committee to provide additional pass. there's many places we could look at to pay for this. i do think that it is notable and i believe you had some version of this in your testimony that the joint committee on taxization yesterday said that full repeal in isolation would give half of its benefit to americans that earn 1 million a year or more. we shouldn't reward the people that already got rewarded with yet another tax reduction. we've got to find a way to fix this that is fiscally responsible and that recognizes that impact. if congress is not willing to muster the will to fully offset the $670 billion price tag then
12:46 pm
we have to find other reforms in this provision to assure we do it in a fiscally responsible way. every one of you as a local official has to balance your budget. that's something long ago forgotten here in the congress. i believe we should respond to the concerns that all of you have raised this morning that are very legitimate. having been politically targeted but we have to do it in a responsible and fiscally prudent manner to ensure that we don't make matters even worse. thank you very much for being here. >> thank you. i want to thank the witnesses for being here. we heard a lot of testimony about how the salt deduction affects the so called middle class. i want to just reference two articles. the title of this article was from bloomberg.com from june 24th this week.
12:47 pm
titled salt cap repeal would be a $40 billion wind fall for millionaires. it goes onto say they are getting rid of the salt cap would lower the burden for households earning a million dollars by $40 million or 52% from the nonpartisan joint committee on taxization. i'd like to submit that for the record. >> without objection. >> second article from politico titled new jct analysis shows salt cap repeal benefits the rich. this analysis is bad news for democrats who have portrayed the limit imposed by the tax cuts and jobs acts as a hit on average americans. objectively in two different articles and by the non-partisan committee on taxization, talks about this benefitting the rich. now, we have heard today there's lots of definition of what
12:48 pm
constitutes -- >> would you like to enter that to the record? >> i would. >> without objection. >> there's lots of definitions about what constitutes middle class. apparently anyone who doesn't own a yacht qualifies. can you provide more details about the income levels of those affected by salt deduction limitation and those who have an overall higher tax burden under the tcga as a result of the limitation. >> thank you. we can actually look at data from the internal revenue service to figure out where the income thresholds are for the middle class. perhaps we define the middle class as being those between 25 and 75% of median income. what we find is that the top 25% of taxpayers have income of $80,000. the top 10% have income of $140,000. the top 5% have income of around $200,000. many of these examples that have
12:49 pm
been talked about are talking about folks that aren't the so called middle class according to irs definitions along those lines. what we see in the data coming out of the joint committee yesterday analysis that we have done at the tax foundation. analysis coming from economic policy and a group considered to be on the left is that distributionally it's pretty clear. repealing the cap on the state and local taxes pay deduction benefits functionally the top 20% of taxpayers. those making more than about $100,000 a year. >> thank you for that. the other thing i would like to point out, i didn't hear anything from the witnesses about what the tax bill has done for the economy. as we sit here today we have the best economy we've had in 25 years. 7.3 million unfilled jobs. we have moved 5.4 million people off of food stamps. lowest unemployment in 50 years by all standards. lowest unemployment in the
12:50 pm
african-american community. lowest unemployment in the hispanic community. lowest unemployment for women and people with disabilities. 3.2% growth in first quarter and another for another 3% growth. private sector wages are up across the board. more people working in this country than ever before under this tax bill that was passed. you look at the stock market. you look at 401ks and the long-term outlook for the economy, it is strong. by every statistic, and i think that needs to be stated. so i appreciate the witnesses being here today. i'm going to yield my last minute to mr. rice. thank you. >> you said earlier that people moved into your wonderful school district, and i'm glad you have a great school district. education is a top priority, but they moved there and sacrifice to -- because they have to pay high taxes to get in that school district, but don't you
12:51 pm
understand that when you reallocate this tax liability and you give all these millionaires a tax break, you're raising taxes on the rest of the people, and that my poor folks, my poor african american folks in south carolina are being -- you're saying your people are sacrificing to move to that wonderful school district. you're asking my people in marin, south carolina to sacrifice for your wonderful school district. >> thank you for the question. and i would not be suggesting a tax increase for the poorest americans. what i'm saying is what's happening in our school district is we have hardworking americans sacrificing to live in our school district being hurt by this and being double taxed. and i'm asking all of you as our leaders to find a way to fix that. >> somebody's got to pay the taxes. >> thank you. >> time has expired. >> miss csanchez. >> thank you for your commitment
12:52 pm
and i want to thank each of our witnesses for bringing your unique perspectives on salt. lieutenant mitchel i want to begin with you to discuss the impacts on local communities. now, you're from wisconsin, and i am from california but the points you made in your testimony are what i hear every time i go back home to california. can you, again, please tell us what would be the long-term impact of the cap on the salt deduction to your department if the law stays the same and is unchanged? >> well, the fear is if this continues sat state and local municipalities will have to find ways to cut their local and state taxes. if people are being double taxed, and, of course, as i stated earlier, the majority of our work, our salaries, our staffing, our equipment, our training is derived from state and local taxes. once we see state and local taxes being cut, we know what's going to be the ripple effect of that. that is that essential services will be cut, and as i spoke
12:53 pm
earlier, first thing cut is staffing because that's the highest cost for any department. and once you cut staffing, then you're cutting safety for ourselves as firefighters and ems personnel. more importantly, safety for citizens of any community. >> yes. >> that goes from whether you're in california or wisconsin. >> thank you. what comes through in your testimony is your commitment to public service. and i want to commend you for saying that. people in your line of work are not in that line of work to become millionaires. so you know, hardworking folks like firefighters in wisconsin are being squeezed by the this policy. the general public is put at risk by this policy. if you don't have the equipment and the staffing that you need to provide those emergency services, i want to talk a little bit about the issue of fairness. because as was presented earlier, individuals got their salt cap capped at $10,000. the average salt deduction in my
12:54 pm
district is $18,000, and i do not represent a wealthy district. it's a very working class district. but businesses and corporations can claim the full salt deduction. does that seem fair to you, lieutenant mitchel? >> i'm not a tax professional, but no on the basis that does not same fair. >> okay. and mr. imhoff, does it seem fair to you? >> no, it does not. >> no, it does not, but i think it's that way because salt was never taken into consideration as a foundation piece of my tax policy. if it had, we wouldn't be talking about the idea that if we reinstate full salt today that millionaires would be getting benefits. it should have been a foundational piece in any tax bill. >> thank you. mr. danette, does it seem fair one person gets to claim unlimited and individuals have a
12:55 pm
cap? >> hardly. >> mr. turner? >> no. >> what about the corporate tax rate being cut 14% and that was a permanent cut. and on the individual said the tax cut was about 3% and that's not permanent. does that seem fair? does anybody think that's fair? raise your hand. let the record reflect nobody raised their hand. thank you so much. commissioner, i can -- can you delve more into how the salt limitation impacts budgets at the county level and the ripple effect it's going to have on services in your county and please be brief. we've got about a minute and a half. >> let me reiterate until we see the full impact of the tax impact from 2018, we can't do anything other than speculate. i shared that in my testimony already. >> okay. thank you. i want to push back on this notion that somehow folks in marion county are paying more
12:56 pm
taxes so that others could potentially get a full salt deduction. i want to remind everybody that high income states like california where high cost of living states, we get back about $0.72 for every dollar we pay into the federal system. and my guess is that folks in marion county, south carolina probably get a lot of government benefits and subsidies in rural communities that typically tends to be how the tax system redistributes money from higher income, higher cost of living states to lower income more rural counties. so i don't think it's a case that because our middle class families and our high cost of living areas make a lot in comparison to those in rural counties, we also have higher costs in terms of housing, food, transportation. so it's not that one side benefits or subsidizes the other. and i just wanted to make sha point, and with that, i will yield back to the chairman. >> thank you.
12:57 pm
mr. arrington, you're recognized. >> thank you. i'd like to just kind of go down the line. mayor tarter, by the way, i lived in a city there and enjoyed my time there. would you see the lowest unemployment in 50 years is a good thing for the country? >> yes, of course. >> mr. denatale do you think job participation at a 30-year high is a good thing for the united states of america? >> yes. >> commissioner, would you say that wages being up at historic decade high rates and up more for the lowest income folk which equates to about $1,000 a year, do you think that's good for hardworking middle class and lower income families? >> i don't know anyone that would disagree.
12:58 pm
>> well, what about you, dr. imhoff. do you think the higher confidence from manufacturers and small businesses is a good thing for this economy and the prospects for greater prosperity in the future? would you agree with that? >> yes, sir. >> well, i could go on and on, but i would say this wasn't an accident. this isn't something that just happened. we had a decade of stagnation, a flat economy, spiritual low taxes and regulations, and the cost of those were very high. like a big old wet blanket on the greatest economy in the world, and all we did was just add a little freedom in the marketplace. we just took a little burden off the backs of the job creators and put a little money in the pockets of hardworking american people. and we've seen a tremendous response. a tremendous response. and i appreciate what you guys
12:59 pm
have said today, and commissioner, i really appreciate you bringing in the founding fathers and founding documents. i do think it's important to start there philosophically on any discussion we have. i try to. and i'm not an expert on this subject, but you quoted alexander hamilton federalist paper number 31. i'm going to quote you federalist paper number 21 from the same author. if taxes are too high, i'm going to paraphrase. if taxes are too high, they lessen the consumption. the collection is eluded and the product of the treasury is not so great as when they are confined within proper and moderate bounds. my suggestion to you is to consider whether or not you're confining within proper and moderate bounds of those taxes leveed on your good people, and i'm sure they're good people, and i'm sure they're good communities. i know one for sure, because i
1:00 pm
benefitted from that community. but golly, can any of you all tell me that there was a provision in the tax cuts and jobs act that has created this economic renaissance in this country? has any provision in there precluded any of you from lowering your tax burden on your people? is there anything that you're aware of that precludes you from reducing local taxes or anything that you know of that would preclude state lawmakers in your respective states from lowering the tax burden? is there a mandate in there that says you can't lower your tax burden for your folks? because i understand taxes are too high, the cost is too great, and you're probably losing folks. i know states like california, and i'm not picking on california with all due respect to the chairman, but from 2007 to 2016 they lost 13,000
1:01 pm
businesses. the chief beneficiary of that was the great state of texas. now, the reason they said that they were leaving was as a result of high taxes, bad lawsuit climate and heavy regulatory burden. now, let's talk about federalism. federalism gives the state of california the right to do whar whatever they want to do within the respect of the environment they want to create for their businesses. apparently it's not a very good environment. at the heart is division of pour power. it's sovereignty to the states and your local jurisdictions. the federal jurisdictions are there for. state and local taxes are there for your local and state purposes. i don't think we do anything to interfere with that, and to say that washington isn't giving your folks a fair shake, i don't know that their local leaders are giving them a fair shake if
1:02 pm
the taxes could be reduced and that that's in your control to do so. i know i'm out of time, mr. chairman. thank you, and thank you guys for your time. >> thank you. >> thank you, mr. chairman, and thank you to all our witnesses for the time you're taking to be with us today. i've talked pretty extensively about the inequities in the republican's 2017 tax bill. and it's very clear, again, in this situation republicans prioritize corporations over individuals. this is another example where businesses maintain the ability to deduct state and local taxes and individual filers the cap. and i think one of the things that all of you have brought up is that that cap impacting services. services and communities. and how critical it is people are looking for these services in their day today life and the direct impact that this is
1:03 pm
having. i want to thank you for being here to talk about that, and i want to start with you, dr. imhoff. how much of your school district's funding comes from state and local taxes? >> local dialers are 80% of our funding. and state revenue is 13.2%. federal dollars 1.9%. >> the local dollars are critical for you being able to provide services to the community? >> they are our life blood. >> when you look at the salt cap and the impact, have you seen impact now on what kind of -- what impact do you expect to see in the next few years? >> so i'm very active in the community as one of the most visible leaders in the community. and the result of this, and this is anecdotal. people were very pleased when their withholding changed after the tax cut and they saw more
1:04 pm
money in their paychecks, but then when they went to file their taxes, many of those people were very upset because they were paying large sums of money because of this change and the first thing they were saying to me is well, you'd better not be coming back asking for anymore levies for the school, because i just had to pay all of this money to the federal government. and so we have another levy that is going to be on the ballot in november of '20. it takes us about a year to manage a campaign for the lev s levies. we are very concerned about this change and how it's going to impact our ability to continue to provide services for our students. >> what type of services would be cut if you're unable to have the resources you need? >> well, as soon as we lose dollars, then we have to revert back to the minimums and you start losing things that are very, very important to our kids around the wellness of kids, around art and music.
1:05 pm
and p.e., and you just offer the basics which is not in the best interest of students, and which is harmful to their education. >> and i would argue that one of the best investments we make is investments in our students because that gives us an incredible return in terms of their contributions -- >> we are on the same page, yes. >> commissioner, we've heard the argument the salt cap primarily impacts high income taxpayers but it looks different in many districts and communities. what are your concerns about capping the salt deduction, the impact on middle income families? >> again, i shared the data from burke's county in 2016 over 60,000 individuals and families filed tax returns utilizing the state and local tax deduction and 91% of those filers made less than $200,000.
1:06 pm
you just look at the area schools, we're odd in pennsylvania. we have 18 school districts in our county. 17 of the 18, 80% of their money comes from local property taxes. city of redding is highly subsidized by the commonwealth of pennsylvania. education is the major impact. >> and what are you hear -- are you hearing similar things from your community as dr. imhoff brought up? >> right now based on the results of the 2018 tax year, it is just starting to come out as far as any concerns of school districts. not so much municipalities but school districts. >> and lieutenant mitchel, are you hearing the same concerns now as you look at funding for important services like fire? >> yes, we're starting to hear it. i think, again, the concern is going down the road, the impact it's going to have on our safety of our communities.
1:07 pm
>> thank you all. i yield back, mr. chairman. >> mr. chairman, point of order. >> yielding back. >> i just am getting ready to leave because i have to go to the other hearing on nafta. and i just want to restate my strong objection to the fact that these hearings were scheduled simultaneously. >> your point of order was noted. there's a lot going on. everybody has to balance their day. >> this is very -- >> i have to leave here. >> thank you, mr. chairman. and just so i don't forget to do it, can i put an article from bloomberg into the record? >> without objection. such should be the order. >> it has some interesting layouts that the apocalypse did not happen. look, all of you are wonderful, but mr. chairman, i sort of wish we had actually had a little more statistical panel, because i'm actually fascinated where
1:08 pm
the distribution is. i mean, if we're going to have an argument that we all really like a tax system that where the wealthy pays substantially more, if we're about to make an argument saying but we need adjustment for high cost areas, that's a very different discussion than the fact of the matter is the new tax reform is more progressive than the previous one on who pays federal taxes. also another point, and then i have a couple actual questions. first eight months of this year, highest revenue forever. it turns out the revenues turned out to be dramatically better so as we're on talking points, you may want to go back to things we were saying two years ago and update them to the mathematical reality. and articles say repatriation is
1:09 pm
substantially higher than we both modelled and even had been reported in january. so look, the wheels are on. things are positive things are happening. in a previous life, i was the county treasurer for the fourth most populous county in the united states. so i understand -- i have -- and in the west, you're the tax collector. you're the investment officer. you're the bank. so you touch -- i had 3,300 taxing districts but there was a democrat proposal during the markup of tax reform, and i believe congresswoman sanchez may have just spoken to this of removing doing the similar salt mechanisms for businesses. could you walk me through what that would mean to your communities if we did that? you know, is that something you would support? if that -- i mean, do you consider that is something that is equitable in your communities? states like arizona, we actually shift part of our property tacks
1:10 pm
on a higher we'll call it mill rate even though that's not technically accurate, to commercial properties to benefit residentials. i don't know if your states do that. would you support the democrat proposal of limiting salt deductions to commercial property? >> i mean, i guess i'm not sure i totally understand. are you saying to limit the salt deduction? >> yes. exactly. >> i think the better solution would be to restore it as it was for both individuals and -- >> but that wasn't my question. my question is would you support the one doing the same thing for businesses in your community? >> you talking about limiting the to 10,000 for or some amount of money? >> yes. >> i don't think so. >> okay. >> that wouldn't apply to my village. we have probably 95% residential. >> okay. fascinating. >> i'm not ready to throw out
1:11 pm
the principle federalism, so absolutely not. we need salt restored. >> okay. but you wouldn't accept the same equal treatment shall we say to businesses in your community? >> no, because i believe salt is foundational to our system of taxation. >> i don't think your federalism argument works but that's a different discussion. and trust me, being someone who cares a lot about that. >> no, i would not. i think it was a mistake to put this in place for individuals. and i wouldn't want to double down on that. >> but there was a democrat proposal -- >> i'm not worried about r&d. i'm worried about what's best for my residents. >> and that is your job as a local. and thank you -- how long have you been on the force? >> 22 years. >> that's neat. i have a brother-in-law who i think now is in the fire boat in long beach. ich i'm sorry. the stories are just fascinating. in working on that distribution, what would you think would
1:12 pm
happen in your community if we did the same salt thing on your businesses? >> i would leave that question to the elected officials. >> okay. >> i put out fires. >> but do you have a fire boat? >> we do. >> you see? i got to come hang out with you too. >> the economic impact of limiting or removing the salt deduction for corporations would largely depend on what you did with the revenue generated from that. it's hard to say in a hyperth hypothetical what the economic impact would be. >> mr. chairman, look, this is a discussion of wealthy jurisdictions defending their wealthy jurisdictions. if we want to have an honest conversation about distributional curves on taxes, that would be fascinating but that would require more intellectual discourse. >> that this hearing is to hear from folks at the local level as to how this provision of the tax code effects their district.
1:13 pm
as you've heard, there are people here from both red states, blue states, wealthy areas, and medium income areas. >> will the chairman yield for one second? >> no. >> thank you, mr. chairman. >> i'm going to call on mr. beyer. >> thank you to all for coming to talk to us. our family business has been in foster for 46 years and with your leadership and the careful financial stewardship of generations of city managers and mayors, it's been a wonderful place. i want to echo your thoughtful thoughts that falls church is not a ritzy fancy place with lots of mansions. it's a great middle class neighborhood with people with almost all two-parent families working to try to make things get by, and i'd love to put up a couple slides to show the disparity. number one, or -- thank you.
1:14 pm
this is a $725,000 house in falls church. okay? a nice little house, but a nice little house. if we move to the next slide, we see what the same kind of house -- in fact, a nicer house is in florence, south carolina. $215,000. i mean, less than a third for a much better house. you can imagine what that does. and then let's go to the next house in florence, $800,000. it literally is a manks. enormous differences on what you get for your dollar depending on where you live. falls church house again, the new york house. this is a little cottage, $900,000 in bayville, new york. is that your district? >> yeah. >> okay. and then move to lubbock, texas. a comparable house. maybe better, actually.
1:15 pm
nicer for 174$,000. or a comparable house in lubbock, texas. we move ahead one slide. that's a $925,000 house in lubbock, texas. mr. chairman, i'd love to submit all of these photos for the record. >> without objection. >> and just point out that where you live depends on really dramatically different tax rates that have nothing to do with your income levels or your richness or the like. i also want to take -- i'm fascinated by, and receptive to my republican friends arguments about the progressivety of the salt deduction, but i have incredible trouble reconciling that with the tax cut and jobs act referred to. corporations went from 35% to 21%. and study after study including those recently by the congressional research service shows that 85% of that has gone to the top 1 % of tax earners of
1:16 pm
wealth in the country. i saw one study last week that said something, almost maybe for the first time in history, 100% of corporate profits went to buybacks and dividends for the first time in history greater than all that was spent on research and development. and similarly when the very wealthy complained about the salt deduction, what we did is we cut their rate from 39.6 to 37%. the wealthiest don't pay much of it. it's the middle class. those folks living in falls church that are paying in this duh ductieduction. one of the great republican arguments i've heard which i'm sympathetic to is that services are best decided at the state and local level. the superintendent in ohio can make the best decisions or the mayor of falls church. but the salt deduction moves all that money to the federal government. it centralizes financial decision making here in house appropriations rather than in
1:17 pm
bayville or falls church. they just seem to be huge inconsistencies about our argument about progressivety. i think in falls church, people live there and pay enormous amounts of money for houses because they have a wonderful school because they've invested in that, and by taking away the salt deduction, we make it harder to be able to maintain that effort at the local level for police, fire and school and things we like. mr. mayor from falls church, i have 45 seconds left. is there any way you'd like to augment? >> i'd say this. first, thank you. i would say education is the corner stone of our community. it's why a lot of people move to falls church, and what we value most highly. 54% of our budget goes to education. when there's less money to be able to be used for local services, it cuts education. we view that as foundational. we view that as an investment in our future, of our community but also our children.
1:18 pm
so it's a critical thing we're doing and any money we don't have to spend on education really hurts our future and frankly this country's future. so i would urge you to reinstate this deduction or at least raise it. so anyway, thank you. >> thank you. >> thank you, gentlemen. >> mr. chairman, thank you so much for holding this hearing today. ranking member, thank you so much for helping hold the hearing as well. this is -- i've learned a lot here today. mayor, you were a republican who voted for trump, but i still love you and you're a great mayor. >> i hope we're still friends. >> of course we are. we're great friends. i don't think that people realize some of the different inequities. in fairness, it's something i heard a lot today. i want to make america fair again. i want to see fairness here. do you know mayor that new york
1:19 pm
state is the biggest net donor to the federal government than any other state in the united states. they spend about $45 billion more to the federal government than we get back in state taxes. did you know that? we're a huge net donor to the federal government. they were incredulous that you pay high property taxes. we were reduce the property taxes in new york state if we had more of our own federal money coming back to our state. but the reality is that just new york and california together pay $400 billion a year in federal taxes to the federal government. $400 billion a year in federal taxes. california and new york. do you know how much nebraska pays? about 7 billion or $8 billion. 400 billion from new york and california. that's fair and we're in on that because we're all in this together. that's what the united states of america is. >> would the gentleman yield? >> yes, i will.
1:20 pm
>> would it be more fair if nebraska fell under a different federal minimum wage than other states and regions of the country? >> i'll not go off topic on that but i'll be happy to discuss that at a future time. >> mayor tarter, do you think it's fair that people would be taxed on the taxes they already paid? >> no. and it hasn't been part of our tax code since 1862 depending on when you consider the first tax code. >> do you think it's fair that by republican colleagues thinks we should take the long arm of the federal government to reach in to state and local governments and say listen, you got to change your taxing policies because we don't like it in the federal government. you got to change the way you -- do you think that's fair that the long arm of the federal government is going to reach in and try to change local governments? >> i do not think it's fair, but let me clarify. naco has not taken a position for or against the tax cut.
1:21 pm
we've simply stood up for counties. we fought to preserve tax free muni bonds and we will continue to fight to double taxation to protect the salt deduction. >> i want to be clear. we're not talking about the whole tax cut. we're talking about the state and local cap that has been capped at $10,000. do you know that it was the chairman of the house ways and means committee, a man named justin smith morel, one of the founders of the republican party at the time of the enactment of the civil war tax, he said quote, it's a question of the vital importance to the states that the general government, the federal government, should not absorb all their taxable resources that the accustomed objects of state taxations should in some degree go untouched. the orbit of the states and united states must be separate and conflicting. that was the one of the founders of the republican party who
1:22 pm
talked about this juxtaposition between the federal and the states government. but we're putting this pressure on a lot of local governments by doing this. dr. imhoff, lieutenant mitchel, do you think it's fair that local governments would have to cut their taxes and thereby cut their services to pay for this giveaway? >> no. >> no, sir. >> i want to make it clear earlier mr. rice from south carolina was talking about someone's got to pay the taxes if we restore this. we could pay for this. we could pay for this by increasing the federal tax bracket for the highest taxpayers in america from 37 back to where it was to 39.6 and raise the corporate tax rate from 21 to 25. that would pay for the reinstatement of the state and local tax deduction. i think this is a question of fairness. if we want to make america fair again, we want to make it so we don't have double taxation and we're not pushing pressure on the local governments. we don't want to make it unfair
1:23 pm
that the governments, the people that are subsidizing the federal government are not getting hit again with a punch in the gut from this state and local cap, then we should reinstate the state and local cap deduction to the entirety. it would be fair to the local governments and fair to the tax pa payers and be consistent with the separation of the state and federal and local governments. >> thank you. >> thank you, mr. chairman. and i want to thank all the panelists for coming forward as a great panel. so that we keep the focus where it should be on the local level and the fact that this has happened. i was especially happy to hear you. i was having a flashback. when i was i elected to the state legislature ten years ago, one of the first things i was contacted about was not
1:24 pm
representing burkes county, and an angry group of pennsylvanians coming to lobby me on high property taxes. i am very familiar even though i live about an hour and 20 minutes or so away from burkes county, i'm very familiar with the property tax issue in your neck of the woods, and the fact that the republican tax bill last term has now only made that significantly worse. i think that besides my own personal history and the fact i'm a pennsylvanian, i'm also happy to have you here, because too often this is characterized, mischaracterized as a quote, unquote, blue state issue or a wealthy suburb issue. whether it's philadelphia or the suburbs of new york and new jersey, connecticut, california, northern virginia, et cetera. burkes county is not an affluent place. you have a lot of middle class folks.
1:25 pm
a lot of senior citizens. a lot of rural areas. some real pockets of poverty, especially around redding. i think you are -- you being here is in many ways kind of the perfect perspective to show that, in fact, this is a much bigger issue. even myself, i was surprised when i went over the statistics some months ago with staff and looked into those who have been impacted by limiting the salt deduction. we're up to about half of the states in the union. and within the next year or two, we'll be over 30 states affected. those are not just quote, unquote, blue states. so i was wondering if you could speak specifically about the impact -- and you've addressed some of this already in your opening statement, but the way at the local level it has now impacted you, your budget, and some of the tough choices that have now been forced on you by this very unwise policy. >> thank you, congressman. very quickly, we are an unusual
1:26 pm
county. we voted overwhelmingly for trump in '16 and overwhelmingly for democratic governor tom wolf in '18. i am a republican. i chair the board of commissionere commissionerers, but there's 16,000 more democrats than republicans in our county. and redding is one of the poorest cities in the country. the impact is one that we see because we are not an area with significant income from residential. we are an area that are impacted by agriculture and by our schools. and you hit the nail on the head. we are ground zero for school property tax elimination in the commonwealth of pennsylvania for a reason, and that is we have very high property taxes with the exception of the city of redding, because 80% of that income comes from our folks. and i believe our median income
1:27 pm
is under $50,000 in burks county, even though we're a little over an hour from center city philadelphia. we're not an affluent area. and again -- >> if i could, because they only give us five minutes. what is the average property tax bill in burks county? >> that's hard -- >> sorry. i'm quizzing you. >> approximately. >> there's 18 school districts. i would say it's probably in the consistent of 8,000 or $9,000 and high for you take out the 90,000 residents of the city of redding. >> right. so you're already with the exception of redding, in your county, not an affluent place, you're already at the $10,000. >> just the property tax. that's the school. that's not local municipality and that's not county property. >> then you include that, you're over 10,000. then the 3% state income tax which pennsylvania we have one of the lower state income taxes. if any municipality charges a
1:28 pm
personal -- this was a tax increase for a lot of folks that subsidized what essentially most of the money went to reducing the corporate rate from 35% to 21%. a number of us were actually not opposed to the idea of reducing the nominal rate, but going all the way to 21 created a sort of situation where now we're taxing middle class and lower income folks in burkes county and burkes county all across the country, and mr. chairman, it's just not right. thank you. >> i thank the gentleman. recognize miss moore. >> timing is everything. thank you, mr. chairman. i want to -- i want you to forgive me for being taken away. i had other responsibilities. i did get an opportunity to hear all of you make your
1:29 pm
presentations, so i do have some questions. i guess i'll start with lieutenant mitchell describing the situation in wisconsin. as we know, the median income in the state of wisconsin is only $57,000 a year. but yet, you raised the fact that while we have very low median income as compared to some of the other places like others indicate are high valued states, we have a very high property tax. and a property tax collection system which -- 46% of our state and local expenditures on stuff like fire and police relies on property taxes. so i guess i want you to sort of respond to the analysis that only rich people, only properties with high values are
1:30 pm
at risk. >> yeah. well, i can talk -- me personally, i don't consider myself rich. my property taxes were over 85 $00 last year, and plus state and local taxes, it's over that $10,000 cap. so personally as firefighters, like i said earlier, we don't get in this line of work to become rich, but it's definitely -- it's been a hit on not just myself. that's not why i'm here, but also the firefighters that i represent, and the men and women that i sit alongside on the fire truck. so again, our biggest worry and concern, though, is that when municipalities are already strapped, especially in wisconsin, when we have 0% levy limits and shared revenue not coming back to municipalities at the rate it should in 2018 and 2019, that this will be additional, unintended consequence. >> i did not know about the six fire houses that were closed in milwaukee where i live.
1:31 pm
that is terrifying. >> 2017. >> i say miss cading is champing at the bit to say something. i'm going to give you a chance to respond. i guess you have an analysis that basically says that only rich people wouith high propert values are affected. what do you say to our exempting corporations from the salt deductions? are corporations less capable of paying the salt deductions than, say, someone with a $57,000 a year income? >> i think there's a few points to consider. so one, i think it's also important when we're talking about limiting the salt deductions, there were other tax cage changes. many of the individuals received net tax cuts. only 6.5% of american paid more in taxes under estimates in 2018
1:32 pm
than they would have under previous law. >> is that -- that's sort of averaging them out. >> that's -- >> saying california and new york, but we've heard here from individual communities that that isn't the case. >> there's been an analyst including the tax policy center. that's where the number comes from. they reran the analysis if you were to have no limit on the salt deduction. and they said that about 5.5% of americans would have -- >> we hope to put the corporations back in. so thank you so much for that. i really enjoy, sir, your discussion of alexander hamilton and the federalist papers, and so is it your testimony that we're departing from our constituti constitutional principle?
1:33 pm
>> the federalist papers, obviously, were written in defense of the principles of federalism surrounding our u.s. constitution, and yes, that is exactly what i'm saying. and i believe that if salt had been viewed from its historic perspective and had been a foundation principle that was part of the tax cut, i wouldn't be here today. because the salt would be in place, and the tax cuts would have gone ahead respecting that founding principle. >> well, thank you. and mr. natale, you say you were a trump supporter but you are today saying you don't agree with this particular initiative? >> absolutely opposed to it. >> thank you. and thank you mr. chairman, and i yield back. >> thank you for yielding back. mr. schneider, you're recognized. >> thank you, and i want to thank our witnesses for being here. mr. chairman, thank you for having this hearing.
1:34 pm
from my perspective, as i look at tax policy, one of the things i think we should always be driving toward is fairness. this is an unfair burden. in illinois we're one of the donor states that was talked about. ten states that are sending more to the federal government than we get back. in illinois it's estimated that we are sending $40 billion a year more to the federal government than we're getting back. and again from my perspective, forcing any americans in my case people from illinois to pay federal tax on money they've already paid to fund a priorities of the state and local communities is double taxation, and plain and simple, it's wrong. but because of the new cap, that's the situation. thousands of people in our communities and in my district are finding themselves in. in my district in illinois alone 42% of the filers used the salt deduction. and the average deduction is higher than the new cap. this is to say the salt
1:35 pm
deduction has affected a broad swath of my district. and certainly some of those people are at the upper income level, but many are working class families struggling to make ends meet. and i've heard from my constituents consistently stuck this year with a higher tax bill. in fact, one constituent wrote to me after she found out her tax bill increased more than $4,000 under the new gop tax bill due to the salt restriction. she's from grays lake and said this goes without saying. this would be so much easier to stomach a tax increase if it was going toward something like expanded medical coverage or food stamps or education spending. in our case, she continues, we are paying thousands of dollars more for no reason at all. while the rest of the country, especially those 21% tax corporations get much-needed tax relief, end quote. those were her words. i could not agree with her any more.
1:36 pm
the burden of this tax law which overwhelmingly benefits the most fortunate americans and corporations was laid on a hand full of states like illinois. many of those states, the states that are paying more to the federal government than they're getting back, many of those states, in fact, of the people who have spoken today, we represent the states who are the ten most highest per capita tax states. illinois taxpayers pay more than national per capita and national taxes. we are paying around 1.30 for every $1 we receive back. restricting the salt deduction seems to punish states like illinois. i hope we can find a way to work together to roll back this damaging tax and bring tax relief to constituents. there are multiple proposals in the work and i want to highlight the work of to of my neighbors.
1:37 pm
underwood and casten. thank you for their work in introducing hr 77 to reduce the salt cap reduction. that will try to bring us together to try to address this issue. the impact is on our communities and commissioner, i'll start with you. we talk about communities that are closer to the median income. closer -- the working class communities struggling to fund their schools, parks, first responders. what's the impact you're seeing in your county on this salt deduction, the limit on the salt deduction in those communities? >> let me touch on a different aspect. when you look at the county, we don't operate schools in pennsylvania. we raise $144 million a year from our county property tax. 100 million of that goes to run our jail, our courts, our sheriff's department, our public defender, our district attorney.
1:38 pm
that is the bulk of our property tax money. if you want to ask about impact, it's public safety and criminal justice. >> well, thank you, and maybe i'll turn to the mayor. you're seeing your communities, bayville, as you described it, is not a wealthy community, but it's a community that's profoundly affected. what do you see as the impact? >> i'm sorry. would you repeat the question? >> the impact cap on the deductions having on your ability to provide services like schools, libraries, parks, things we all depend upon. >> well, if we've got to reduce taxes, we have to reduce services. we fund the local fire house for over $350,000 a year. we have only a $5 million budget. we have roads to take care of. we run a water department. and we are going to have to cut back at various places. >> and i'll reclaim my time, lieutenant mitchell you talked about it, talking about fire
1:39 pm
departments. it's affecting your ability to protect the community and protect folks like us, make sure we're safe at night, during the day in our homes. what impact is it having in your community? >> i think the long-term effect will be the ripple effect of adequate staff and training for our men and women that serve. >> thank you. and i'm running out of time. but again, i'll emphasize, thank you for being here, sharing the impact this tax is having. the emphasis should be on having a system that's fair, that's growing our economy and strengthening our communities. this tax is doing the exact opposite. that's why i think we're here to repeal it. >> time expired. dr. ferguson. >> thank you. first, lieutenant mitchell thank you for your service and willingness to make our communities safer. for every first responder, we are grateful for your willingness to put your life on the line. thank you very much for that. i'm -- i was a former mayor. i am a former mayor. i was elected to office right
1:40 pm
before this opportunity to run for congress came up. so it's very interesting listening to those in local government talk about your communities. because you're talking about trying to provide all of the services that you have on what are remarkably high tax values and property values. and i was a mayor of a town of about 4500 trying to do it on the exact opposite side of that where we have property values. many of the homes you showed about a house that was $900,000 may have been closer to 70 or $80,000 in my community. so as a local mayor, we -- we did the same things that you're doing on a fraction of the budget. paved roads. found ways to fund education. built utility systems. rebuilt utility systems. service the utility systems. we provide for fire, ems, police
1:41 pm
protection. all in a small community at a high level. and we were able to do it in a fairly low tax environment. i think it was just remarkable to hear the differences in our communities, and mayor tarter, i think you made the comment, you said people move to our communities because they value being there. correct? and i think that's why most people do move to a community. they see themselves as part of that community. but then you also said that the taxes are burdensome on them. but they make a choice, and they -- and they -- local communities, i think, dictate what they want and what they're willing to pay for. i've seen that across the board. so one question for each of you that has been in local government, and been in charge of a budget, have any of you voted to lower property taxes?
1:42 pm
>> yes. as a matter of fact, one of the first things i did when i got on counsel, our local government has a surplus. i proposed a tax refund for everybody in the city, and that ultimately passed. so i'm tax sensitive on a personal level and maybe even more so -- >> so having lower taxes is something that people generally like? >> they do. i mean, as i said -- >> very good. let me ask you this. have any of you proposed budgets that were smaller in one year than they were the previous year? or each year did the budgets get bigger and bigger? >> during recessions our city has had budgets that ranked and periods of time when things are difficult. >> so when there are times where finances get tough, then you find ways to tighten your belt and still provide the excellent services your community expects? >> our services probably weren't -- >> yes or no?
1:43 pm
>> i would say it's more complicated. >> thank you. reclaiming my time. miss keeting, we've heard a lot about double taxation. can you tell us has there ever been a case where there has been limitations on salt deductions in the past, and can you talk a little bit -- just give me your thoughts on the double taxation issue. >> i'll answer the questions in reverse. >> sure. >> first, i would disagree with my former colleagues here that this is not double taxation. this does not meet the economic definition. instead we have the federal taxes pay for the delivery of federal services. and state taxes pay for the delivery of state services. local taxes pay for the delivery of local services. these are different and distipgt taxes paying for different types of services. the first question, historically there have been other limitations at the federal level to the salt deduction. namely the alternative minimum tax passed in 1969 with a
1:44 pm
concern about high income individuals using deductions too freely. while this is the first time we've explicitly limited the salt deduction, we have impli t implicitly limited it for many years. >> quickly, do you think raising the corporate tax would have a negative impact on the economy? >> yes, it would. >> with that, mr. chairman, i yield the balance of my time to mr. smith. >> thank you. there was earlier reference to the honorable service of dave camp, and let me just make sure the record would reflect the camp draft actually eliminated all state and local tax deductions. all. and so while i appreciate the positive reference to mr. camp, he's a good guy. the current policy reflects a compromise, and a reflection of input from many folks and jury dictions all across the country. thank you. >> thank you. what we've all been waiting for. >> thank you, mr. chairman. now that we know that we're on
1:45 pm
the greasy path to get rid of all deductions, you watch the debate. 2017, that's why you're going to get a tax, your taxes back in a postcard. simple. i'm glad that everybody in this room agrees that filling out your taxes now is more simple. you know what is going to be even more simple? when you don't have any deductions. let's look at some of the things that has been said today, mr. chairman, ranking member. this has been said. you know, charitable deductions, you agree with that, helps a lot of people. a lot of country. a lot of people within our counties. the charitable deduction, would
1:46 pm
you believe it or not, goes to taxpayers over $1 million, 59% of it. want to end deductions tomorrow morning? they'll be one of the ones on the chopping block. we got to make that tax form as short as possible. charities do good work in our communities. so do state and local governments. i wish my brother from georgia was still here, former mayor, 4500 people. i was a mayor of the third largest city in new jersey. we have mandatory costs. i know without asking him he has volunteer fire department. there's a big difference in costs between a volunteer fire department and a paid fire department. so there's a big difference in
1:47 pm
the town that you manage or your operate and you're the mayor of. this is serious stuff we're talking about today. i've heard a lot of crocodile tears about all this money that's in terms of property taxes and the deduction for state and local taxes. that's going to the rich. well, let's take a look at that. chairman thompson, thank you for having this hearing. we know how far back the salt deduction goes. and lincoln's re knew act of 1861 it was pronounced. probably the oldest deduction we have. the salt cap is a double tax that is devastating my home state of new jersey. i've never seen such punitive tax policy since i've been on this earth. it was literally designed to pitch states against each other.
1:48 pm
so these are -- there are those who say salt is for the rich. i say that's 100% poppycock. i'll define that, if you're not sure about it. last year half of the population of new jersey lived in middle income households. capping the salt deduction hurt these middle class families, and i am determined to reverse that policy. you had to come up with $600 billion to feed the cats at the top. i put it a different way than the report that many of you referred to before. so where we going to get of 6 $0 million? let's go to the 12 states that pay the most to the residents in terms of deduction of the property tax and the state tax. every county in new jersey except for one has an average
1:49 pm
salt deduction over the $10,000 limit. with 80% of the households making under $200,000. the report that was referred to before, the middle class is $100,000. i don't know what middle class we're talking about here. i really don't. because we know the middle class is more than $100,000. we're not talking about 1962. the average in burr ga county, part of my district, how about this. the deduction, $25,000. so it's very different being the mayor and trying to put things together when you have 4500 people in it than a mayor where there's 160,000 or millions of people. there's a whole different ball game here. whole different ball game.
1:50 pm
so capping salt is bad for the communities and the state of new jersey. who should care? you don't live in new jersey. but we're all in this together. what this is all about. what's good for the poor and the middle class is good for rich people too. they paid their taxes. so i don't want to hear complaints from those who are saying -- >> thank you mr. -- >> can i finish my sentence? quickly. thank you. i don't want to say that i'm concerned mostly that the money is going to the rich. that's why my legislation asks for an increase from 37% to 39% to begin to pay for this. we need to start to pay for things. thank you, mr. chairman. i yield back. >> the gentleman's time is expired. mr. pa net tashgs you're recognized.
1:51 pm
>> thank you, mr. chairman, ranking member smith and the witnesses for this opportunity to talk about an important issue, not just for my community but clearly as you heard for this country, one of the great things about this committee, about this congress, a lot of diverse and diverge gent views but you're here to provide us evidence and hopefully find compromise when it comes to this issue. i come from one of these communities that is very expensive to live in. central coast of california, if you turned on the tv last weekend and watched the u.s. open, you saw my district. pebble beach. but you also didn't see -- you saw a lot of beauty there which we have but we have a lot of bounty big ag district, number one in my area so it is -- so, you know, kind of jumping off what mr. ferguson, drew ferguson said about making a choice. people make a choice to live in pebble beach but also make a
1:52 pm
choice to move to salinas to work in the fields looking for opportunity but unfortunately it's a very, pensive place to live, not just in pebble beach but the salinas valley, san juan valley. in fact, in monterey county the median household price is $600,000. in santa cruz, the median is $937,000. and so we've been taking advantage of the s.a.l.t. deduction. there is no doubt about it. it's helped out tremendously. before the s.a.l.t. cap was lowered in monterey county, 53,000 families took that deduction for an average of over $15,000. in santa cruz county the deduction was even higher with 47,000 families and taking an average deduction of $18,000. so we are one of those states that -- one of those communities that clearly relied not just
1:53 pm
benefited but relied on that deduction in order to live in that place, be it to live there in pebble beach or the salinas valley. i apologize if you've already answered these questions. i had another obligation, another hearing for ways and means but mayor tarter, can you explain just generally how capping the s.a.l.t. deduction has an outsized impact on localities that have that high cost of living? >> thank you very much. yes, i can. for us education as i mentioned earlier is the cornerstone of our community. we spend over half our budget on educating our children and as you know we take all commerce. whoever wants to come to our community we have to educate and enrollment has increased over the past ten years, it's increased 35% and school budgets have increased commence rat with that so it's going to hurt education in the long run because it's the main part of your budget and so -- but it's a shame because this is one of the
1:54 pm
critical reasons why people come to falls church. it's our future. it's this country's future so i see the major impact happening on education fund sdmrk dr. imhoff, i think you would agree. this isn't just a blue or red state issue. this issue affects all of us especially when it comes to education. can you elaborate on that as well. >> i totally agree, sir, and this is about largely about public education as you've heard about where a lot of this funding goes and we are being asked to do more and more and more to serve our students which is right, but that does take money. and at times it is suggested we can just do more with less and when we're being asked to do more and more and more we need revenue to do that and this i think will hurt that and ultimately hurt kids which is why we need to reverse this decision. >> thank you. now, ms. kaeding, i'll save this last question for you for a couple of reason, one, because of your expertise but, two, i had heard it's your wedding
1:55 pm
anniversary today. >> it is, thank you. >> and so obviously the major issue with the s.a.l.t. cap is that it penalized marriages, married taxpayers and single filers face the same exact cap, $10,000, it allows unmarried couples to double the deduction and discourages marriage. is this a fair or efficient way to treat married couples versus those sharing a home and filing separately. >> if i would suggest a possible place of revisiting the saupt cap i do think that is a fair place to reconsider that decision. there is an implicit marriage penalty within the s.a.l.t. deduct. the trade-off, of course, to fixing that what level you fix ittal and the sacrifice becomes revenue. i know representative underwood has a bill to do this and still reduces them to $225 billion over the next decade in thank you for your service. ma'am, happy anniversary. i yield back. >> mr. gomez is recognized for
1:56 pm
five minutes. >> mr. chairman, my district -- so i'm not going to ask a question but i do want to paint a picture. i represent the 34th congressional district in california. and this is a community that runs from hancock park, multimillion dollar homes, you know, this is where -- a lot of consulate generals in los angeles live to downtown los angeles to skid row to unincorporated east l.a. where a per capita income is $19,000 a year. the prices and homes are skyrockefellering. and it's really becoming out of reach for a lot of working class individuals to even own a home. the s.a.l.t. deduction has always made it and we reached the cap pretty quickly and the price is going up and up and up. so one of the things i know is
1:57 pm
the s.a.l.t. deduction is a way that helps people get into a house. it's part of their calculation. it's part of the way that they balance their checkbook, so to speak. so one of the things i want to emphasize is that the working class people are impacted but people that are also higher income and one of the things i learned early on in my tenure as a public servant is that you got to represent everybody. so i represent those poor folks and city tariffs struggling to get back as well as those in hancock park so it is something that is -- the cap is hurting people and i want to make sure we look at it carefully. i like the idea that marriage penalty -- how do you kind of do that? that's something i think we should look at. with that, mr. chairman -- >> mr. gomez, would you yield a
1:58 pm
minute or two of your time to you. >> yeah, i would like to yield some time to mr. suozzi from new york. >> so ms. kaeding and ranking member smith, i want to point out one thing, a constituent called me up, a woman who is a full time nurse, she works 50 or 60 hours a week and her husband is a retired union supermarket worker. between the two of them their incomes are $150,000 a year. and she was calling crying because her taxes were going up and she's choking. she owns a $400,000 home with a $200,000 mortgage. her bathroom has been leaking for the past couple of years and hasn't been able to fix the bathroom because she lives day to day and three of her sons recently graduated from college and he has $200,000 college debt for those kids. i asked her to come in. i met with her and brought my accountant in, does she have huge credit card bills, does she go out to dinner all the time?
1:59 pm
no, she's very responsible in the way she lives her life but lives in an expensive place to live in the united states of america and works very, very hard. she and her husband had great jobs. they're responsible people. would you consider the person who's making $150,000 a year between her and her husband to be middle class? >> using the irs definitions of income, she would not fall in that definition. she'd be probably the top 10% of all the income earners in the united states. >> that definition doesn't apply when you look at people like this woman in my district who is a hard working person trying to get by working 50 or 60 hours a week and her husband had done the same until he got his small pension from the union supermarket job. but these people are struggling every single day and we need our colleagues to understand that the united states of america we don't want to divide states against each other. we need to be together in this and we can't separate our different states based upon the different cost of living that we have here. and if you want to talk about things about middle -- about minimum wage and things like that, i'll talk to you about it
2:00 pm
and try to understand where you're coming from but this is hurting middle class hard working families in my community and communities throughout this country that are middle class people as far as every single one of us is a practical way of looking at believes and they are suffering incredibly because of this cap on the state and local tax reduction. thank you very much, mr. gomez. i yield back my time. >> i yield back. >> thank you, witnesses, for your testimony today. and ms. kaeding, happy anniversary. please be advised that members have two weeks to submit written questions to be answered laettner writing. those questions and your answers will be made part of the formal hearing record. with that the subcommittee on select revenue measures stands adjourned. we'll see you at 2:00 p.m. or after votes -- we stand adjourned. we stand here in recess. at 2:00 p.m. or after votes will
2:01 pm
be back for part two of the s.a.l.t. cap discussion. mr. pascrell. >> i don't know. this weekend american history tv features the 50th
2:02 pm
anniversary of the apollo 11 mission and moon landing. starting saturday at 7:00 a.m. eastern, we're live from the smithsonian national air & space museum on the national mall with apollo 11 astronaut michael collins, air & space museum director ellen stofan, john logsdon and teasel muir-harmony and at 10:00 a.m., president kennedy's moon speech recorded september 12th, 1962 at rice university in houston. >> we choose to go to the moon in this decade and do the other thing, not because they are easy, but because they are hard. >> then at 4:00 p.m. eastern the smithsonian national air and space museum hosts a discussion with space suit testers and designers, ryan nagata and dana newman. >> take all the systems of a spacecraft, provide your
2:03 pm
pressure, give you your oxygen to breathe, you have to scrub out your carbon dioxide and now you want the person to stay alive, be safe and get their work done. >> at 1:00 p.m. on real america the 1970 film "moonwalk one" showing preliftoff preparations for apollo 11 and parades for the astronauts after their safe return to earth. >> 2 minutes, 10 seconds and counting. the second and third stages now have pressurized. t-minus 1 minute, 35 seconds. third stage completely pressurized. t-minus 60 seconds and counting. we part t-minus 60. 55 seconds and counting. neil armstrong reported back when he received good wish, thank you very much. we know it will be a good flight. >> sunday on orals histories at 8:00 a.m. eastern, apollo 11 flight director gene kranz talks about training for the mission,
2:04 pm
spacecraft problems and the july 20th moon landing. >> and they're all cheering and you get this weird feeling, it's chilling that it soaks in through the room and i get it and say, my god, we're actually on the moon. >> explore our nation's past on american history tv. all weekend every weekend. only on c-span3. next week on c-span 3 robert mueller will testify before the house judiciary committee and the house intelligence committee. the judiciary committee hearing will get under way at 8:30 a.m. eastern and the intelligence committee hearing begins at noon eastern. both are live here on c-span3 and on line at c-span.org and listen free with the radio app. navy admiral craig faller head of

73 Views

info Stream Only

Uploaded by TV Archive on