The conundrum over the GOP tax overhaul, and its accompanying lobbying and jostling on Capitol Hill have produced surprising developments. This could be important for home buyers, sellers, and owners. One aspect is sure though: Republican thinking underwent a few changes from the time congressional Republicans and White House have published their framework for tax bill September 27. Considerable changes have happened in case of local taxes and state taxes deductions. The tax plans of the GOP have asked the doubling of the standard deduction. This will come to $12,000 and $24,000 for the single filers and the joint filers respectively. These could be paired with the elimination of a number of the popular write-offs, including both local taxes and state taxes.
The United States tax code widely uses the 'SALT' deduction. It is inclusive of property taxes, income taxes, and the general sales taxes. If eliminated, federal revenues will go up by about $1.3 trillion over the coming decade. Pushing out SALT is one of the important elements of the GOP tax plan. This plan desperately requires revenue sources to counter the crippling losses as a result of tax slashes for the corporations and also others.
Owners of homes in high tax areas of Virginia, Washington, Maryland, the Northeast, and parts of California and the Midwest are the heaviest benefactors of SALT. The majority of such areas have higher than median household incomes and home prices. These constituents usually vote Democratic but also have GOP representation in Senate and House.
Hard look and change
Republicans are a vital force on re-analyzing SALT. They understand that their constituents would be extremely impacted by SALT deduction elimination. This has compelled Republicans to lobby Senate and House tax-writing leaders of the various committees formed to examine this matter for relief. The list of possible results due to this intervention include: permitting owners of homes to write off their property taxes at the cost of sales or income taxes. The homeowners will also be given the choice of writing off either mortgage interest or state taxes or the local taxes. They, however, could not get relief from both of them. The ceiling for household income set to take SALT deduction could also be implemented. Whatever the result, there is a surety that the SALT issue is in consideration. Any such changes would lower revenues. There is a political benefit, however, from such a decision. A compromise on SALT will result in solid political support for tax plans among the blue state Republicans. The latter's support is vital to pass any bill.