Trump Tax Cut
It is interesting to note the most prolific objection to President
Trump's tax plan is the "un-fairness" of reducing the interest deduction cap from
$1-million to a mere $750,000 and the establishment of a $10,000 local tax cap.
As a response, many state Legislators are proposing a substitute
tax plan for those affected by this reduced tax provision whereby large
charitable donations could be applied to reduce the tax burden to the U.S.
Treasury. The logic behind this
legislative contrivance is puzzling. In
order to reduce the tax burden caused by the $750,000 tax cap, a person could
pay an undetermined amount toward an acceptable charity; but, if the affected
taxpayer donates considerable sums of money toward a charity, instead of paying
tax to the U.S. Treasury, how is he saving any money?
A Monterey Herald commentary (March 12, 2018) entitled "Tax law, rates add to local housing
crisis," contends that an interest deduction cap of
$750,000 (reduction from $1-million) and local tax cap of $10,000 will prevent
local residents from being able to buy a house. Incredibly, this article points
to the increase of the interest rate from 3.95 to 4.46 percent and this new tax
law as affecting the growing number of first time home buyers - really?!
The average
household income in Monterey County is measured at less than $60,000, so, in
retrospect, how can these deduction caps affect the average resident? I would
suggest that those who require the tax advantage of $1-million deduction can
probably afford a mere $750,000 deduction.
Possibly,
the thrust of this article is concerned with affordable houses, as it appears
cheaper housing will be a political issue in the approaching Governor's
race. Some of the candidates (for Governor) are suggesting subsidized housing or bond issues
as a solution.
Of
course, subsidized housing and bond issues would lead to higher taxes and most
politicians have never seen a tax they did not like. Possibly, it would be more prudent to examine
the cause of the escalating housing prices.
Increased
population appears to have resulted in a community feeling of
anti-development. The welcome mat has
been replaced with a "keep out" attitude - not just in Monterey County - but in
nearly every community throughout our state.
More people means more traffic, more use of vital resources like water
and then there is the pollution of the air we all breathe and the increase in
garbage on our beaches and along our public roads.
Now we, as a
community, have put up barriers to prevent population growth. There are endless requirements to be overcome
by prospective builders like environmental impact reports justifying water use,
air quality, additional traffic solutions, protection of unknown animal species
"ad infinitum."
And if a project somehow gets past all this,
there are impact fees, architectural reviews, permit fees and then, of course,
the ultimate confrontation with planning commissions and city councils or
county board of supervisors. But none of
this covers the potential litigation put forth by the "smart growth" or "no
growth" contingent.
Limiting
population growth by creating barriers to prevent community development has
resulted in high priced housing. It
would appear the only way the cost of housing can be reduced, so that our
children can afford to stay in our community, is to reduce the red tape
involved. Bond issues and subsidized
housing is simply not an answer!