Taxes on people in certain locales. Officials from new york, ohio, pennsylvania and virginia testified. This is 2 1 2 hours. The subcommittee will come to order. The subcommittee on select revenue issues is gathered and how this armed schools First Responders and housing values. Before i begin my Opening Statement, i would like to yield to richie neil for his opening remarks. Thank you chairman thompson. I want to acknowledge you and the other members of the sub mindy on revenue measures who are indulging me with some time to speak at this important hearing. Your leadership on both this hearing and the Membership Group is important to congress. I want to take a moment to express my gratitude to the witnesses who have come to give their testimony today. Former mayor of springfield, i can tell you firsthand, my experience as to how important the work all of you do is. It is from that lens that i view the state and local Tax Deductions or salt as we call it. I hear from the Vantage Point of someone whos life impacts local government and what those investments can mean in terms of the lives of our citizens. Insuring children from all walks of life are provided with highquality education, divided my revitalizing economically downtrodden neighborhoods and Building Infrastructure so people can get where they need to go safely and efficiently as possible is part of our challenge. That is precisely what local government does. Mr. Thompson, that is why the work that you and the rest of the members here were working tirelessly on this issue of the salt clap, salt cap is so important. You understand what our state and local taxes support. You understand what it means for the federal government to undercut the good work that you do by imposing a cap on the deduction. We need to find a workable solution. Dont take it for 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 and the former are leased of equal importance with the letter to the happiness of the people. We warned against the risk that in order to give efficacy to national revenues, other resources of taxation might by degrees become the subjects of the federal monopoly to the entire, exclusion and destruction of state governments. We must ensure that our state and local governments continue to thrive and prosper. I want to thank all of you on the committee and particularly you mr. Thompson for living up to the promises you made on this. Thank you, mr. Chairman. With that, welcome to todays hearing on how the recently enacted cap on state and local Tax Deduction is affecting communities, schools and housing values. The cap on the salt deduction is one of 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 cut corners and skipped important factfinding hearings like this one today. State and local government leaders and Community Members were silenced in 2017 and have been forced to deal with the fallout of the salt cap since then. Todays hearing shouldve taken place two years ago but it did not. And so 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, deserve to be fully explored. The concept of federalism that under pins our government. The United States has a system which Critical Public Services and responsibilities are allocated among federal, state and local governments. The federal government does not aim to meet all of societys needs and its texting capacity is significant. For a century, our federal income tax has recognized this threat and has used the salt deduction to provide flexibility to state and local governments. Second, the salt cap and asked a massive marriage penalty. The a 10,000 cap applies per tax filer whether a single individual or two married taxpayers filing 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 34,000 for a couple. The increased standard deduction plus the 10,000 salt cap means that a married couple would need 14,000 in mortgage interest, charitable donations, or other itemized deductions for itemizing to be worthwhile. As millions 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 homeownership is a crucial way for middle class families to build wealth. Furthermore, charities are extremely concerned about the potential future impact of their giving. Fourth, although the direct benefit of salt deduction primarily fall to upper income tax payers, they support local state governments. Those expenditures support programs with widely shared benefits like Public Schools, infrastructure, First Responders, and healthcare programs. As states try to balance their budgets with less revenue, local leaders likely will make cuts in those very programs. Concerns about the distributional effect of the salt cap certainly did not 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 salt cap punishes highcost living areas. The charge was made repeatedly that these states and localities were somehow prolific it. I beg to differ, differ. The cost of living varies so tremendously from one corner of this nation to another that the compass, comparison is truly apples to oranges. Every School District in america employs kindergarten teachers. Every Law Enforcement agency in the country pays its police officers. They need to be able to pay rent or a mortgage wherever they live. It is 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 the median price of rent in new york. You cannot pay them the same amount. I am pleased that todays 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 will recognize the Ranking Member mr. Smith of nebraska for an Opening Statement. Thank you mr. Chairman and q to our witnesses, as well. Let me begin by saying this. Pretty taxes and other high state and local taxes are a problem not just on the coast at all across the country. And nebraska the problem with property taxes is particularly acute. This leads to a massive poverty tax burden on agriculture producers regardless of the state of commodity prices. While the legislature has not yet found a solution, one question is how can we reduce the tax burden on nebraskans and make our state a more attractive place to live in and how can we generate more revenue. As we review the impact tax cuts jobbed act, it is important we consider provisions and propose changes within the full context of the law. The s. A. L. T. Clap, s. A. L. T. Cap must also be viewed for families. Even with the s. A. L. T. Cap in place, most families have lower overall tax bills now than they did prior. Before this, the deductibility of state and local taxes was already limited in various ways including under amt and through the piece limitation. In addition, the s. A. L. T. Deduction is only useful if youre itemized deductions exceed the standard deduction. We doubled the standard deduction for individuals and 24,000 for mary couples. Even with a 10,000 cap on s. A. L. T. Deductions, a married couple could cumulatively spend 34,000 on state and local taxes before they are guaranteed to be affected by this cap. For example, a married couple with no children in california, i am just thinking on california because of the high state income tax rates not because it is your home, but if we looked at a married couple with no children in california in which rent, wouldnt pay more in state income taxes than the value of their standard deduction until their income exceeds 300,000 dollars per year. 300,000 per year. This highlights one of the biggest problems with proposals to repeal or increase the s. A. L. T. Caps we know the benefit of such a repeal which is estimated to cost 673 billion over the next eight years would accrue largely to the highest income tax payers in high tax states. Or fundamentally, the s. A. L. T. Deduction is a matter of fairness to taxpayers across the country. Those with similar levels of income have a similar rule income tax bill. We shouldnt effectively have one federal income tax rate for the wealthiest portions offor and new york and im of, another much higher rate for nebraska and south carolina. If some communities want to have high levels of spending in their community, that is fine, so long as they pay for the prior s. A. L. T. Deduction could shift those costs to the rest of the country. The policy is inefficient and unfair we also know the largest benefits of the s. A. L. T. Repeal would go to the highest earners with the average family making 1 million or more, 1 million or more per year and seeing a tax cut of 67,000 and the average family over 3 million per year receiving a tax cut of 140,000 under such a proposal. Contrast that with our approach when we crafted the s. A. L. T. Limitations. Under tc ja, a single mom with two kids making 50,000 per year has no federal income Tax Liability in the s. A. L. T. Cap was specifically designed to ensure a typical family earning up to 200,000 per year would be held harmless as the average s. A. L. T. Objection pretcg a. The average middleclass family making 50,000 75,000 would receive less than five dollars per year if the s. A. L. T. Cap were repealed. In an this pushed the act to give away like expanding or repealing s. A. L. T. Caps. There are many ways we could be working on a bipartisan basis to improve the irs code. While i hope we can engage in a constructive conversation today, i struggle to think this might be one of them. But i will certainly listen and participate thank you. Thank you. With that objection, all members Opening Statements will be part of the record. Mr. Chairman i would like to make a point of order real quick that is, i really object to the timing of this hearing in that there are two very important subcommittee meetings scheduled simultaneously. One of them the usmc a which is horribly important to our economy and the other on s. A. L. T. You are requiring us to decide which of these is more important to our constituents. I just strongly object to it. It should be administered better and we should be allowed to participate in both of these matters which are so very important to our entire country. I yelled back. Thank you. We have a distinguished panel of witnesses here with us today to discuss the important issue of how recent limitations on the s. A. L. T. Deduction on communities, First Responders and housing values. First i would like to welcome the honorable david. Next is the honorable bob dean attali. Mirror of bayville new york we have the commissioner from berks county pennsylvania. Doctor paul who is the superintendent of Upper ArlingtonSchool District in ohio. Lieutenant Malin Mitchell a firefighter from wisconsin. Finally we have the Vice President of federal and special projects tax foundation. Each of your statements will be part, made part of the record in its entirety. I would ask that you summarize your testimony in five minutes or less. To help you with that time, there is a timing light at your table. You have one minute left. The light will switch from green to yellow and then finally to read your five minutes are up. Mayor, we will begin with you. Thank you very much. German thompson, members of the subcommittee. I am proud to serve as mayor of falls church virginia. It is a small, independent city of about 14,000 citizens located on the outskirts of washington. Our local elections are nonpartisan and i was elected as an independent. I come here today without a lyrical ask to grind. That being said, let me be clear about the issue at hand i believe it is a poor idea to cast the s. A. L. T. Deduction. It hurts hardworking families and municipalities like mine. In falls church, we ask a lot of our taxpayers. We have to is a city in virginia we are independent of an county and yet we must provide the same full range of municipal services. Excellent schools, a Trustworthy Police force, well maintained parks and clean streets. Lack any, lacking the scale of our neighbors, People Choose to live in falls church anyway. In recent years we built a new middle school, expanded two Elementary Schools and earlier this month we broke ground on a new high school. All that plus we are renovating the city hall and library. These Capital Investments are expensive but our citizens view them as a necessary part of maintaining the Falls Church Way of life the median cost of a Single Family home in our home, in our town is 825,000. That does not buy you a mansion. More likely a modest brick rambler built in the 1950s. Armenian city mortgage payer lays out more than 36,000 per year. So well our income may appear hi, when stacked against the imposing cost of living, many residents struggled to make house payments, pay taxes and make ends meet. There are no yachts, just watch of hardworking families trying to get by in a high rent district. Most of the folks i know are two income families who serve their country through work in government or the military and want the best education possible for their children i am not a wealthy man. I have discovered that eating a locally elected official is not a financially lucrative career. Like many of my fellow citizens, i pay thousands in extra taxes because of the s. A. L. T. Deduction. Like you i care about the tax burden on my constituents. Even before this cap i thought our community was at the top end of the taxing capacity. The number one issue i hear about our pretty taxes when campaigning. The owner of the 825,000 home i mentioned will pay 11,000 in taxes this year alone. What does this mean . It means that text dollars that could have gone to the city are now going to the federal government. There is less money available for essential local services ike schools, lease and fire protection. The new cap on the s. A. L. T. Deduction double taxes citizens in these payments. It penalizes workers in high cost areas like my city or wages and income are high but are fully matched by the cost of living. To us in local government, the recent imitation also has the look and feel of another hundred mandate or higher levels of government can explain they have reduced taxes when in reality they are shifting the burden downstream. That high school i mentioned earlier was built in the 1950s. With grants and 0 loans from the government. Today, we are on our own. Our local taxpayers are getting no assistance from the federal government and worse with the limitation of the s. A. L. T. Deduction texas have been effectively raised back home we agree with that must famous virginian, thomas jefferson. The government closest to the people serves the people best. We balance our budget and provide Necessary Services in the most costeffective manner. Local government is where the rubber meets the road. We should not be at odds with the federal government and instead working in close ship to create Better Outcomes for our citizens from where i sit, repealing this will be a step in the right deduction, step in the right direction. Thank you. I am robert, the mayor of a small village in long island called bay hill. I served as a volunteer. We are also not elected by political parties. Although, i must admit to being a republican. I would like to think the comment german thompson, Ranking Members, members of the Sub Committee and the congressman for the opportunity to share with the committee the hardship caused by the limitation on s. A. L. T. Deductions. Congress decision in 2017 to limit taxpayers state and local Tax Deductions has hit millions of families with a oneto punch. Higher taxes and the lower home values. This is harming village bottom lines and hurting our ability to provide key services. The perception that the s. A. L. T. Deduction cap is only affecting wealthy families is false. The village of bay hill located on long island has 7000 residents that are mostly middleclass, hardworking people. They chose to live here. Some our home of teddy roosevelt. It is a three mile peninsula that is home to average citizens. The vast majority of homeowners need two Household Incomes to afford to live here. It is not a haven for the wealthy. Another huge attraction to our community is our wellregarded School District. It cost the average taxpayer over 10,000 per year. We may soon be faced with reducing local taxes to make up the rule tax increase caused by the s. A. L. T. Deduction limitation. This would have a devastating impact on the services are con