Sen. Collins Defends Property Tax Deduction in Face of Pushback

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By Che Odom

Sen. Susan Collins (R-Maine) is defending her support for the Republican tax bill after it was amended to include a deduction she sought for property taxes paid to local and state governments up to $10,000.

“Her amendment protects Mainers’ ability to continue deducting local property taxes, up to $10,000, as they have for more than 100 years,” Annie Clark, the senator’s communications director, told Bloomberg Tax in a Dec. 1 email. “Mainers have the 11th highest per capita property tax burden in the nation.”

Passed by a 51-49 vote in the early hours of Dec. 2, the Senate-amended tax bill (H.R. 1) would retain a deduction up to $10,000 in property taxes paid to state and local governments similar to a provision in the House tax bill ( H.R. 1). An earlier plan proposed repealing the full deduction for sales, income, and property taxes paid at the state and local level.

Various organizations representing state and local governments, including the National Governors Association and the U.S. Conference of Mayors, pushed to preserve the deduction, calling it necessary to prevent their taxpayers from paying taxes multiple times on the same income.

Sen. Collins said in Twitter post on Dec. 1 that she was delighted that “the Senate has agreed to include my property tax deduction amendment, that will allow 166,000 Maine taxpayers who itemize to deduct a total of $725 million in property taxes each year.”

‘Useless’ Deduction?

An analysis released Dec. 1 by the Institute on Taxation and Economic Policy (ITEP) said that only 6.4 percent of Maine taxpayers would still claim the property tax deduction under the scenario that Collins championed. ITEP describes itself as a nonpartisan, nonprofit research organization.

Carl Davis, a research director at ITEP, said Dec. 1 on Twitter that the “property tax deduction will be useless to most (75%) of people in Maine who receive it today. Actual numbers in Sen. Collins’s tweet should be 44,000 and $262 million.”

Collins’ office countered, saying the ITEP claims are misleading and that her amendment to the tax bill was designed to help Maine residents. Mainers earning “less than $75,000 typically deduct more in property taxes than they do in state income taxes,” Clark said.

“Since the Senate bill doubles the standard deduction, many Mainers who currently itemize will choose this option rather than itemizing,” Clark said. “Inexplicably, ITEP claims it’s a bad thing that more Mainers will take the standard deduction, even though it will provide them with greater tax savings and dramatically simplify their tax filings.”

Collins sought to preserve the property tax deduction because it is more likely to benefit lower- and middle-income families, Clark said.

“ITEP appears to be more concerned with preserving wealthy families’ ability to claim the state and local income tax deduction,” she said.

The House and Senate will begin to work out any remaining differences between their two bills. The final product will have to pass both chambers before President Donald Trump can sign the bill.

Eliminating deductions is a way for the federal government to broaden the base of what is subject to tax and raise revenue to pay for cuts in individual and corporate rates—features of both the Senate and House bills. Democratic and Republican members from higher-tax states such as California, Connecticut, New Jersey, and New York have been pressing to preserve the state and local tax deduction.

Impact on Homeowners

Americans Against Double Taxation, a coalition of state and local government groups, realtors, and others supporting the deduction, said the SALT provision in the tax bill would increase taxes for middle-class homeowners and drive down home values.

“For the first time in the nation’s history, this bill doubles taxes for millions of Americans and creates a double standard by partially eliminating SALT for individuals and families while preserving this same benefit for corporations,” according to a Dec. 2 statement from the group.

U.S. Conference of Mayors President and New Orleans Mayor Mitch Landrieu (D) said in a Dec. 2 statement that many mayors around the country are concerned about proposals to repeal the SALT deduction and end the individual mandate of the Affordable Care Act.

“This bill will severely undermine economic development in cities and towns across the country, add to the deficit and make our country weaker, not stronger,” he said. “It will make communities less safe and far less equitable.”

Landrieu said the bills negatively impact the middle class, “which is why mayors of both parties strongly opposed this tax hike on hard-working families.”

To contact the reporter on this story: Che Odom in Washington at codom@bloombergtax.com

To contact the editor responsible for this story: Cheryl Saenz at csaenz@bloombergtax.com

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