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 constituents depend upon. Combined with county and village taxes, the average modest home has a total tax bill of 20,000. A great many of our residents live in the flood zone which requires Flood Insurance in order to obtain a mortgage. Of course the Flood Insurance averages 2000 annually. The medium income for a Single Person in our village is 68,500 work the Median Income for a family is 77,800. The s. A. L. T. Deduction limitation causes many residents to rethink staying in the village where they grew up or have raise their children. As a result, we have over 60 homes listed as for sale on most , multiple services on long island. That is a 30 increase since 2017. The typical resident is having a difficult time balancing personal budget, maintaining their property and saving for the future. Indeed, a recent newsday article documented the fact that most young people are being forced to relocate. The inability of residents to fully deduct all property taxes is certainly something weve been grappling with the change was made. Limiting the s. A. L. T. Deduction will have longterm 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 deductions has hurt homeowners financially and they may not be negatively impacting the housing the market. Home values may soon decline. Only further eroding our tax base and reducing the ability of the many families in my community to meet their daily basic needs. Restoring the s. A. L. T. Program to previous standards would be a huge help to our residents. I urge the subcommittee to restore the previous positions of the original program. I wanted to show you in the little bit of time i have left, a few homes in our village listed at 900,000. These are nowhere near palatial residences. This is the typical residence. This is what we must pay to live in this community. Though it is not a question of republican or democrat, it is a question of fairness. I am a registered republican and i actually voted for president trump. This s. A. L. T. Cap limit is totally unfair in villages like mine and others throughout the country. Thank you. Thank you, very much. Thank you chairman thompson and Ranking Member smith were inviting me to testify before this committee today. I am an elected county commissioner from berks county pennsylvania. I am also here today representing the National Association of counties and 3069 counties across the country. The state and local Tax Deduction is an integral part of the tax code and im glad to be here today to urge congress to fully restore it. The history of the s. A. L. T. Deduction establishes a clear resident for the necessity of the deduction. It dates back to the principles set down by the nations founders. In federalist paper number 31 Alexander Hamilton argued that the taxation power of the federal government should not intrude on state and local taxing decisions. To ensure local autonomy and that state and local decisions would be protected, the First Federal income taxes included s. A. L. T. 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 is a fundamental understanding that taxing dollars already paid with double taxation including the s. A. L. T. 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 constituents. We support local Law Enforcement and Fire Departments. They put their lives on the line for our communities every day. Counties also own and maintain a wide variety of safety infrastructure and we are the First Responders when disasters hit. We are also major stakeholders in Infrastructure Development across the country. Collectively we own 45 of american roads and nearly 40 of bridges. We are stewards of the Publics Health and wellbeing operating hospitals, Nursing Homes and jails across the country. All of these rely on text dollars primarily from. States already cap the amount of property and sales tax counties may levy. The federal governments decision to eliminate the s. A. L. T. Deduction would present yet another unwarranted strain on county resources forcing us to eliminate some of these Vital Services we provide. After all, counties operate unbalanced 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 police or fire personnel. A delayed 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 k12 education. I would like to make one final note before i conclude. Capping the s. A. L. T. 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 taxable income, the result is an exposure to double taxation. This tends to be true for most homeowners who must pay property taxes on top of their state income taxes. This is particularly true in berks county. In 2016, the latest year for which data is available, over 60,000 individuals and families in our county filed tax returns utilizing state and local Tax Deductions. 91 of those filers made less than 200,000. According to an evaluation of iris data the average s. A. L. T. Deduction in 2016 was above the 10,000 s. A. L. T. Cap this means that many of these filers were potentially exposed to double taxation during the 2018 filing season. To add insult to injury for these middleclass families, businesses and landlords can still deduct all of their state and local taxes as a business expense. Meanwhile, middleclass families must phase down double taxation. Of course when taxpayers see their taxes go up, they turned to the level of government poses to the people for relief. As they do with others in the community. Under this new pressure, counties are having to reconsider many of the Vital Services we provide chairman thompson and Ranking Member smith, i appreciate your attention to this issue today. This is not a blue state or red state issue him a rather the s. A. L. T. 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. Chairman thompson, Ranking Member smith, it is an honor to be here and offer testimony in order of removing the cap on the state and local Tax Deduction referred to as s. A. L. T. D. I am the super intendant in suburban columbus ohio. I have been an educator for 29 years and our district serves over 6000 students in the community of over 30,000 residents. We are widely considered one of the finest School Districts in the state of ohio and even though we are a builtup community, enrollment projections call for growth of almost 20 in the next decade. In short, we are a community attracting families due to the quality and reputation of our Public Schools. I am here today because my district is beginning to see how the s. A. L. T. Deduction cap threatens our ability to maintain local autonomy over how we raise local revenue. A major source of our funding. In fact, over 80 of our funding comes from local property tax levies. Our School District like many in ohio relies on property taxes to fund schools. We find that we need to ask for a new property tax levy every three havent for years because our levy collections are fixed and are not allowed to grow with inflation. The full deductibility of property taxes has long been a key factor passing these levies and funding our schools. Deducting state and local taxes was an original component of the First Federal tax code and that deductibility directly impacts how willing and able local taxpayers are to support changes in local taxes. Without the ability to deduct avoid paying double taxes and increase at the local level is felt twice. That is not something our taxpayers will readily support. I and many of my colleagues have followed this debate and have heard the narrative that s. A. L. T. D is a state issue or only impacts state on the coasts. Im here from ohio to stress that this is not a red or blue state issue, it is a Public Education issue. Public education is the foundation of our republic and the overwhelming majority of funding for Public Schools comes from state and local sources. The cap threatens our ability to raise those funds at the local level which could begin to deprive local districts of resources needed to educate our students. Im concerned that the unintended consequence of this change will be to provide additional revenue to the federal government at the expense of local School Districts. You cannot allow this to happen to our students. The ever argument i have heard is that this only affects will the people and they can afford a tax increase. This is not correct. The median home value is 367,000 in the are pretty taxes are almost 10,000. Meaning that property taxes take the average resident of our community to the new s. A. L. T. D cap before even factoring in state taxes and local income and earning taxes. This change is significant for average families in my district and in districts across the state of ohio. If you have visited my community you would find beautiful treelined streets with families who care deeply about one another and invest heavily in Public Education. If you have heard of Upper Arlington, you may know we are considered an affluent community. That is correct. When i shared our home value you may think that someone who owns a 357,000 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 student in our schools. These are families living paycheck to paycheck with less flexibility in their household ajit to absorb tax increases. This change in tax law has meant an increase in federal taxes when they do not have the margin to pay for such an increase. I am concerned that these families will not be able to afford Future School tax levies 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. Senator mitchell, you may begin. My name is Malin Mitchell, i am a 22 year activeduty firefighter where i am able to knit for the city of madison. I appreciate the opportunity to appear on behalf of the interNational Association of firefighters, our general president and i. I come to offer my testimony on the federally mandated cap and its impact on firefighters, Fire Departments and public safety. At its core, this is for local agencies like firefighters and schools to be able to deliver the best possible services. Fairness for communities to decide how best to deliver local services. Fairness for tax payers who are now being double taxed. As a lieutenant with the city of madison i see firsthand how local governments have been forced to tighten their belts and the impact this has had on public safety. I hear from fellow firefighters about how they are being forced to do more with less. Shackled by inadequate staffing and lacking in health and safety measures. This cap is not only hurting those in fire service but also those in the communities we serve, as well. Essential investments that give our First Responders the tools we need to get the jobs done. In wisconsin we already experienced significant revenue limitations. This has been due to downturns in the economy but also due to a reduction in her state revenue. Just last year or in 2017, sorry, the city of milwaukee had to close down six fire stations across the city due to inadequate funding. They had zero working fire engines in the city. Imagine that. You call 911 and you get crickets. Or a neighbor in the community has to come help you. As a result in both milwaukee and menomonee falls, response times were on the rise putting lives at risk. This is not just in wisconsin. Quite frankly it is not unusual across the country. We are 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. We cannot be our best if we do not have adequate staffing, equipment or training to do so folks always say, whenever you testify, you make it personal. It actually is personal. What if it were your family needing help . What if it were your mother or your daughter your brother, your sister, you make me get my point. It is personal. We are always asked to do more with less which quite frankly is not possible. A federal cap on the s. A. L. T. Deduction but even more Financial Stress on municipal, and municipalities charged with providing essential services. This is not a political game. Firefighters and citizens of the state of wisconsin to them it is a matter of life and death. It unfairly penalizes hard working middleclass taxpayers as we have heard. This double taxation scheme is deeply harmful to middleclass taxpayers in many of these same communities and firefighters and other Public Servants call them. Taxpayers in all 50 states benefit from the deduction. Middleclass workers make up the clear majority of those who benefit from this deduction. Capping the s. A. L. T. Deduction clearly hurts Public Services and becomes propped up on the backs of firefighters. The damage is already done but there is an opportunity to mitigate the situation. In my opinion, Congress Must fully restore the deductibility of state and local taxes. Legislation has been introduced to do just that. Bypassing this critical bill congress would restore the full ability to state and local government to provide Critical Services. There is no doubt in my mind that the current s. A. L. T. Deductions impairs the ability of other Public Services. It will make my job to protect the city of madison, wisconsin and is residents much harder. Again, i would like to think the subcommittee for the opportunity to testify today. I am happy to answer any questions. I cant believe i kept that under five minutes. Thank you. Lieutenant mitchell thank you for your testimony and for your services as a first responder. Chairman thompson and Ranking Member smith, members of the committee. Thank you for the opportunity to speak to you today about the recent changes to the state and local taxes deduction and its impact on the community. This is the oldest organization dedicated to promoting economically sound tax policy at the federal, state, local and global level. We are not partisan organization. More than 80 years, tax Foundations Research has been guided by the principles of sound tax policy. Taxes should be neutral to decisionmaking. They should be simple, transparent and stable. Today i have been asked to discuss recent changes made within public lot 115 97 known as the tax cut and jobs act. This overhauled the federal tax code. It lowered tax rates and expanded the standard deductions. Limited the alternative minimum tax unlimited known deductions including the s. A. L. T. Deduction. On that, most americans have a tax. Limiting the s. A. L. T. Deduction helps maintain progressivity within the tax code. Prior to tax reform, more than 90 of the benefits of the s. A. L. T. Deduction accrued to those making more than 100,000 per year for the top 20 of taxpayers. The impacts therefore is concentrated on high income individuals. The s. A. L. T. Deduction is often discussed as benefiting residents of high tax rates. But that analysis obscures the real impact. It is better understood as an a fitting high income individuals living in expensive housing and in high Tax Jurisdictions within high tax rates. The benefits are not monolithic across the state even in high tax states. The mean deduction in Westchester County new york is seven times that of county, new york. In other words, deduction benefits are focused in areas of high levels of income and wellbeing not just high tax states. The tcg a limited the s. A. L. T. Deduction as it was estimated to raise 600 8 billion over the next decade. 65 of americans were projected to have lower taxes in 2018. Those impacted by the s. A. L. T. Cap benefited from other tax changes. First they received relief from other implicit s. A. L. T. Limitations. Second, some quit itemizing and switched to the standard deduction. Filers benefited from lower tax rates. To the small group of individuals with net tax increases, an estimated 6. 85 in 2018, it is unlikely that was due solely to the s. A. L. T. Tax. Is often due to interactions with other divisions. Very few had a tax increase only due to the s. A. L. T. Cap and those that did were at the high end of the income spectrum. Repealing the cap would significantly reduce federal revenue. An estimated 700 billion over the next decade with that benefit going almost exclusively to the top 20 . The tax code would be less progressive. The deduction cap is frequently cited as impacting state budgets. However, the impact is overstated. We saw an increase because of conformity to the tax code. States like georgia, virginia, new york, have estimated more than 1 billion in annual revenue because of the tcg a. The s. A. L. T. Cap is also noted for its impact on housing value. The impact on housing values is not due to the s. A. L. T. Cap in isolation. Limits play a role. To the extent that these two provisions do Impact Housing values, the impact on low and middle income households is overstated. There are important considerations here. First, the limits are progressive. Only high income individuals can purchase homes that cost more than 750,000. Second, its impact would then be limited to expensive areas in the country. Less than 1 of counties in the united dates have median home prices exceeding 750,000 third, any impact on housing value would actually be beneficial to many particularly firsttime homebuyers. Tax reform is a difficult tax limiting deductions burdens those in the context of the tc ji, limiting the s. A. L. T. Deduction was a desirable and strong was a choice thank you very much. We will now proceed under the five minute rule with questions for the witnesses. I will begin by recognizing myself for five minutes. Lieutenant mitchell, as a result of the turndown of 2008 the state and local governments were forced to make difficult choices about which Government Services to fund and outlet levels to fund them. Many of these governments are still operating under those restrictions. Can you speak to how reduced state and local budgets affects First Responders to adequately provide Critical Services to the public particularly with the new s. A. L. T. Cap in place . Yes, it greatly affects any state or municipal budget. About 56 on average is placed in keeping citizens safe. We have seen that a lot in the state of wisconsin. It is the first thing cut normally, that is staffing. Right now at least in the city of madison, it is pretty much standard in wisconsin. We try to have at least four people on a fire engine or fire truck. That is what is needed in order to do our job safely and efficiently. In order for us to keep others safe, we have to obviously keep ourselves safe when we go from 43 on a fire truck which happens when there are staffing cuts, we are putting our lives of not Just Community at risk but us, as well. We are seeing that a lot in wisconsin where we have increases where the city is not able to raise levees. Shared revenue being cut and it has not been raised in decades. I have unfortunately been on the job 22 years, fortunately, but i have been part of pulling four civilians out of burning buildings. I can tell you that we could not do that and not have done it as effectively if we had three people on a fire truck as opposed to four. It is detrimental to our staffing and also to the safety of not just the citizens but us, as well. The s. A. L. T. Cap harms middleclass communities that make substantial investments in infrastructure, schools, First Responders and other important programs. Mayor, you noted that the Median Income for a family is 78,800. That is correct. According to the irs data from 2016, more than half of the tax returns from your zip code itemized and are likely to be harmed by the s. A. L. T. Cap, in your Opening Statement you notice that the Bayville School system cost the average taxpayer over 10,000 per year. Can you expand on some of the other Important Services funded by your local tax system . County wise, yes, we have a number of facilities, sport facilities, some incredible and beautiful beaches and a first rate police department. The village itself, we run simply a department of public works. We fund a local free library. At 500,000 per year just to run the library. We have public beaches for residents and we have a Senior Community center and probably thats about it that i can think of at the moment. Commissioner, you mentioned in your testimony on 70 of counties are considered rural. In a state like california with both largest cities and rural areas, state funding is critical to all counties whether urban or rural. Can you discuss how the s. A. L. T. Cap impacts Rural Counties . Again, the impact of the actual s. A. L. T. , thank you congressman, the impact is only now just being felt because it only impacted the 2018 taxes. The core issue for us is the federalism case that when you look at the issue, it goes back to the respect that federal governments should not have tax policy that ignores the state and local government. That is why i cited federalist paper number 31. When you look at our county, berks county is both rural and urban. In our particular county, 61 of our filers, 90,000 people, and i am forgetting about the number here, anyhow, filed for state and local Tax Deduction of over 10,000 in 2016. That is the latest year we have data. Our number one industry is agriculture in our county. We are very concerned about the impact on our county and other Rural Counties are saying the same thing and schools are the number one source of Property Tax Funding that is going to the k12 schools. Thank you. Do you think middle class payers were surprised to find that in 2018, their charitable deduction was limited due to the limits on other itemized deductions and the increased standard of deductions . I think many taxpayers are often uncertain of all the components of the federal tax code while they might have been limited slightly in their ability to deduct Charitable Giving, that is largely because they were taking out the expanded deduction. On that they were actually better off than they had been under previous tax law. What you think happens to Charitable Giving in 2019 for middleclass taxpayers who have not experienced the limitation from this year . I think it will be interesting to watch. We saw a slight increase in 2018 that could also be related to impact to the fact that incomes have increased. Overall, particularly for a lower income individual, their giving is not for tax reduction, but because they want to give to local churches. A do think that the loss of the s. A. L. T. Deductibility will impacted . I believe it can. I know recognize Ranking Member smith. Thank you again to our entire panel. I appreciate your service and certainly sharing your perspective mayor, again, thank you for your service. Prior to coming here i served on the city council in my hometown, a similar sized community in nebraska. No public beaches, but certainly i appreciate the challenges of operating a village in a Small Community such as dayville. As i was reviewing your testimony, a couple numbers stood out to me. As you said in your statement the Median Income for a Single Person is 68,500 40 families 77,800. Get the combined taxes on an average modest home is 20,000. It does not leave you too much left over, does it . I hear you. With families with these levels, we would expect the federal taxes to be minimal. A two parent household with three kids with an income of 77,000 800 would have a liability of about 75. Can you help me square those numbers of how there seems to be, how can someone im not in the position that i can certainly get the information for you. I do not have an accounting background work i come from a retail background. I cannot answer that question. I look forward to more information. I struggle to think someone making 78,000 could eighth warm , could a form afford a home not to mention the property taxes. But that is the middle. Does that strike you mr. Smith, the numbers im giving you, i have gotten right off the internet. As published numbers. Further than that i really could not comment. Okay. I certainly think you for your testimony. You have obviously processed the Bigger Picture of the tax policy and where we were before and where we are now. And certainly what you think is good tax policy. I would share many of the same observations. You addressed the way in which the various states conform their rules and the federal tax policy. That has led to a broadening of the basin those states thanks to the tea seed ga. The increase of revenue actually resulted from that base broadening. For example, new york estimated an increase in revenue of about 1. 1 billion, that is billion with a b thanks to the broadening. At the same time, you noted that conformity was not impacted assault deductions. Can you elaborate . Thank you. In general states using the federal tax code as the states tax code. It makes it easier for filers. They can literally copy numbers from their federal 1042 their state return. It makes an easier time because they can rely upon federal debt , definitions, irs guidance etc. We can think about the tc ga at a basic level is lowering a tax base and broadening the tax base. States dont conform to the tax rate at the federal level