Cspans q and a. The house ways and means subcommittee has been examining limits but on the deductions of state and local taxes under the 2017 republican tax bill. Fromearlier today we show you the first part of this hearing while the senate is in recess. Farming communities, schools, First Responders and housing values. Before i begin my Opening Statement id like to yield to the chairman of the full ways and Means Committee for his opening remarks. Thank you chairman thompson and i want to acknowledge you and the other members of the subcommittee for indulging me with time to speak in this important hearing. The leadership of this committee and the working group is invaluable to congress. I want to take a couple minutes of time to express my appreciation to the witnesses who come to share their testimony today. Its a rare occasion that we can hear from hardworking folks make up our state and local governments. As former mayor of springfield until your firsthand of my experience as to how important all the work you do is. It is from that lens that i view the issue of state and local Tax Deductions or salt as we call it. If you from a Vantage Point of someone whos like experience has been a testament to the advancements weve made, services provided, by local governments and what those investments can mean in terms of the lives of our citizenry. Children from all walks of life are provided with education, downtrodden neighborhoods, building and maintaining roads bridges and tunnels so people can get where they need to go safely and efficiently as part of our challenge. Providing the service for low income families and others rely upon the safety net is our obligation. That is precisely what local government does. Mister thompson, that his wife the work that you and mister pascal and the rest of the members here are working tirelessly on this issue of this is so important. Its the reason the good folks before us have come here to testify, mayors, commissioners, school attendance, you understand what our state and local taxes support. You understand what it means for federal government to undercut the good work you do by imposing a cap on that deduction. Foreign policy and we needto find a workable solution. Take it from me, take it from Alexander Hamilton who wrote in the federalist papers 31 quote, revenue is a requisite to the purposes of local administrations as it is to those of the unions. The former are at least of equal importance to the latter. The creation of a strong Central Government is in order to get efficacy to National Revenues for all the resources of taxation by degrees become the subject of federal monopoly and the entire exclusion and destruction of state governments. We must ensureour local governments continue to provide and prosper and i want to thank all of you on the committee and you in particular Mister Thompson for living up to the promise you made. Thank you mister chairman and with that, welcome to todays hearing on how the recently enacted on state and local Tax Deduction is affecting communities, schools, First Responders and housing values. A cap on the softdeduction was one of the most divisive and controversial provisions arising from the deeply flawed and sloppy tax cuts job act. The process that brought us tax law was written behind closed doors and passed a mere 51 days after its introduction. Corners and skip important factfinding hearings like this one today. They and local government leaders and Community Members were silenced in 2017 and have been forced to deal with the fallout of the salt since then. Todays hearing should have taken place two years ago. But it didnt so it falls on us today to hear from state and local government leaders, education experts and First Responders about how the salt is affecting their communities, their work and their decisionmaking. Salt raises a host of issues that delivered to the folly deserved to be fully explored. First, the questions of the concept of federalism that underpins our government. In the United States we have a system in which Critical Public Services and responsibilities are allocated among federal, and local governments. The federal government doesnt aim to meet all of societys needs and its taxing capacity is significant. For a centrally our federal income tax hasrecognized this threat and has used the salt deduction to provide flexibility to state and local governments. Second, assault and ask a massive marriage penalty. 10,000 applies for tax whether a single individual or two married taxpayers file jointly. Third, the salt creates disincentives for homeownership and Charitable Giving. 2017 tax law increase the standard deduction to 12,000 for a single eiler and 24,000 for a couple. Increased standard deduction plus the 10,000 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 with switch over to the standard deduction, they will lose most of the tax incentives for homeownership and charitable contributions. We all know that homeownership is a crucial way for middleclass families to build wealth. Furthermore, charities are extremely concerned about the potential future impact on their giving. Fourth, although the direct benefit of salt deduction primarily faulty upper income taxpayers, the deduction supports date and local government budgets. Those expenditures or programs with widely shared benefits. When Public Schools, and protector, First Responders and health care programs. And as they strive to balance their budgets,less revenue , local leaders likely will make cuts in those very programs. Concerned about the distributional effect of these certainly apply to the republicans when they were looking at other Tax Deductions and candy alleviated by adjusting tax rates, not operating a century old bedrock aspects of Public Finance of our country. Finally, the salt on this as i possibly areas. We heard a lot of talk in this committee about the sins of date and local governments that will be pinched by the salt. The charge was made repeatedly back these states and localities were somehow prolific. I think it ever. The cost of living varies so tremendously from one corner of this nation to another that the comparison is truly apples to oranges. Every School District in america employs in the garden teachers. Every Law Enforcement agency in the country painted police officers. They need the cable pay rent or mortgage for wherever they live. It is not reasonable to expect a teacher in new york or a teacher in Mississippi Mississippi earns. The gross income of the average mississippi teacher is the same as the median price of rent in new york. You cant pay them the same amount. Im pleased that todays panel is a bipartisan one with elected leaders across the political spectrum. Thank you for taking the time away from your heavy responsibilitieselsewhere to help us better understand this issue. With that, ill recognize the Ranking Member mister smith of nebraska for an Opening Statements. Thank you to our witnesses as well. Let me begin by saying this. Property taxes and other high state and local taxes on a problem not just on the post but across our country. In nebraska the problem with property tax is particularly acute in rural agriculture areas like the Third District which i represent where high land values in concert with a flawed state School Funding formula lead to a massive property tax burden on agriculture producers regardless of the state of commodity prices. While the nebraska legislators not yetfound a solution we can at least be thankful agreement question for nebraskas senators , how can we reducethe tax burden on the rations make our state a more attractive place to live instead of how can we just generate more revenue. As we review the impact of tax cuts and jobs act on americans and on our economy, it is important we consider provisions and proposed changes in the full context of a loft. Salt and the salt will be used through the prism of lower overall tax rate for family and pc ja. Even with this place, most families have lower overall tax bills now and they did prior to pc ja. Before dcj the flexibility of state and local taxes was already limited in various ways including under amt and cep limitations. In addition the salt reduction is only useful if your itemized deductions exceed the standard deduction. In cja we doubled the standard deduction to 12,000 for individuals and 24,000 for married couples. Meaning even with a 10,000 on all deductions, a married couple could cumulatively spend 24,000 on and local taxes before theyre guaranteed tobe affected. For example, married couple with no children in california im just picking on california because of high income tax rates and not because itsyour home mister chairman , but if we look at a married couple with no children in california, which rents is it called when pay more in state income taxes and the value of their standard federal deduction until their income exceeds 300 thousand dollars. Per year. 300,000 per year. This highlights one of the biggest problems with proposals to repeal or increase the salt. We know the benefit of such a repeal which is estimated to cost 673 billion over the next eight years with through largely to the highest income taxpayers and high tax states. More fundamentally, the salt deduction is a matter of fairness the taxpayers across the country. Tax reform in to achieve a principle that is straightforward , at least. Find the way. Those with similar levels of income have a similar federal income income tax and we shouldnt have one federal and contact for the largest areas of new york and another higher rate for nebraska and South Carolina. Some communities want to have high levels of Government Spending in their community, that is fine so long as they pay for it. Regrets seem to the prior law salt deduction instead would tell communities to spend more because they can ship those costs to the rest of the country. Such policy is inefficient and unfair. We know the largest benefits of the salt repeal would go to the highest earth with the average family making 1 million or more per year seeing a taxcut of 67,000 and the average family over 3 million per year receiving a taxcut of 140,000 under such a proposal. Contrast that with our approach when we drafted the salt limitation. Under g cja, a single mom with two kids making 60,000 a year has no federal income tax and the salt was designed to ensure a typical family earning up to 200,000 per year would be held harmless and the average salt deduction pre gcja was in the 7000 range. The middleclass family making 50,000 75,000 would receive less than five dollars per year if the salt repealed. And an environment where just last week the majority chose the markup legislation to expand provisions the ipc and deductibility of the Child Tax Credit, this push to enact a giveaway like expanding or revealing is simply baffling. For many ways we could be working on a bipartisan basis to improvethe irs code. Internal revenue code, and why i hope we can engage in constructive conversation today, i struggle to think that thismight be one of them but i can certainly listen and participate. Thank you, i yelled back. Without objection, all numbers Opening Statements will be part of the record. Mister chairman, i like a point of order by may. I would like a point of order, and that is i really object to the timing of this hearing in that there are two very important subcommittee hearings the ways and means scheduled simultaneously at 9 30, one on the us mca which is horribly important to our economy and the other on salt and youre requiring us to decide which of these is more important to our constituents and 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 kneeled back. Thank you. We have a distinguished panel of witnesses with us today this discussing the important issues of how recent limitations on the salt deduction arm communities, schools, First Responders and housingvalues. First id like to welcome the honorable david carter, mayor of balls church virginia. He is the honorable bob tina kelly, mayor of dave hill new york. We have kristin leinbach, commissioner from berks county pennsylvania. Doctor paul in half, who is the superintendent of over arlington School District in ohio. Lieutenant malin mitchell, firefighter and president of the professionalfirefighters of wisconsin. Finally, we have Nicole Keating who is the Vice President of federal and special projects Tax Foundation. Each of your statements will be part of, a 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 time in life at your table area you have one minute left, like a switch from green to yellow and then finally to read where your five minutes are up. Mayor tarter, we will begin with you. Thank you very much, german thompson, ranking number smith, numbers of the subcommittee. My name is david carter and im proud to serve as mayor of falls church virginia. Falls church is a small independent city of about 14,000 citizens. Updated on the outskirts of washington. Our local elections are nonpartisan and i was elected as anindependent. So i come here today without a political ax to grind. That being said, let me be clear about the issue at hand. I believe it is a poor idea to the salt reduction. It only hurts hardworking families and municipalities like mine. In the church we asked a lot ofour taxpayers, we have to. As a city in virginia where independent of the county , and yet provide the full range of services. Excellent schools, a Trustworthy Police force, wellmaintained parks, clean streets. Lacking the economies of scale of our larger neighbors and property taxes are permissible. People choose to live in falls church anyway. Because im proud to say that our town values are the right thing. Like our awardwinning School System. In recent years we built a new middle school,expanded to Elementary Schools and early this month for a round on a brandnew high school. All that us we were renovating our city hall and library. These Capital Investments are expenses. But our citizen. As a necessary part of maintaining a Falls Church Way of life and investments in ourcommunitys future. The median cost of a Single Family home in our town is 825,000. That doesnt buy you a mansion or likely a modest rambler built in the 1950s. Our median city mortgage payer lays out more than 36,000 a year. So while our house of income might appear high, when stacked against the imposing costofliving , many of our residents to make house payments, take taxes and make andmeet. There are no yachts in falls church, just lots of hardworkingfamilies trying to get my in the high rent district. To the folks that i know are two income families who serve their country the working government or the military. And what the best education possible for their children. Im not a wealthy man. Ive discovered that being a locally elected official is not a financially lucrative career but like many of my fellow citizens i face the prospect of paying thousands in added taxes because of limitations in the salt deduction. Because of you i care about the tax burden of my constituents. Even before this i thought our community was at the top end of its taxing capacity. The number one issue i hear about when campaigning is property taxes, and indeed they are burdensome. The onus of that hundred 25,000 house was to pay over 11,000 in property taxes this year alone. Youhad in virginia income and car tax, that same citizens payments exceed the 10,000. What does that mean . It means tax dollars that could have gone to the city are now going to the federal government and theres less money available for essential local Services Like schools, police and fire protection. A new cap on the salt deduction double taxes citizens on these payments and penalizes workers in highcost areas like my city where wages and income are high but are fully matched by the cost. The recent salt limitation as the look and feel of another Unfunded Mandate whereby higher levels ofgovernment can claim theyve reduced taxes but in reality there merely shifting the burden downstream. That clement was built in the 1950s with grants of three percent loans from federal and state governments. Today were on our own. Local taxpayers are getting no assistance from the federal government and worse, with thelimitation of salt deductions, taxes have been effectively raised. Back home we agree with Thomas Jefferson who said the government closest to people serves the people best. In falls church we balance our budget and provide Necessary Services in a costeffectivemanner. Local government is where the rubber meets the road. We should not be at odds with the federal government but working in Close Partnership to create Better Outcomes for ourcitizens. Repealin