Congress. I want to express my appreciation to the witnesses who have come to share testimony today. Its a rare occasion that we can get to hear from the hard working folks who make up our state and local governments. Former mayor of springfield i can tell you my experience as to how important the work all of you do is. It is from that lens that i view the issue of state and local Tax Deductions as s. A. L. T. I view it from the Vantage Point of someone whose Life Experience has been a testament to the impact and investments made and Services Provided by local governments and what those investments can mean in terms of the lives of our citizenry. Over xi be that choeinsuring maintaining roads, bridges and tunnels, so people can get to where they need to be is part of our challenge. Responding emergencies, providing services for low income family, elderly and the others rely on the safety net is our obligation. That is precisely what local government does. Mr. Thompson, thats why the work that you and mr. Pasquerel do on s. A. L. T. Cap is so important. Folks come to testify, mayors, superintende superintendents, First Responders, you understand what it means for the federal government to undercut the good work that you do by imposing a cap on that deduction. Its the wrong policy and we need to find a workable solution. Tick it from 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. The former are at least of equal importance. We warned against the risk that in order to give efficacy to National Revenues all the resources of taxation might become the subjects of federal monopoly to the exclusion and destruction of state governments. We must insure that state and local governments thrive and prosper. I want to thank all of you on the committee, particularly mr. Thompson for living up the promise you made to hold hearing on this legislation. With that welcome to todays hearing on how the recently enacted cap on state and local Tax Deduction is affecting communities. Schools. First responders. And housing values. The cap on the s. A. L. T. Deduction was one of the 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 governmenters and Community Members were silenced in 2017 and forced to deal with the fallout of the s. A. L. T. Cap 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 cap is affecting their communities. Their work and their Decision Making. The salt cap raises a host of issues that delivered to be fully deserve to be fully explored. First the cap questions, the concept of federalism that underpins our government. The United States we have a system which Critical Public Services and responsibilities are allocated among federal, state and local governments, the federal government doesnt aim to meet all of societys needs. In its taxing capacity is significant. For a creptry our federal income tax has recognized this threat and has used the salt deduction to provide flexibility to state and local governments. Second, the s. A. L. T. Cap enacts a massive marriage penalty. The 10,000 cap applies per tax filer. Whether a single individual or two married taxpayers file 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 24,000 for a couple. The increased standard deduction plus the 10,000 s. A. L. T. 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 moips 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 Home Ownership is a crucial way for middle class families to build wealth. Furthermore, charities are extremely concerned about the potential future impact on their giving. Fourth. Although the direct benefit of s. A. L. T. Deduction primarily fall to upper income taxpayers, the deduction supports state and local government budgets. Those expenditures support programs with widely shared benefits like Public Schools, infrastructure, First Responders, sand health care programs. As states try to balance their budgets with less revenue, local leaders likely will make cuts to those very programs. Concerns about the distributional effect of the salt cap certainly didnt apply when republicans were looking at other Tax Deductions, and can be alleviated by adjusting tax rates, not uprooting a centuryold bedrock aspect of Public Finance in our country. Finally, the s. A. L. T. Cap punishes high cost of living areas. We weve heard a lot of talk about the sins of state and local government that will be pinched by the s. A. L. T. Cap. The charge was made repeatedly that these states and localities, were somehow, profliga profligate. 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 kindergarten teachers. And every Law Enforcement system pays its police officers. They need to be able to pay rent or mortgage wherever they live. Its 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 a 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 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 ill recognize the ranging member, mr. Smith of nebraska for an Opening Statement. Thank you to our witnesses as well. Let me begin by saying this, property taxes and other high state and local taxes are a problem. Not just on the coast but all across our country. In nebraska, the problem with property taxes is acute in rufrl Agricultural Districts that i represent. Flawed state School Funding formula lead to a massive property tax burden on agricultural producers. Regardless of commodity prices. While the Nebraska Legislature hasnt found a solution, we can be thankful that a question for the senators and governor is how can we reduce the tax burden on nebraskans and make our state a more attractive place to live . Instead of how can we just generate more revenue . As we review the impact tax cuts and job act on americans and our economy, it is important to consider provisions and changes within the context of the law. The s. A. L. T. Cap must be view the through the prism of lower overall tax rates. S. A. L. T. Cap in place, most families have lower overall federal tax bill now. Before tcja, the deductibility of state and local taxes were r was limited through amt and the paez limitation. The s. A. L. T. Deduction is only useful if your itemized deductions exceed the standard. In tcja we doubled the standard deduction for 12,000 for individuals and 24,000 for married. Even with a 10,000 cap on s. A. L. T. Deductions a married couple could spend 24,000 on state and local taxes before they were guaranteed to be affected by this cap. For example, a married couple with no children in california im just picking on california because of the high income high state income tax rates, if we look at a married couple with no children in california in which rents its home wouldnt pay more in state income taxes than the value of their standard federal deduction until, 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 repeal. Estimated to cost 673 billion over the next eight years would accrue largely to the highest income taxpayers in high tax states. More fundamentally the s. A. L. T. Deduction is a matter of fairness to taxpayers across the country. Tax reform aims to achieve a principle which is straightforward. Those with similar levels of income have a similar federal income tax bill. We havent have one tax rate for the wealthiest portions of california and new york and another much higher rate for nebraska or South Carolina. If some communities want to have high levels of Government Spending in their community. Thats fine. S. A. L. T. Deduction would tell communities to spend more because they can shift those costs to the rest of the country. Such policy is inefficient and unfair. We also know the largest benefits of s. A. L. T. Repeal would go to the highest earners with the average family making 1 million or more per year, seeing a tax cut of 67,000, and the average family over 3 million per year receiving a tax cut of 1 40,000 under such a proposal. Contrast it with our approach when we crafted the s. A. L. T. Limitation, under tcja, a single mom making 50,000 with two kids has no federal income Tax Liability and the s. A. L. T. Cap was designed to insure a typical family earning up to 200,000 per year would be held harmless. Expand proikss like the eitc and the deductibility of the child tax credit. Push to enact a giveaway like expanding or repealing s. A. L. T. Caps is baffling. There are many ways we could work on bipartisan basis to improve the irs code. While i hope we can engage in constructive conversation today, i struggle to think that this might be one of them. But i will certainly listen and participate. Without objection all members Opening Statements will be part of the record. I would like a point of order real quick. Pardon me . I would like to make a point of order. I really object to the timing of this hearing. In that there are two very important subCommittee Hearings in ways and means scheduled simultaneously at 9 30. One on the usmca, horribly important to our economy and the other on s. A. L. T. 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. I yield back. Thank you. We have a distinguished panel of witnesses here today with us to discuss the important issue of how recent limitations on the s. A. L. T. Deduction harm communities, schools, First Responders and housing values. First i would like to welcome the honorable david tarter, mayor of falls church, virginia. Next is the honorable bob dinatali, mayor of bayville, new york. We have kristen linebach, the commissioner from berks county, pennsylvania. Dr. Paul imhof, the superintendent of Upper ArlingtonSchool District in ohio. Lieutenant maitland mitchell, a firefighter and president of the professional firefighters of wisconsin. And finally, we have nicole kating, the Vice President of federal and special projects, Tax Foundation. Each of your statements will be made part of the record in its entirety. I would ask that you summarize your testimony in five minutes or less. To help you, theres a timing light at your table. When you have one minute left, the light will switch from green to yellow and then finally to red when your five minutes are up. Mayor tarter. Chairman thompson, Ranking Member smith, members of the subcommittee. My name is david tarter and im proud to serve as mayor of falls church, virginia. Falls church is a small independent city of about 14,000 citizens. Located on the outskirts of washington, our local elections are nonpart san and i was elected as an independent. I come here today without a political axe to grind. That being said, let me be clear about the issue at hand. I believe it is a poor idea to cap the s. A. L. T. Deduction. It only hurts hardworking families and municipalities like mine. In falls church we ask a lot of our taxpayers we have to. As a city in virginia were independent of a county. Yet must provide the same full range of municipal services, excellent skoop schools, a Trustworthy Police force, well maintained parks and clean streets. Lacking the economies of scale of our larger neighbors, our property taxes are formidable. People choose to live in falls church, anyway because im proud to say that our town values the right things. Our awardwinning school system. Recent years we built a new middle school. Expanded Elementary Schools and broke ground on a new high school. All that plus renovating our city hall and library. These Capital Investments are expensive. But our citizens view them as necessary to maintain the Falls Church Way of life and investments in our communitys future. The median cost of a Single Family home in our town is 825,000. That doesnt buy awe mansion. More likely a modest brick rambler built in the 1950s. For that our median city mortgage payer lays out more than 36,000 a year. So while our house of income may appear high, when stacked against the imposing cost of living, many of our residents struggle to make house payments, pay taxes and make ents meet. There are no yachts in falls church, just lots of hardworking families trying to get by in the highrent district. Most of our families are twoincome family who is serve their government or the military. Im not a wealthy man, ive discovered that being in a locally elected official is not a locally elected official is not a financially lucrative contemporacareer. Like you, i care about the tax burden of my constituents. Even before this cap i felt our community was at the top end of the taxing capacity. The number one issue i hear about when campaigning are tax, property taxes. Indeed they are burdens ome. The owner will pay over 11,000 in property taxes this year alo alone. When you add in virginia, income taxes, it far exceeds the 10,000 cap. What does that mean . It means that thax dollars that could have gone to the city are going to the federal government. Theres less money for schools, police and fire protection. The new cap on the salt deduction double tax the citizens of these payments and penalizes workers in high cost areas like my city where wages and income are high but are fully matched by the cost of living. To us in local government, the recent salt limitation has the look and field of another Unfunded Mandate where by higher levels of government can claim they are reduced taxes but in reality they are shifting the burden downstream. That high school mingsi mention earlier was built in the 1950s. Today were on our own. Our local taxpayers are getting no assistance from the federal government and worse, with the limitation of salt deduction taxes have been effeiv effectiv raised. Back home we agree that the government closest to the people, serves the people best. We balance our budget and provide Necessary Services in the most Cost Effective manner. We should not be at odds with the government but working in Close Partnership to create Better Outcomes from our citizen. Repealing the cap would be a step in the right direction. Thank you. Mr. De natale. Im mayor of a small village on long island. I serve as a volunteer. Its not a paid position. We are also not elected by political parties. Although i must admit to being a republican. Id like to thank the chairman thompson, rank member smith, members of the subcommittee and congressman for the opportunity to share with the committee the hardship caused by the limitation on salt deductions. Congresss decision in 2017 to limit taxpayers state and local Tax Deduction has hit millions of families in new york with a onetwo punch of higher taxes and lower home values. This is harming village bottom lines and hurting our ability to provide key services. Perception that salt deduction cap is only affecting wealthy families is false. The village on long island has 7,000 residents that are mostly middle class, hard working people. They chose to live because of the proximity to Long Island Sound and beautiful oyster bay. Summer home of our 26th president , teddy roosevelt. Its a three mile peninsula thats home to average citizens. The vast majority of homeowners need two Household Incomes to afford to live here. Its not a haven for the wealthy. Another huge attraction is our well regarded School District. It cost the average taxpayer over 10,000 a year. We may soon be faced with red e reducing local taxes to make up for federal tax increase caused by the salt deduction limitation which would have a devastating impact on the services our constit