Senate Republicans are aiming to vote on their bill to overhaul the federal tax code by the end of the week. The GOP plan includes a number of changes that could significantly affect how much Californians pay in federal taxes.
Here's a breakdown of what the bill's passage could mean for the state:
Fewer write offs
The GOP plan aims to double the standard deduction (for single filers, it would rise from $6000 to $12,000). In exchange, a host of other write-offs would go away. Among them: the state and local tax deduction. That would hit hard in California, where state taxes are some of the highest in the country. The GOP tax plan calls for keeping the mortgage deduction in place, and scrapping the property tax deduction, though some Republican lawmakers are pushing to keep the property tax deduction in place.
A potential shake-up in the California housing market
If the property tax deduction were to go away, California's homeowners and prospective home buyers could be hit particularly hard. For instance, a Southern California family living in a median-priced home (approx $500,000) could lose a $5,000 property tax deduction. The loss of that attractive tax break could discourage new buyers from purchasing homes in already pricey markets. And with fewer buyers, home prices could fall.
Individual tax cuts wouldn't last
For renters who earn modest incomes (and take the standard deduction) the tax plan could save them a couple thousand dollars at tax time. But the tax cut is slated to expire after 2025. The Tax Policy Center finds that this phase-out would affect earners differently, depending on their tax bracket: high earners will still reap the benefits of the plan, while middle-income taxpayers would see their tax cuts vanish, and low-income people would actually see a tax increase, on average.
California's big winners
As in the rest of the country, some of the state's biggest beneficiaries would be large corporations. The GOP tax plan would slash the corporate tax rate from 35 percent to 20 percent. And unlike the individual tax cuts, this one would be permanent.
Where California's representatives stand
Predictably, this is mostly split along party lines. All of California's Democratic representatives, including its two senators, are against the tax bill. Earlier this month, nearly all of California's House Republicans voted for it. Three GOP representatives in Southern California voted no, including two congressmen from Orange County. They represent districts where over a third of taxpayers take the state and local tax deduction.
Other details could complicate the picture for many taxpayers
Currently, many graduate students have their tuition waived in exchange for contributing to an academic department. Under the GOP tax plan, that waived amount would count as taxable income. Meaning, a California grad student who earned a $30,000 stipend, and had their $50.000 tuition bill waived, would havc to pay taxes on the full $80,000.
The Senate plan also gets rid of the healthcare individual mandate, which requires all Americans to buy health coverage. Without that mandate, a larger portion of healthier Americans are expected to forgo health insurance, which will hurt insurance pools and could force Obamacare to unravel. The Congressional Budget Office estimates 13 million people could lose coverage.