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Targeted Tax Deduction Used Often      11/18 11:29

   A popular deduction targeted in the GOP's overhaul of the tax code is used 
by more than a quarter of all filers in a majority of states, including many 
led by Republicans where some residents eventually could see their federal tax 
bills rise.

   ATLANTA (AP) -- A popular deduction targeted in the GOP's overhaul of the 
tax code is used by more than a quarter of all filers in a majority of states, 
including many led by Republicans where some residents eventually could see 
their federal tax bills rise.

   The exact effect in every state isn't known, in part because of differences 
in the Senate and House versions of the bill. But the change to the deduction 
for state and local taxes could alter the bottom lines for millions of 
taxpayers who itemize.

   Residents in high-tax, Democratic-led states appear to be the hardest hit. 
But some filers also could be left paying more in traditional Republican 
states, such as Georgia and Utah where about a third of taxpayers claim the 
deduction.

   "It's a bad deal for middle class families and for most Georgians," said 
Georgia state Rep. Bob Trammell, leader of the House Democrats.

   He said Republicans are eliminating the state and local deduction to help 
pay for tax cuts for businesses and the wealthy.

   How many winners and losers are in each state depends in large part on 
another aspect of the Republican tax overhaul that would nearly double the 
standard deduction --- to about $12,000 for individuals and about $24,000 for 
married couples.

   Republicans say that provision would be a net benefit for most tax filers.

   The Tax Policy Center, run by the Urban Institute and Brookings Institution, 
has estimated that the number of people itemizing deductions would drop by 
three-quarters. Some of those taxpayers could get a larger deduction under the 
Republican plan, even though they no longer could claim a break for state and 
local taxes.

   "Based on what I have seen, it might actually help some Georgians" to 
replace the state-and-local tax break with a higher standard deduction, said 
Georgia state Rep. Terry England, the Republican chairman of the House 
Appropriations Committee.

   Yet estimates by the Tax Policy Center and a nonpartisan congressional 
analysis say some taxpayers eventually will end up owing more in federal taxes 
under the GOP plans.

   The left-leaning Institute on Taxation and Economic Policy said changes to 
the state and local tax deduction under the House bill would contribute to one 
of every five taxpayers in the hardest hit states getting a higher tax bill. 
While most of those states are led by Democrats, Republican-led Georgia and 
Utah, and the swing state of Virginia were among them.

   Democratic lawmakers said that any initial tax relief felt by the middle 
class or working-class families will eventually disappear. In Georgia, for 
example, an estimated 9 percent of filers would pay higher taxes in 2018, 
rising to 22 percent by 2027, according to an analysis by the Institute on 
Taxation and Economic Policy.

   The state and local tax deduction is just one of many provisions targeted 
for change under legislation that passed the House earlier in the week and is 
pending in the Senate. The House version would repeal the deduction for income 
and sales taxes while capping the property tax deduction at $10,000. The Senate 
bill would end deductions for all state and local taxes.

   Most tax filers currently take the standard federal deduction of $6,300 per 
individual or $12,600 for married couples. But some reap larger tax breaks by 
itemizing deductions for state and local taxes, medical expenses, charitable 
contributions and interest paid on home mortgages.

   The state and local tax break is the largest of those. About 44 million 
taxpayers claimed deductions totaling around $550 billion for state and local 
taxes paid in 2015, according to the most recent IRS data.

   The top 10 states with the highest average state and local tax deductions 
all voted for Democrat Hillary Clinton in last year's election. New York led 
the way with an average state and local tax deduction of more than $22,000, 
followed by Connecticut, California, New Jersey and Massachusetts.

   But when analyzed by the percentage of taxpayers claiming the deduction, 
several states won by Trump rank in the top third nationally. In reliably 
Republican Utah, 35 percent of taxpayers claimed the deduction for state and 
local taxes. That figure was 33 percent in Georgia and 31 percent in Wisconsin. 
Thirty-five states had at least one-quarter of their taxpayers claim the 
deduction.

   Because of its widespread effect, debate over curtailing the deduction 
already is creeping into competitive 2018 elections.

   Democratic U.S. Sen. Tammy Baldwin of Wisconsin has warned that repealing 
the deduction could lead to a tax increase for many state residents.

   The left-leaning Wisconsin Budget Project has estimated that the Senate plan 
overall eventually would leave nearly 300,000 Wisconsin taxpayers with higher 
federal income taxes. Baldwin said the plan will disproportionally benefit 
corporations and the wealthiest.

   "That's not right and it's not fair," she said during a news conference 
Friday in Milwaukee.

   One of her Republican challengers, state Sen. Leah Vukmir, has signed a 
letter encouraging the tax repeal. Republican Gov. Scott Walker, a tax overhaul 
supporter who is seeking re-election, has been criticized by the liberal 
advocacy group One Wisconsin Now. The group says repealing the deduction would 
have "the net effect of a massive property tax increase for Wisconsin 
homeowners."

   Utah state Sen. Howard Stephenson is a strong supporter of repealing the 
state and local tax deduction, even though a comparatively high percentage of 
residents there claim it.

   Stephenson, a Republican who is president of the Utah Taxpayers Association, 
said he believes the deduction generally favors high-tax states to the 
detriment of states with a lower tax burden, such as his own.

   "We don't like paying for the excesses in other states," he said.


(KA)

 
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