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The GOP's tax plan is terrible for Los Angeles

The GOP's tax plan is terrible for Los Angeles
A gardener works in the yard at the former Linda Vista Hospital that is now affordable housing buildings on Sept. 18, 2015. (Los Angeles Times)

It's not perfectly clear just how badly the Republican tax plan would devastate Los Angeles taxpayers. But as Republican lawmakers rush their overhaul through Congress — the House narrowly approved the plan last week and the Senate is now taking up its version — it's become apparent that, if the plan is approved, the middle class would suffer, L.A. would lose and California would bear the brunt.

As the city controller of L.A. and a concerned citizen, I believe this is plain bad fiscal policy.

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According to the Congressional Budget Office, the plan would increase deficits by $1.5 trillion between 2018 and 2027. These deficits will inevitably be paid for by our children and grandchildren.

What's more, taxpayers at the bottom of the earning brackets — those who need the most help — will see their taxes rise. According to the Joint Committee on Taxation, by 2027, taxes will increase for Americans making $75,000 a year or less, and those making between $20,000 and $30,000 will see their taxes go up by 25.4%.

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The Republican tax plan would exacerbate L.A.'s affordable-housing crisis.


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This means that millions of Angelenos will see a tax increase — under a plan that President Trump called the "largest tax cut in history." Out of 3.3 million households in L.A., 49% earn less than $50,000 a year and 66% earn less than $75,000 a year.

There's more bad news for Angelenos in this bill. State and local tax deductions would be eliminated. Doing away with SALT deductions would yield $1.3 trillion in revenue for the federal government, but it will cost Angelenos dearly. In L.A., more than 2.2 million taxpayers claim the SALT deduction, worth about $33 billion. These deductions translate into money in the pockets of Angelenos, and therefore into our local economy. Eliminating the SALT deduction will hurt average Angelenos and our city as a whole.

The so-called tax reform on homeownership also threatens to have profoundly harmful effects. In the House bill, Republicans lowered the cap on the mortgage interest deduction to mortgages of up to $500,000. This means millions of Californians would lose a key deduction that helps make home ownership a little less unaffordable and has helped to drive a strong real estate market.

This change would hit particularly hard in L.A., where the median home value is now $550,000. The Senate's version of the plan keeps the mortgage interest deduction largely intact at its current rate, but this could change as lawmakers work to merge the bills. Any drastic reduction would have deleterious effects in L.A., where it is already hard enough to buy a home.

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The Republican tax plan would also exacerbate our affordable-housing crisis. Buried deep within the draft is a provision that would end the tax-exempt status for the bonds used to fund affordable housing. This would affect millions of Angelenos, including veterans. There are also provisions that could hurt our green economy yet help owners of private planes.

Overall, California pays more in taxes than any other state — $405 billion, or about 12% of all taxes paid in the country. Considering our enormous contributions, one must ask why Californians would get hit so hard.

President Trump has insinuated that states such as New York and California, which claim a larger deduction in state and local taxes, "really are being subsidized by states like Indiana and Iowa."

No, Mr. President. California is helping to bankroll the federal government, and we will not stand by as you effectively bludgeon our state and our city. L.A. County is the third-largest metropolitan economy in the world, with a population of more than 10 million and a GDP of over $700 billion — that's larger than the GDPs of Belgium, Saudi Arabia, Norway and Taiwan.

The country's tax code could and should be improved. But Americans deserve a more thoughtful consideration of what will be a seismic shift in our local and national economy. Any changes to our tax code will be felt for generations. It is foolhardy for legislators in D.C. and the president to jam through an ill-considered plan simply to obtain a pyrrhic victory.

Politics aside, the Republican tax plan is just bad policy. As the Senate prepares to vote, I hope our congressional leaders — reasonable Republicans of good conscience in particular — remember that party loyalty should come second to love of country.

In the meantime, Angelenos should send a clear, unified message to Washington: We will not stand for any assault on our middle class, on our most vulnerable or on our economy as a whole. If Republicans fail to do the right thing, they will surely be the ones drained from the swamp.

Ron Galperin is the Los Angeles city controller.

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