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Tax bill's impact on San Diego: Lots of downsides

Tax bill's impact on San Diego: Lots of downsides
Rep. Kevin Brady, R-Texas, chairman of the House Ways and Means committee, heads to a meeting with House Speaker Paul Ryan, R-Wis., on Capitol Hill. Recent polling shows that the Republican tax legislation is among the most unpopular initiatives taken up by Congress in years. (AL DRAGO / NYT)

Question: Will the congressional tax bill, either the Senate or House version, be good for San Diego’s economy?

Phil Blair, Manpower

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NO: As a state with very high state income taxes and high real estate costs, resulting in high mortgage interest costs, the lack of deductibility of these costs will result in much higher tax payments for most San Diegans. I am most concerned the middle-class taxpayers will be the hardest hit.

Kelly Cunningham, San Diego Institute for Economic Research

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YES: Although far from perfect, especially on the individual side, business tax cuts will generate an investment boom. The cuts should help bring economic growth back to historical norms of 3 percent to 4 percent. Stagnant GDP growth has lagged because of lack of capital formation with little business investment, flattened productivity and barely any increase in real workforce wages. A tax-cut-led investment boom will generate much faster growth benefiting everyone from small businesses, start-ups, investors and wage earners.

David Ely, San Diego State University

NO: For many San Diegans, the proposed changes to tax rates and the standard deduction will not offset the impact of eliminating the state income tax deduction, capping the property-tax deduction, and possibly reducing the mortgage interest deduction. Some San Diegans could see their taxes rise. Since residents of states with low income tax rates and inexpensive housing will experience far larger benefits from the tax plans, San Diego companies will face greater challenges in hiring employees.

Gina Champion-Cain, American National Investments

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NO: San Diegans who itemize their returns will lose their largest deductions, state, local and property taxes. California's high tax rates make these losses extremely painful. The loss of deductions will overshadow any individual tax benefits received and will have an immediate negative effect on the local economy. Business tax relief will be returned to shareholders, the vast majority of whom are not locals. Expect health care premiums and the deficit to soar followed by interest rate increases.

Alan Gin, University of San Diego

NO: Those at the top end will benefit from the reduction of rates and the elimination of the estate tax. Some corporations that didn’t have loopholes will benefit from a cut in the corporate rate. But many in the middle class will see their taxes go higher as the deduction for state and local taxes is reduced and a limit is placed on the mortgage interest deduction. The economy would be given a boost, but both the local and national economies are already near full employment.

James Hamilton, UC San Diego

He is not participating this week.

Gary London, London Group of Realty Advisors

NO: This tax bill is a direct assault on our regional economy. While tax reduction and simplification are welcome, reducing brackets and bringing some of our tax rates down, San Diegans will disproportionately be penalized by (1) double taxation: no state income tax deduction; (2) the mortgage interest deduction will be severely cut; (3) an increase of marginal income tax rates for top earners; 3) elimination of a whole slew of tax credits including those for electric vehicles, student loans, etc. It is economic illiteracy to contend that a reduction of corporate tax rates will appreciably contribute to economic growth by reinvestment of those windfalls. It is astonishing to me how this aimless tax bill is being ramrodded through Congress.

Norm Miller, University of San Diego

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NO: Large corporate shareholders will benefit from the reduction in corporate taxes and lower estate taxes, so this is a plus for our top tier households. If the alternative minimum tax is eliminated, that will also help top-tier income households. The counterbalance is that limits on mortgage deductibility, property taxes, and the lack of being able to deduct state and income taxes will hurt most middle- and upper-income households. Our affordable housing program will be hurt by the lower value of tax credits, the potential elimination of tax free bond financing and the elimination of the 4 percent tax credit program. For lower income households, even the child care tax credits are meaningless if they pay little in federal taxes. Net net this is a real loser for the average San Diegan.

Jamie Moraga, IntelliSolutions

NO: California taxpayers may be hit disproportionately under the proposed bill as California has the highest income tax rate and one of the highest median home prices in the country. Losing the state and local tax deduction could increase the tax burden and outweigh any benefit of lower federal rates. San Diego is one of four metro areas in the U.S. where more than half of homes are priced above $500,000. The House plan limits the mortgage interest rate deduction to $500,000, where the Senate plan limits it to $1 million. Losing these deductions could result in a bigger tax hit.

Austin Neudecker, Rev

NO: The bill directly hurts San Diegans because we can no longer write off California state taxes (note: this is how our public schools are funded). However, the plan will be a windfall for our largest corporations (substantially lower corporate tax rate and pass-through business waivers) and wealthiest individuals (huge tax cuts for those making $1 million-plus). I expect the stock market to react favorably while average living conditions deteriorate.

Bob Rauch, R.A. Rauch & Associates

YES: While the tax bill hurts some San Diego households by taking away state and local tax deductions, cutting the corporate taxes to 20 percent will stimulate strong economic growth. This is likely to propel the economy to perform at over 3 percent Gross Domestic Product (GDP) growth and provide more than enough dollars to pay for the revenue shortfall. GDP growth averaged just 2.1 percent per year over the past eight years.

Lynn Reaser, Point Loma Nazarene University

NO: The ending or major reduction in deductions for state and local taxes will hurt many San Diegans. The tax bills hurt college students and institutions of higher learning by limiting deductions. The tax credit for research and development, critical to many of the region’s biotech firms, could be eliminated. Hopefully, these measures will be scaled back. Lower tax rates should improve the competitiveness of businesses and boost economic growth, but San Diego’s share of benefits would be limited.

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John Sarkisian, SKLZ

He is not participating this week.

Chris Van Gorder, Scripps Health

NO: Reducing or eliminating mortgage interest, real estate taxes, or state and local tax deductions will add to the high cost of living here. Not-for-profit hospitals will pay higher interest rates to finance health care facilities when they can no longer issue tax-exempt debt. Health-care providers will need to care for more uninsured patients with the elimination of the Affordable Care Act’s mandatory insurance provision. Health-care providers are among the largest employers in the San Diego region; what hurts them hurts San Diego.

Have an idea for an EconoMeter question? Email me at roger.showley@sduniontribune.com

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