In today’s CALmatters column, Dan Walters considers a few of the impending effects of the recently-passed GOP tax reform plan on California.

Above all, Walters makes the point that taxes are arbitrary; subject to the ideology of those crafting the policy, but also plenty of external factors, such as the involvement of special interests and political maneuvering.

In tax-heavy California, politicians fear a potential exodus to states with lower tax burdens.

Among the highlights Walters finds in the new tax bill is the piece that will do away with deductibility for state and local property and income taxes. According to the bill, anything up to the $10,000 limit can be itemized, but anything over that cap is fair game for the IRS to, essentially, tax twice.

In tax-heavy California, Walters notes that politicians have been especially opposed to the plan, at least partially driven by a fear of a potential exodus to states with lower tax burdens.

He adds that the limits established for mortgage deductions — $750,000 – could serve to further discourage a move to California, since homes in many areas of the state are more expensive than $750,000.

In all, Walters points out that this new tax regime could lead to reforms within California, including a revision of the classic California tax measure: Proposition 13.

By reflecting on the inspiration for a firmer push on Prop. 13 coming from the federal tax revision, Walters concludes by bringing us back to how arbitrary – and susceptible to the political winds of that moment – tax policy can be.

To read his full take, click here: How would federal tax overhaul hit California?


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