NEW CRAIN’S CHICAGO BUSINESS REPORT: A HALF-MILLION CHICAGO-AREA HOMEOWNERS LOSE UNDER NEW TAX LAW
Crain’s: “The biggest reported losers locally are residents of Illinois’ 6th Congressional District.”
(Downers Grove, IL) October 26, 2018 – Congressman Peter Roskam helped write the Trump tax law and a new study from the Institute for Taxation and Economic Policy makes it clear that his constituents are paying the price. As Crain’s Chicago Business reports:
- “The biggest reported losers locally are residents of the 6th Congressional District, where 71,000 out of 170,000 homeowners in that district who had claimed the SALT deduction will lose at least part of it.”
Peter Roskam believes the typical voter in Illinois’ Sixth makes over $395,000 a year. The median income in Illinois’ Sixth is actually $98,889 a year – over three times less than the number Roskam cites. The mean income is $128,374.
Crain’s Chicago Business: A half-million Chicago-area homeowners lose under new tax law, report claims
By Greg Hinz, October 26, 2018
A study lays out who is worse off under the GOP’s caps on state and local deductions, but U.S. Rep. Roskam says the authors excluded the good stuff in the law.
The biggest reported losers locally are residents of Illinois’ 6th Congressional District.
More than half a million Chicago-area homeowners will lose at least part of their federal deduction for state and local taxes under terms of the tax law pushed through by President Donald Trump and congressional Republicans.
That’s the charge from Democratic members of the metro area’s congressional delegation in a new report being issued today. The study is drawing critics, but was largely researched by a Washington, D.C.-based think tank that has a reputation of being somewhat to the political left but also knows how to count.
The report (below), which lands less than two weeks before the Nov. 6 election, concludes that an estimated 507,000 local homeowners who have been able to fully deduct state and local taxes—SALT, in Washington jargon—will not be able to do so on 2018 returns because the new law caps the SALT deduction at a maximum of $10,000 a year.
Overall, about 1.2 million local homeowners had been claiming the SALT deduction, according to federal tax and census data compiled by the Institute for Taxation and Economic Policy, which worked with the congressmen.
Republicans generally have contended after earlier studies that taxpayers overall will still be ahead because the tax bill stimulated economic growth, lowered tax rates and expanded the standard deduction for those who do not itemize deductions.
But institute Senior Fellow Matt Gardner, who crunched the numbers through the institute’s model, says he included the impact of the expanded standard deduction in his calculations. In other words, the 507,000 taxpayers are worse off even with the larger standard deduction, though an unknown number still could have a lower tax bill due to other factors.
The biggest reported losers locally are residents of the 6th Congressional District, where 71,000 out of 170,000 homeowners in that district who had claimed the SALT deduction will lose at least part of it, the report says. The 6th has one of the hottest congressional races in the country, with GOP incumbent Peter Roskam of Wheaton, one of the prime authors of the tax bill, trying to hold off a challenge from Democrat Sean Casten.
The 6th is hit hard because residents in the largely upper-middle-income swath of the western suburbs tend to have expensive homes with relatively high property taxes, mostly for public schools. On 2017 tax returns, the mean deduction for property taxes was $9,101, not too far from the total SALT cap of $10,000 before counting Illinois income and sales taxes, the study found.
I passed on the gist of the study’s findings to Roskam, and his office strongly suggested that the study is only examining part of the impact of the tax bill, excluding many of the benefits.
“With the removal of the Alternative Minimum Tax, the lower tax rates for every income range, the doubling of the child tax credit and the near tripling of the qualifying income limit for the child tax credit, itemizers will see an overall savings in their taxes—even with the $10,000 cap on SALT,” his spokeswoman said. Using an online calculator published by a more conservative group, the Tax Foundation, “a married couple making $395,374.55, claiming $13,887.50 in property taxes and $19,571.04 in income taxes, is claiming $33,458.54 in SALT deductions in aggregate (not accounting for the tax benefits of children or potential small business and pass-through income) and will receive a tax cut of $16,709.22.”
Back to the new report: The impact of the SALT cap also is particularly heavy in the north suburban 10th District, the study found, with an estimated 57,000 homeowners who deducted a mean of $9,859 last year for property taxes expected to lose at least a portion of their deduction. The numbers even are fairly high even in largely minority districts, with 22,000 homeowners estimated to come up short because of the SALT cap.
“This report demonstrates how, yet again, Republicans are benefiting corporations and billionaires and leaving everyday Americans to pick up their tab,” said Rep. Jan Schakowsky of Evanston, one of those who asked Democratic staff on the House Committee on Oversight and Government Reform to prepare the report, along with research by the institute.
“When Illinois homeowners pay more in taxes, they can thank congressional Republicans,” said Rep. Robin Kelly of Matteson. “What they are doing to Illinois homeowners is bad policy and makes zero economic sense.”
Similar statements came from Chicago representatives Danny Davis, Luis Gutierrez and Bobby Rush, and Schaumburg’s Raja Krishnamoorthi.
Local homeowners also will lose from another section of the GOP law that limits the deduction of interest on home equity loans to loans of under $100,000 that are used exclusively for home improvement rather than other purposes, according to the report.