The Republican tax bill, likely headed to President Trump's desk by Christmas, will have particularly adverse affects on urban America, with numerous tax breaks traded away for what the GOP says is a more fair tax code.
The bill would eliminate tax breaks for everything from bike commute subsidies to building charter schools. One break for refinancing municipal bonds — which saved New York City alone $425 million over the past four years — would be gone. A key break for rehabbing old buildings is getting scaled back. At the same time, mayors and county executives are going to face pressure to cut taxes themselves.
But the biggest punch comes by way of capping the state and local tax deduction:
The $10,000 cap on state and local income and property tax deductions is by far the biggest blow for high-tax, high-cost-of-living, liberal big cities and their surroundings. The deduction was worth an average of $24,900 to New York County residents and $17,000 to those living in Marin County, California, across the bay from San Francisco, according to 2014 IRS data compiled by the Tax Foundation.
The change also concerns those serving in urban, low-income school districts. Many are worried that residents will pressure local officials to cut school taxes in order to relieve the added strain.
“I think there’s likely to be a significant burden on urban and other low-income districts that don’t have a capacity to generate revenue at the local level,” said Thomas Gentzel, executive director of the National School Boards Association, a nonprofit.
Other losses include:
- Ending a refinancing option that cities and other local governments use more broadly to reduce debt through lower interest rates, known as advance refunding bonds.
- Eliminating a write-off that businesses get to subsidize their workers' commuting costs. That includes mass transit, parking and bicycling.
- Changing eligibility for tax credits relating to redeveloping historic and abandoned buildings, making those built before 1936 ineligible unless they're on the National Register of Historic Places or located in a Registered Historic District.
Local officials have openly criticized federal lawmakers for making their own financial mess and subsequently reigning down adverse effects on state and local governments.
Mayor Stephen Benjamin of Columbia, South Carolina, said he feels like he's being punished for doing something Congress hasn't been able to: balance its books. His city has finished with a budget surplus in five of the seven years he’s been in office, he said, doubled its reserves, had its credit rating increased twice, and its property tax rate remains at the same level it was a decade ago.
“We’ve done the things that we’re supposed to do,” said Benjamin, who’s also the vice president of the U.S. Conference of Mayors. “I wish that the federal government would have the record that my city does.”