Two scary proposals
It may be rampant paranoia, but what the Republican Party is touting as tax reform sure looks like a big cannon aimed at states that lean to the Democrats.
Both the House and GOP versions of tax reform would be devastating to residents of Hawaii. Both would eliminate the deductions for state and local taxes.
Now, that wouldn’t matter a whit to states like Florida and Texas that have no state income tax. It would be devastating to the middle class in states like Hawaii, New York, Connecticut, Massachusetts and California.
The House version takes the cruelty even further — it limits the amount of interest one could deduct on a home mortgage. Anyone who currently owns a home could maintain the current cap of $1 million — but newly purchased homes would see that cap cut in half, to $500,000.
Now, that may be fine in parts of the Midwest where median home prices are somewhere between $125,000 and $200,000. But on Maui where the median price is close to three-quarters of a million dollars, the proposal could wreck the housing market.
It could have the same effect on the pricey suburbs that surround Washington, D.C.
Yes, if you already have a mortgage, you’d be protected up to $1 million. But — you’d never sell your house for what you paid for it. How many middle-class folks can come up with a $250,000 down payment? That is 33 percent of the cost of a $750,000 house.
The median price would have to tumble because the median citizen on Maui wouldn’t be able to afford the median house. Reducing the mortgage interest deduction would end the ability of the middle class to buy homes in states where housing is the most expensive.
Ah, well, these bills are in the early stages. But boy, these are scary opening proposals.
* Editorials reflect the opinion of the publisher.