Capitol Alert

Ten things Jerry Brown hates about the GOP tax plan

How does Gov. Jerry Brown dislike the tax overhaul Republicans in Congress are poised to pass?

Let us count the ways.

Brown’s chief financial adviser wrote a letter on Wednesday to the state’s congressional delegation laying out the governor’s objections. They are:

1. That’s trillion with a ‘T’: Brown’s office cited a Congressional Budget Office projection that the tax overhaul would swell the federal deficit by $1.4 trillion over a decade, potentially leading lawmakers to cut government-funded services that benefit Californians. “This would undoubtedly lead to billions of dollars of cuts affecting California,” Michael Cohen, director of Brown’s Finance Department, wrote.

2. So long, SALT: The GOP tax overhaul scraps a deduction that particularly benefits Californians, the state and local tax deduction. More than 6 million California tax returns tend to claim that deduction, which allows them to offset some of the local taxes they pay.

3. Skimpy benefits for low-income families: Versions of the tax plan that Cohen analyzed include fairly small tax credits for lower-income households. The lowest-income families would save $30 a year, for instance. By 2027, those families likely would see their taxes increase because the credits that they benefit from expire.

4. Pulling the plug on renewable energy: Brown, the governor who doubled down on climate change and renewable energy, does not want to see the federal government wipe out a tax credit for electric vehicles. “Its elimination, as proposed in the House bill, would put our manufacturers at a competitive disadvantage while China and other countries race to dominate in this strategic market segment.”

5. Comforting the very comfortable: Brown sees a recipe for growing income inequality in proposals that would lower tax rates on business income and dilute the estate tax. About .2 percent of families are expected to owe the tax this year, and only if they are receiving inheritances worth more than $5.49 million.

6. Breaks for corporations: A centerpiece of the Republican tax plan is its steep cut in the corporate tax rate from today’s 35 percent to a proposed 20 percent. Cohen notes that the corporate tax rate is permanent, but not tax cuts for households are phased out in the proposals. Cohen warns that businesses might take advantage of a proposed incentive for capital investments to buy equipment that would help them automate labor. “As a result, this provision could lead to job losses while decreasing the corporate tax base,” Cohen wrote.

7. Caps on property tax deductions: Property owners with homes worth more than $750,000 will lose a portion of their mortgage interest deduction in the tax overhaul. “This provision will disproportionately affect California,” where coastal county home values often soar over the proposed threshold, Cohen wrote.

8. Raising the cost of public works: Tax-exempt organizations that build schools, performing arts centers and research institutes likely would pay more for their construction projects if the tax overhaul becomes law. The tax reform would require them to pay taxes on interest they accumulate when they borrow money for major projects. That would “greatly increase borrowing costs for such borrowers, resulting in the delay, downsizing or outright abandonment of these socially beneficial projects and the people and jobs who depend on them,” Cohen wrote.

9. Striking a benefit for fire victims: The tax overhaul would repeal a deduction that people often use after catastrophes, like October’s wildfires in Sonoma County and this month’s fires in Southern California. Eliminating the benefit “is an unnecessary step that will only compound the difficulty for the many thousands of Californians who either are or will be struggling to recover from devastating losses,” Cohen wrote.

10. Starving students, graduates and graduate schools: Brown’s office warns college graduate students will suffer if the tax overhaul succeeds in eliminating a deduction for interest on student loans and imposing a tax on tuition wavers for graduate students. “In total, all of the changes to education provisions will raise taxes on Americans by over $60 billion over 10 years.”

Adam Ashton: 916-321-1063, @Adam_Ashton.

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