The problem with California going rogue – Orange County Register

Just returning from Washington, D.C., where tax reform is on the front burner, I can attest that California, for all of its innovation and creativity, is not of particular concern. With the multitude of emergency situations at home and around the world, California’s self-inflicted wounds are seen for what they are and we could begin to pay on our next income tax return.

Having dodged the elephant in the room, Obamacare repeal, replace or reform, the Republican-controlled Congress believes they have to do something, and tax reform is it. Federal outlay for this program and potential expansion of services will heavily influence current and future spending priorities and hence, tax reform and budget negotiations.

We met with congressional leaders and administration officials and found much to be liked on the stimulus side of the package. Lowering the corporate tax rate, allowing for repatriation of off-shore dollars, and immediate expensing of equipment will have a positive effect on business planning and stimulate job creation to business-friendly states.

Eliminating the Alternative Minimum Tax, middle-class tax reductions, streamlining the tax code and simplifying reporting are worthy goals. But due to static analysis, and congressional and Senate rules, attempts to encourage business development and investment, and to allow taxpayers to keep more of their hard-earned dollars must be “paid for.”

And that’s where “California Dreaming” D.C. style comes in to play. Elimination of the State and Local Tax Deduction that is envisioned to “pay for” the reforms will hit wage earners in our state hard.

Deductibility of state income tax and property taxes (the local tax) prevents double taxation. But in the Washington view, it also allows high tax states such as California to mitigate their own putative, highest-in-the-nation, state income tax rate.

As we know, in many parts of our state, the middle class means those with a household income of $50,000 to…

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