By Carolyn Y. Johnson, Reuben Fischer-Baum and Aaron Williams, Washington Post
The GOP tax plan’s changes to deductions would hit people in blue states the hardest, with limits on popular tax deductions that would have the biggest effects in states with high property taxes and expensive homes.
The tax plan doubles the standard deduction to $24,000 for a married couple, meaning most people wouldn’t itemize their mortgage interest or property taxes anymore. But for those who do, the popular home mortgage interest deduction would be capped for home purchases made after Nov. 2, 2017 — at $500,000 of the loan amount. The deduction of state and local property taxes would be capped at $10,000.
“If you live in New York City, where you pay high taxes and where the cost of housing is pretty high, this is a double whammy,” said Howard Gleckman, a senior fellow at the Urban-Brookings Tax Policy Center.
There aren’t many people with mortgages over $500,000 in the country — only about 1 million mortgages, or about 5 percent of mortgages between 2012 and 2014, according to an analysis by the United for Homes campaign, which advocates for changes to the mortgage interest deduction.
But those mortgages are most common in solidly blue states. The District of Columbia tops the list, with 27 percent of its mortgages over $500,000, followed by Hawaii, California, New York, Connecticut, Virginia, New Jersey, Maryland, Massachusetts, Washington and Illinois.
An analysis by the conservative Tax Foundation found that capping the mortgage interest deduction would decrease the deficit by $319 billion over a decade.
The deduction for state and local property taxes is also mostly used in blue states, although the loss of the deduction won’t matter to those who were paying the alternative minimum tax, since those people can’t use property-tax deductions.
An analysis by the Tax Foundation showed that 37.4 percent of filers in Connecticut took a property-tax deduction, followed by Maryland, New Jersey, Massachusetts, Virginia and Oregon.
“I think the basic thing to say about this tax bill is, like most tax bills, it is very political,” Gleckman said. “This is just moving stuff around, raising taxes on some people, cutting taxes on some people — it’s all political.”