Tag Archives: taxpayers

U.S. towns, cities fear taxpayer revolt if Republicans kill deduction

U.S. towns, cities fear taxpayer revolt if Republicans kill deduction

By Richard Cowan

WASHINGTON (Reuters) – From Pataskala, Ohio, to Conroe, Texas, local government leaders worry that if Republican tax-overhaul plans moving through the U.S. Congress become law, it will be harder for them to pave streets, put out fires, fight crime and pay teachers.

A tax plan approved by the House of Representatives on Thursday would sharply curtail a federal deduction that millions of Americans can now claim for tax payments to state, county, city and town governments.

Ending that deduction, the local leaders say, could make their taxpayers, especially in high-tax communities, less likely to support future local tax increases or even tolerate local taxes at present levels.

The proposed repeal of the state and local tax (SALT) deduction is part of an “assault on local governments” by Republicans in Washington, said Elizabeth Kautz, the Republican mayor of Burnsville, Minnesota, near Minneapolis.

“My hope is that we look at being thoughtful about what we’re doing and not ram something through just to get something done before the year is out,” Kautz said of the plan being rushed through Congress by her own party.

In the United States, local governments run schools, operate police and fire departments and maintain streets, parks and libraries, among other essential services. The federal government’s role at that level is limited.

Cities, towns, counties and states collect their own property, sales and income taxes. Under existing law, payments of those taxes can be deducted, or subtracted from federal taxable income, lowering the amount of federal tax due.

The House tax bill just approved would eliminate the deduction for individuals and families of state and local income and sales tax, while capping property tax deductions at $10,000.

A bill being debated in the Senate, with Republican President Donald Trump’s support, would kill the SALT deduction entirely for individuals and families, although businesses would keep it. The fate of that bill is uncertain.

Ending the SALT tax break is part of a package of changes to deductions that would help Republicans raise more than $1.2 trillion in new federal tax revenues over 10 years.

That increase would help offset the $1.4 trillion in revenue that would be lost from cutting the corporate tax rate, another part of both the Senate and House plans.

POLICE CONCERNS

Chuck Canterbury, president of the Fraternal Order of Police, which represents 325,000 law enforcement officers nationwide, wrote a letter to congressional leaders on Tuesday.

“The FOP is very concerned that the partial or total elimination of SALT deductions will endanger the ability of our state and local government to fund these (law enforcement) agencies,” said the letter, distributed to reporters.

Emily Brock, a director at the Government Finance Officers Association, said if SALT deductions were killed by Congress, voters could revolt. “Can you blame an individual taxpayer?” she asked. “They try to minimize their individual tax liability.”

Those who want to curb the century-old SALT deduction argue it only motivates local governments to seek more tax increases and spend more money. “Maintaining the deduction encourages government overspending and taxation,” argues the American Legislative Exchange Council, a nonprofit group of conservative state legislators and private activists.

Various other groups are fighting on Capitol Hill to defend the SALT deduction, such as the National Association of Realtors and the U.S. Conference of Mayors.

BRADY’S DISTRICT

Steve Williams, chief financial officer for Conroe, Texas, said its rapid growth demanded new fire stations, schools, roads and public safety services.

Conroe is near Houston and in the congressional district of Republican Representative Kevin Brady, chairman of the House tax committee and a champion of restricting the SALT deduction.

“Tax reform comes with picking winners and losers and I think in the final analysis, the people in (congressional) District 8 will be losers,” Williams said.

Conroe is part of Montgomery County, which voted 75 percent to 22.5 percent for Trump over Democrat Hillary Clinton in the 2016 presidential election.

In Pataskala, Ohio, near the state capital, Columbus, city finance director Jamie Nicholson said the local police department needed a new station. It now works out of an early 1900s building with no holding cell for suspects who are under arrest. “They get handcuffed to a chair,” he said.

Given the past difficulty Pataskala has had convincing taxpayers to approve new taxes, he said, eliminating or paring back the SALT deduction might trigger demands for chopping local taxes and blow a huge hole in his budget.

Greg Cox, a Republican member of the San Diego County, California, Board of Supervisors, echoed similar concerns about the impact on his community.

He said the Republican plan was unfair partly because it let businesses keep the SALT deduction, while taking it away from individuals and families.

(Editing by Kevin Drawbaugh and Peter Cooney)

Swedish commission proposes cap on profits in welfare

A general view shows Stockholm January 17,

STOCKHOLM (Reuters) – Sweden should impose a profit cap on private schools, hospitals and care homes funded by taxpayer cash, freeing up more money for investment to improve services, a government-appointed commission said on Tuesday.

Sweden was a trailblazer of deregulation in the health and education sector in 1990s, but many Swedes are now worried that public services have deteriorated while taxpayers are directly funding shareholder payouts by businesses.

“I do not think we should waste taxes in this way,” the head of the commission, Social Democrat politician Ilmar Reepalu, told reporters.

Sweden has slumped in international education rankings while reports of neglect in care homes and fat profits for companies offering housing to asylum seekers have prompted the center-left government to pledge to roll back some market-oriented reforms.

Government attempts to reform Sweden’s welfare sector will be eagerly watched by countries, such as Britain, which have followed a similar path in outsourcing some public services.

The commission recommended firms operating in the welfare sector be licensed and have a ceiling on profits, increasing the amount they would then invest in their businesses.

“I cannot believe that anyone would complain if more resources go to schools and tax money produces better school results,” Reepalu said. “Who would say no to 5,000 or 6,000 more employees who should reduce the pressures in care homes for the elderly?”

In 2014, Swedish regions and municipalities bought services for almost 120 billion Swedish crowns ($13.3 billion) from private welfare companies.

The proposed cap – on operating profit in relation to working capital of 7 percentage points plus the risk-free rate – would mainly hit private equity companies, Reepalu said. “It could well mean that a number of those private equity firms that operate in this sector … switch to other sectors.”

Profitability in tax-funded welfare firms was double that in the services sector in general, according to the report.

But the minority coalition may struggle to introduce a cap, despite widespread public support.

“A profit cap, whatever the level, means the incentive for entrepreneurs to invest money, time and creativity will disappear,” Marcus Stromberg head of school firm AcadeMedia, partly owned by private equity fund EQT V, said.

Annie Loof, head of the Center Party that is part of the center-right opposition, said the report should be “thrown in the waste basket.” Experts have also said a cap could break EU law.