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Experts: House tax plan doesn't add up

North State Congressman Doug LaMalfa says tax cuts passed this week by the House of Representatives will create jobs and save his constituents money while increasing household income.

“Under the Tax Cuts and Jobs Act, the vast majority of North State residents will save money, period,” LaMalfa said in a statement his office released Thursday.

LaMalfa went on to state that the more than 70 percent of 1st District residents who do not currently itemize their tax returns will get a significant tax cut.

But two experts say the House Tax Reform bill is a bad deal for the North State and California.

LaMalfa spokesman Parker Williams said the numbers LaMalfa uses come from the Internal Revenue Service. The jobs and income projections come from a study conducted by the Tax Foundation.

Here are the main benefits, according to LaMalfa, in the House tax bill:

It is estimated that the Tax Cuts and Jobs Act will create 1 million jobs across the nation, including 111,108 in California.

“We are at full employment, so this is not going to increase any jobs in the near term,” said David Gallo, economics professor emeritus at Chico State University.

The nation’s unemployment rate is hovering around 4 percent, which experts consider “full employment.” In California, the not-seasonally adjusted rate is 4.3 percent. Shasta County’s jobless rate last month was 4.9 percent, the lowest it’s ever been.

Moreover, the House tax bill is expected to increase the federal deficit by $1.5 trillion over the next decade. That could mean an increase in interest rates — it would cost more to borrow — and cuts in federal domestic programs, Gallo said.

“Those would have adverse economic impacts that would offset any impacts in the bill,” Gallo said.

Jonathan Kaplan, a senior policy analyst for the California Budget & Policy Center, said an increase in the federal deficit would hurt middle and low-income families.

“What is important to consider about increasing the federal deficit, it would likely require in the future years cuts to federal spending to programs that benefit middle- and lower-income Californians,” Kaplan said.

Median household income in California will increase by $2,932.

Gallo harshly criticized this claim, saying “they are just making this stuff up.”

Gallo explained that income might go up but proponents of the House tax bill don’t give a time frame. “This doesn’t tell me a whole lot.”

“Eventually it might increase, but not because of this tax cut,” Gallo said.

The average household will save $1,200 in taxes.

An important distinction here is the average household, not median.

Both Gallo and Kaplan said the House tax bill will benefit the wealthy at the expense of lower-income individuals in California.

“It’s an average, not median,” said Gallo, who believes the $1,200 figure is a little high. “So the big savings is at the top — not much at the bottom.”

Said Kaplan: “If you look at the assessment of the tax bill, 48 percent of the total tax cuts will go to those earning in the top 1 percent of income by 2027.”

If you claim the home mortgage interest deduction you can continue to do so.

This is true.

Standard deductions for individuals and married couples will double to $12,000 and $24,000, respectively.

Kaplan said the House tax cuts would take effect in 2018. Current law shows that the standard deduction for individuals in 2018 will be $6,500 and $13,000 for joint filers. Double those numbers and you get $13,000 and $26,000, respectively.

“If you double those numbers, you are north of these numbers” in LaMalfa’s example, Kaplan said. “So H.R. 1 does not double the deductions.”

More than 45,000 families in Northern California claim the child tax credit, which is increasing from $1,000 to $1,600.

Kaplan said it’s hard to say what LaMalfa’s office considers Northern California.

“It’s hard to check that,”

It is true that the child tax credit would increase $600 to $1,600.

Meanwhile, both Kaplan and Gallo believe the biggest takeaway from the House tax bill, something that is not getting enough attention are cuts to the federal deduction for state and local taxes, or SALT.

That would be a huge hit for California residents, Kaplan said.

Nearly a third of those who filed a tax return in LaMalfa’s district claimed the state and local taxes deduction in 2014, according to a California Budget & Policy Center analysis.

“Reducing or eliminating the federal SALT deduction would increase the personal tax bills of millions of Californians and would do so in order to help pay for major tax cuts that predominantly benefit the wealthiest households and large corporations,” Kaplan wrote in a California Budget & Policy Center blog post he co-authored.