How Trump’s tax plan would affect Californians

The San Francisco Chronicle reports:

President Trump’s tax proposal for individuals would give California taxpayers some tax breaks but take away others. Without more details, it’s impossible to say what the net effect would be, but here are a few things we can surmise from the bare-bones plan released Wednesday.

Taking away the itemized deduction for state and local income and property taxes would hurt people in high-tax states such as California more than those in low-tax states. High-tax states tend to be blue or Democratic-leaning. This could put pressure on states to cut taxes, because they would no longer be subsidized by the federal government.

On the other hand, Trump’s plan to kill the alternative minimum tax would offset, to an extent, the loss of the state and local tax deduction. That’s because state and local taxes are not deductible under the AMT. For people subject to AMT, losing the state and local tax deduction while escaping from AMT could be a wash. Again, the AMT hits people in high-tax states more than low-tax ones.

The Trump plan could, at the margin, make renting a home more attractive financially than buying one. Even though the plan would retain the mortgage interest deduction, it also would double the standard deduction, so fewer taxpayers would itemize deductions. As a result, fewer people would benefit from the mortgage interest deduction, although those with Bay Area-size mortgages probably would.

Heh.