by Elisabeth Keller, director of public policy, ICMA
Now that the Senate passed its tax bill (51-49 vote) on December 1, the House and Senate are expected to move quickly to bring a final bill to the President to sign. They have two options: The House could vote on the Senate bill, or the differences in the two bills could be resolved in a House-Senate conference committee. These are the key provisions that affect local governments:
- State and Local Tax Deduction: Taxpayers will no longer be able to deduct state and local taxes, except for up to $10,000 in local property taxes. The practical effect of this will be that many homeowners will still have a tax increase, not a tax decrease. The main reason it works out this way is that fewer middle-income earners will be able to itemize.
- Advance Refunding Bonds: Fully eliminated in both the House and Senate bills.
- Private Activity Bonds (PABs): Tax exemption fully eliminated in the House bill. Senate bill preserves PABs.
- Health Insurance Individual Mandate: Eliminated in the Senate bill; not included in the House bill.
- Tax Credit for Historic Property Renovations: Eliminated in the House bill and weakened in Senate bill.
ICMA, along with the Government Finance Officers Association, National League of Cities, National Association of Counties, U.S. Conference of Mayors, and many other organizations sent a letter on December 6 to House and Senate leaders to urge them to retain the current tax treatment of private activity bonds and also to address problems related to the elimination of advance refunding bonds.
The Congressional Budget Office has estimated that the Senate tax bill would add $1.313 trillion to the deficit by 2027. The Joint Committee on Taxation estimates it would add $1 trillion to the deficit, including the effect that the bill could have on economic growth. The House passed its tax bill without an estimate of its impact on the deficit.
For a more detail look at the differences between the two bills check out this chart from the National Association of Counties.
ICMA encourages its members to engage with their representatives about key issues that affect their local governments.