LOS ANGELES (CBSLA) — Are all tax cuts created equal? Not if you live in California, says USC Professor of Law and Economics, Ed McCaffery.
Professor McCaffery says people in California will pay a heavy price for living in a state with high state income taxes and expensive home prices.
Under the proposed Republican plan, the money you paid the state in taxes can’t be deducted from your federal return — it becomes a part of your taxable income. And you won’t be able to deduct your mortgage interest on loans that are more than $500,000.
How would that affect housing prices?
“I think it’s going to have a devastating impact,” McCaffery said. “I would expect all things being equal a kind of pretty quick crash in the residential real estate market around that $500,000 to million dollar price range.”
Professor McCaffery says the small savings in taxes for wage earners with modest incomes who use the standard deduction will usually amount to a few hundred dollars a year, while the rich stand to save much more on their tax bills.
Are there any clear winners?
“The rich,” McCaffery said. “If you have 8 million dollars you have nothing to worry about America is going to be great again for you, if you don’t have significant assets, good luck.”