How House tax reform plan hurts San Diego economy, jobs
By Debra Rosen
Published by San Diego Union-Tribune, Full Commentary
The House has released a sweeping national tax reform bill that affects mortgage interest payments. The proposed legislation places a lower cap on interest payments from a home loan of at least one million dollars to only $500,000. California homeowners, especially those in San Diego County with a mortgage debt of over $500,000, will be negatively impacted.
This tax reform proposal directly affects California’s thriving coastal cities where property values are much higher than the national average. In California alone, homes are priced at approximately 2.5 times higher than the national median. The majority of homeowners in coastal cities such as San Diego, San Francisco, Los Angeles and New York, where the average home is priced well over $500,000, will be severely affected by this legislation.
Recovering from the previous housing collapse and navigating through the current housing crisis, San Diego County potentially faces additional challenges from these proposed legislative changes, including a decline in homeownership, driving talent outside of the region, and putting local businesses at risk.
Living the American Dream will be more difficult with the currently proposed tax reform, posing the greatest damage to the middle class.
With a low inventory of homes, very little building, price increases from low inventory, and skyrocketing property values, the middle class cannot transition into homeownership. According to McKinsey Global Institute, housing shortages cost the U.S. economy between $143-$233 billion annually.
The current mortgage interest deduction, utilized by many families, serves as a benefit when purchasing a home because interest payments help offset the expenses of owning a home. By limiting and adding a cap on the mortgage interest payment, this increases financial liabilities. As a result, the appeal of buying a home diminishes causing a decline in homeownership.
How does this affect our region’s employers? They already face challenges in recruiting and retaining talent. With the increasing barriers to homeownership, our dynamic talent is relocating out of state where home prices are lower. People who live and work in the region fuel the economy through their purchasing power and we want them to stay and thrive.
The Think Local First San Diego initiative, powered by the North San Diego Business Chamber, has shown that money spent on local businesses stays in the community. For every $100 spent at a locally-owned business, $45-$68 goes back into the community and our tax base.
According to the Think Local First San Diego philosophy, businesses directly inject money into the local economy through wages and benefits to local residents, who in turn spend and invest these funds in our local economy. When local businesses hire and procure locally, the economy and community benefits. Indeed, local entrepreneurs and employees are more likely to contribute to causes that impact them close to home.
We call on our locally elected officials to fight for the region and support a balanced approach to tax reform that protects California families and the American Dream of owning a home.
Rosen is president/CEO of North San Diego Business Chamber.