[California] Budget writers study closing tax loopholes

San Jose Mercury News ^ | 12/30/07 | Steve Geissinger

[ProtectOurFreedom]

California faces an estimated $14 billion budget deficit, but the state's independent fiscal watchdog has an answer: Trim some of the tax loopholes, which total $50 billion.

Simple idea. Difficult to make happen.

Each of the hundreds of tax breaks is important to some interest group, political analysts said, and a few of those loopholes are perceived almost as a constitutional right.

Nevertheless, Legislative Analyst Elizabeth Hill's recommendations on tax breaks, which she says mostly benefit the rich and corporations, are drawing attention. She even addressed the largest, seemingly most untouchable tax break: allowing homeowners to deduct mortgage interest off their state personal income taxes.

Hill said in a report that the deduction, which exceeds $5 billion a year, no longer serves its intended purpose of encouraging home ownership. She believes there are more targeted, less costly ways to aid those who need the assistance, without subsidizing wealthy homeowners.

Without commenting on any specific tax break, Senate leader Don Perata, D-Oakland, and Assembly Speaker Fabian Núñez, D-Los Angeles, said Friday the Legislature will seriously consider Hill's recommendations.

And Steve Maviglio, a spokesman for Núñez, said closing tax loopholes - including possibly changing the mortgage interest deduction - will be part of Democrats' broad considerations of deficit solutions.

"We are looking at it, but no decisions have been made," Maviglio said. "We haven't targeted anything specific at this juncture."

But Hill has. In addition to the mortgage interest deduction, she would end a tax credit for small refineries making low-sulfur diesel, and halt a tax incentive for construction of low-income housing, which she argues has become excessive.

[biff]

I was familiar with it but could not remember the number. 13,eh? How appropriate!!

Cali is going to have some serious, serious fiscal problems when the full impact hits. (As if they don’t already.)

[calcowgirl]

Here's a simpler idea: Cut spending.

BUMP!

[Fresh Wind]

Invest in deportation.

[ConservativeMind]

Why should there be a special home mortgage interest deduction, anyway?

If it is already more worthwhile to purchase rather than rent, then purchase without the deduction.

I don’t ‘not’ buy a car because I can’t get a car interest deduction.