Morain: Seven ways the tax bill hurts Californians

Randy Otremba lives in a mobile home on the outskirts of Crescent City, makes do on about $1,000 a month and was calculating how the Republican tax plan would affect folks like him, veterans of military service.

Cancer almost cost him a leg. He still feels the effects of having smashed his head in a car wreck. In 2010, his old mobile home caught fire, destroying all that he owned. He found shelter by patching up a discarded trailer, but the roof leaked and there were rats. In desperation, he phoned a number he saw on a television ad for the California Department of Veterans Affairs.

And then, Otremba's luck began to change, thanks to a California loan program tailored to help veterans who served with honor and funded by state-issued bonds that are tax exempt, for now. The House Republicans' 400-page tax bill contains many bad ideas. One is a provision to end the tax-exempt status for the bonds used to fund affordable housing, including the state program that helped Otremba.

“They should be adding benefits for vets, not taking them away,” he told me by phone.

In August, Stephen Moore, a libertarian economist and adviser to Donald Trump who helped draft Trump's tax plan, visited Sacramento and spoke to a conservative National Tax Limitation Committee gathering at the Sutter Club. Rep. Tom McClintock, the Elk Grove Republican, was among those who attended.

“We have got to get this tax cut done,” Moore said, looking at McClintock and promising the cuts would boost the economy.

Moore told me the main goal was to reduce the corporate tax rate, which he believes would stimulate hiring and give the middle class a tax break. It seemed eminently doable. Republicans, who campaign on tax cuts, do, after all, control Washington.

“This has to be done and every one of my congressional colleagues understands it has to be done,” McClintock told Moore and the 100 or so people in attendance, though he voted against the bill passed last week by the House.

As often happens in Washington, the simple has become tangled. A corporate and middle class tax cut has morphed into a gift basket for the rich, paid for by the rest of us, especially those of us who live in California.

The Republican plan hurts Californians in no fewer than seven ways, one for each of the seven House Republicans who sit in districts carried by Hillary Clinton in 2016; Democrats will target the seven in the 2018 elections.

For one, the deal would monkey with child care credits in ways that would hurt California parents. It would abolish the deduction people can take when they incur property losses because of natural disasters, for another. Many people whose homes were destroyed in Wine Country fires last month will use that deduction. Tough luck to people who lose homes in future disasters.

Republicans aim to tax the endowments of private universities, and not just at Harvard or Stanford. The Chronicle of Higher Education reports 140 colleges would take a tax hit: University of the Pacific in Stockton, the California Institute of Technology and Pitzer, among them, plus Gallaudet University in Washington, a school for deaf people, and historically black colleges.

In another attack on education, the tax bill would end the deduction for interest on student loans and impose a new tax on tuition waivers granted to students of limited means. The California Department of Finance estimates these provisions would cost California, which depends on an educated workforce, $7 billion during the next decade.

The House version would cap the home interest mortgage deductions at $500,000. That's fine for low cost states. It would be a killer in California, particularly in the high cost Orange County districts represented by several Republicans facing 2018 challenges.

Worst of all, the GOP tax plans would eliminate the ability of Californians to deduct state income taxes from their federal taxes. That would affect more than 5 million Californians. McClintock represents a safe Republican district. But the Government Finance Officers Association estimates his constituents would lose an average of $11,802 if the deduction for state income taxes is abolished.

And then there's the provision to revoke tax-exempt status of the bonds used to help Randy Otremba.

It's a program that dates to 1922, when Proposition 1 offered to give back something to the men who fought in the War to End All Wars. Major Gen. Hunter Liggett, a hero of World War I, signed the ballot argument, writing that the state wanted to help veterans “of good character,” particularly ones who were disabled, buy “a home or farm of moderate value.”

More than 71 percent of the electorate voted for it. Since then, voters have approved veterans' bonds 23 times, helping 423,000 veterans get loans. One was Otremba.

He enlisted in the Army in 1971 and served in Germany. Upon his honorable discharge, he returned to Del Norte County and worked as logger, like his father. Then his health faltered and his mobile home caught fire. Worried about becoming homeless, he turned to CalVets.

His sister, Jackie Boor, helps tell his story. Traditional lenders never would have deemed Otremba creditworthy. He didn't have a bank account. His income is fixed. But CalVets worked to get him the loan of $50,000 to buy a new mobile home. He pays $315 a month.

“Your determination and flexibility made all the difference in the world,” she wrote in a letter to Walter Sanders, who oversees the lending unit at the Department of Veterans Affairs. “They saved my ass,” Otremba said.

On Nov. 10, Speaker Paul Ryan put out an insipid statement commemorating the founding of the Marines: “Whenever our nation needs you, you there there first, last and always.” He didn't mention that when the House offers a tax package, it might strip veterans of a benefit they might one day need.

Dan Morain is a columnist for the Sacramento Bee.