Legislation that provides $35 million in new revenue to help balance the state budget will be debated by the House in the near future. And House Speaker Shap Smith strongly supports the plan.
The proposal is being drafted by the House Ways and Means committee, and it would affect only those people who itemize their income tax deductions.
It places a cap on the total amount of deductions that a taxpayer can claim. The cap would be two and half times the size of the current standard deduction. For individuals, the new cap would be $15,500, and for a couple, the cap would be $31,000.
The bill also removes a provision that allows taxpayers to deduct the amount they paid in state and local taxes in the previous year.
It's estimated that the proposal will raise roughly $35 million a year and will affect roughly 25 percent of all taxpayers.
Smith says most states don't allow any deductions on their income tax forms.
"I think that given where we're making reductions in the budget, it's fair to ask people who might be doing a little better off to pitch in to solve this problem." - House Speaker Shap Smith
"In fact, almost all of them that have income taxes disallow the pass through of the federal itemized deductions in their totality,” Smith says. “So I think this does make some sense and I think that it's a fair way to raise revenue."
Smith says the overall cap is still pretty generous, and that it's reasonable to help close the state's $110 million budget gap with some new revenue.
"I think that given where we're making reductions in the budget, it's fair to ask people who might be doing a little better off to pitch in to solve this problem. So I think it's the right balance,” he says.
House Republicans say it's a mistake to raise new revenue, and they'll outline a plan next week that will call for additional budget cuts.
Meanwhile, House Progressives argue that the proposed budget cuts go too far and they support an effort to raise other taxes.
