Under the compromise, Americans will be able to deduct property taxes of up to $10,000, but not income taxes. That’s rough if your state happens to have the nation’s highest income tax and one of the country’s lowest property tax rates. That is, if your state is California.
The natural response to this turn of events would be to rebalance the revenue mix. California Democrats could offer a bargain: Lower personal income tax rates combined with a property tax rate more in line with the rest of the country. Of course, that would require voters to first repeal Proposition 13, which since 1978 has severely limited property taxes.
Because property taxes remain deductible, Californians likely would save money. And the new tax system would be more predictable, less reliant on volatile income and more on home values, which outside of the historic housing bubble of the 2000s are generally more stable.