House and Senate tax bills treat disaster victims unequally
If the House Republican tax bill became law, victims of hurricanes in Texas and Florida who've yet to account for all their losses could deduct them on their 2018 taxes. Not so for victims of the California wildfires.
If the Senate version prevailed, victims of all federally declared disasters – a category that cover victims of both hurricanes and the wildfires – could deduct their losses. But people who lost homes in smaller-scale disasters couldn't.
Such disparities, seemingly arbitrary, show how political decisions have helped shape the tax legislation being crafted by Republicans, who insist they're trying to simplify the tax code, reduce rates and treat everyone fairly.
"I don't know that treating disasters differently makes sense as economic policy, but it's understandable as part of the political process," said Michael Simkovic, a tax professor at the University of Southern California law school. "That's how things work."
No one is sure which provisions of the House and Senate bills will end up in the final reconciled version that Republicans are working on and hope to finalize as early as this week. But whatever changes survive the reconciliation process could have far-reaching consequences for a vast range of households, including victims of natural disasters.
The House bill was written by Rep. Kevin Brady, the chairman of the tax-writing Ways and Means committee. His district adjoins Houston, which was thrashed by Hurricane Harvey in September. Brady's provision would end the personal-loss deduction that has been used by taxpayers who suffer severe losses from fires, floods or crimes.
Yet the House bill would create an exception allowing victims of Hurricanes Harvey, Irma and Maria to use that deduction in the future if they haven't yet totaled their losses from the storms by the time they file their 2017 taxes.
"If they call out one kind of devastation over another, that stinks," said Larry Keyser, whose home was one of 3,500 structures destroyed in fires in Northern California in October as the tax bill began to move through the House of Representatives.
"The Senate side, that stinks, too," added Keyser, a retired engineer who is struggling to total all the losses his family suffered. He doubts he will have determined his total financial loss by tax time.