Written by: Charles Elmore, Palm Beach Post

The biggest federal tax changes in three decades please plenty of companies and households, if not budget hawks lamenting a projected $1 trillion pile of new debt.

But area mayors meeting this week grappled with other effects — such as possible downward pressure on home prices and local tax revenues.

“There is a potential for losing property values,” said Theresa Lucotti-Bildik, local taxpayer advocate for the Internal Revenue Service in South Florida.

Why? The majority of Americans will not find it worthwhile to itemize deductions including mortgage interest on their taxes, taking some steam out of one longstanding incentive to buy a home, she told a gathering of municipal leaders in Palm Beach County.

“Time will tell,” Lucotti-Bildik said. “It’s still the American dream to buy a home, and that won’t go away.”

Certainly tax deductions are not the only factor when someone is considering a home purchase, said Wellington mayor Anne Gerwig.

But here is another, she said: Whether the potential buyer thinks home values will rise.

Buyers, particularly of higher-end homes, are more likely to hesitate “if the property values aren’t going up,” Gerwig said. “That’s the key to the whole thing.”

On the other hand, lower tax rates tend to help upper-income residents most, the folks most likely to buy the most expensive homes in the first place. Leaders in affluent communities such as Palm Beach and Manalapan said they will have to wait and see about the net effect.

Congress passed the biggest tax changes since 1986 in December, lowering the tax rate permanently for corporations and temporarily for individuals in several tax brackets. They add about $1 trillion to the debt over a decade according to congressional budget forecasters. President Donald Trump promptly signed it, emphasizing projections of higher economic growth.

Property taxes pay a big role in paying for schools and local government services, noted U.S. Rep. Lois Frankel, D-West Palm Beach.

With reduced incentives to buy a home, “that’s something you’ll have to keep your eye on,” Frankel told local government officials in a meeting she hosted Wednesday afternoon.

The National Association of Realtors warned property values were likely to drop in every state under early versions of the tax bill . After the final version passed with changes, the group said “some local markets, particularly in high cost, higher tax areas, will likely see price declines as a result of the legislation’s new restrictions on mortgage interest and state and local taxes.” Overall, NAR projected projected “slower growth in home prices” of 1 percent to 3 percent in 2018 “as low inventories continue to spur price gains.”

Mortgage interest deductions will be capped at properties worth up to $750,000, down from $1 million. The property tax deduction will drop to $10,000. Meanwhile, the standard deduction for all taxpayers will almost double to $12,000 for single filers and $24,000 for joint filers, meaning fewer people are likely to itemize.

About 30 million U.S. households that itemize today are expected to take the higher standard deduction instead. In all, more than 90 percent of households are projected to take the standard deduction.

That could simplify their tax returns. Whether it complicates life for local governments is what concerns mayors now.