House Republicans who voted against the House’s tax reform bill over objections to the bill’s elimination of the deduction for most state and local taxes may be divided over a potential proposal that would meet the concerns of representatives from some high-tax states, but not all.
Rep. Lee M. Zeldin, R-N.Y., said at a November 29 press conference that he heard California Republicans are talking to the House leadership about implementing an income tax deduction cap instead of full repeal because their constituents are more reliant on the income tax deduction than the property tax deduction than those in New York and New Jersey.
The current House tax reform bill (H.R. 1) keeps a $10,000 deduction for state property taxes.
Californians “have the highest state income tax rate in the entire country, so that is important for them. The way that this fix is structured potentially for California, it could possibly have little to no effect for us in New York or it could potentially have a great effect,” Zeldin said. He offered another potential fix.
If the choice comes down to an income tax deduction or a property tax deduction, “essentially just about everyone who is currently benefiting from a $10,000 property tax deduction cap is not seeing any added benefit with that particular compromise,” Zeldin said. On the other hand, he said, “If you come up with a number for income tax deduction cap and that was added to a $10,000 property tax deduction, when you add it together, now you’re getting closer to capturing all of the middle-income people in our area.”
Zeldin said it was positive that there is some agreement to support the House’s treatment of the SALT deduction in the White House and Senate, but that it is ultimately not enough.
“It’s good that the Senate would be coming off a position of proposing full elimination, but we need to go a little bit further, and the fight is going to need to be more so in the House than the Senate because there aren’t any Republican senators in California, New Jersey, [or] New York,” Zeldin said.
However, some lawmakers are optimistic that the Senate will be able to create a compromise to pull lawmakers to a yes vote.
“I think it’s becoming clearer each day that the property tax deduction compromise is going to make its way through the Senate, so any complete elimination of the state and local tax [deduction] is, in my opinion, each day becoming less and less likely,” House Ways and Means Committee member Tom Reed, R-N.Y., told Tax Analysts.
Retaining the income tax deduction in its entirety is not a realistic expectation, just as keeping the property tax deduction in its entirety is not realistic, Reed said, but he added that there can be a compromise.
He also said lawmakers may be able to make up part of the loss of revenue from retaining the deduction in some form by keeping the Senate’s proposal to eliminate the Affordable Care Act’s individual healthcare mandate.
Ways and Means Committee Chair Kevin Brady, R-Texas, told reporters that the committee’s staff continues to work on legislative options for those House and Senate Republicans who have concerns about the elimination of state and local tax deductibility. “We’re working with lawmakers on some ideas, figuring out the scores for some options” to bring to the conference committee, Brady said.
“We made this commitment to our high-tax state members that we’ll continue to work for them,” Brady said.
Rep. Tom Cole, R-Okla., a member of the House Budget and Appropriations committees, told C-SPAN’s Washington Journal that his vote on the tax bill will be related to keeping the property tax deduction at a high level. It was a “concession” made in the House because of high property taxes in some states, he said. He added he was “pleased to see the Senate pick it up” and thinks it’ll be in the Senate bill. Cole also said that it’s important to bring corporate rates down to “be competitive with other industrial countries.”
Dylan F. Moroses, Stephen K. Cooper, and Zoe Sagalow contributed to this article.
Follow Asha Glover (@AshaSGlover) on Twitter for real-time updates.