House Republican lawmakers are considering changes to a provision in their tax reform plan that would eliminate state and local tax deductions, under the threat of a possibly fatal split within the GOP.
Republicans from high-tax states such as New York, California, and New Jersey have threatened to vote down the GOP tax reform plan unless the state and local tax deduction is put back in.
The GOP is now considering a revised plan that either puts caps on people who are eligible for the deduction, or allows filers to deduct either their mortgage interest or their state and local taxes from their federal tax bill.
A group of Republicans met Monday night at a Washington D.C.steakhousee with Ways and Means Committee Chairman Kevin Brady, R-Texas, to hammer out a new plan.
"This was a discussion about how can we level the playing field to the point where we can get Republican votes from the 33 members that represent high-tax states," Rep. Chris Collins, R-N.Y., said Tuesday.
Collins said among the ideas pitched is one that would allow filers to deduct their property tax instead of their mortgage interest.
Collins said he proposed another solution: Capping the property tax deduction, perhaps limiting it to homes worth up to $1 million.
"If we cap it in some way, make it more middle-income related, which would take away the argument that this is a tax cut for the rich," Collins said.
The proposed elimination of the state and local tax deduction has roiled the GOP, pitting lawmakers from low-tax states against those with high taxes.
Collins said removing the deduction could mean "a very large increase" in taxes for filers in his state, where a person owning a $600,000 home typically pays $24,000 in property taxes.
Lawmakers from states with lower local taxes want to get rid of the deduction, arguing it forces the rest of the nation to subsidize those states.
"I don't think there is any reason a federal taxpayer from a low-tax state should subsidize a high tax state," said Rep. Bill Flores, R-Texas.
While details of the tax reform are not finalized, House this week will vote on the fiscal 2018 budget, which will serve as a legislative vehicle for the tax measure.
House Budget Committee Chair Diane Black, R-Tenn., told the Washington Examiner Republicans are trying to resolve the tax deduction dispute.
"We have to look at every state and the congressmen who represent the states where this is a big issue, so we are doing that and we are listening and trying to figure out a way to make sure everyone is treated equal at the end of the day," Black told the Washington Examiner.