House Republicans were working Tuesday to adjust their tax bill to address worries from GOP lawmakers from blue states, just one day before the planned release of the legislation they hope to put on President Trump’s desk before the end of the year.
“As we’re fine-tuning this product, and as we’re rolling this out, we’re continuing the conversation with the entire New York delegation,” said Rep. Tom Reed, a GOP member of the tax-writing committee from New York who has been involved in negotiations over the bill’s treatment of the state and local deduction. The treatment of the deduction could prove critical to the Republican goal of cutting taxes for middle-class families across the country.
Reed, speaking on a call with reporters with House Majority Leader Kevin McCarthy, said the New York delegation had a call with White House officials Monday night to discuss potential treatment of the state and local deduction, which disproportionately benefits people in high-tax states such as New York and New Jersey.
The administration and congressional leaders had proposed eliminating the break altogether to offset revenue lost from lowering tax rates.
After pushback from blue-state Republicans, however, Ways and Means Committee Chairman Kevin Brady said Saturday night that the plan would be scaled back. He said individuals would still be allowed to deduct state and local property taxes from their federal taxable income.
Reed, however, suggested Tuesday that that approach was not finalized, even though he was confident there would be some compromise offered to members from New York and New Jersey. “As to where the final dials are, we’ll know in 24 hours,” he told reporters.
Speaking Tuesday morning with conservative radio host Hugh Hewitt, Brady confirmed that his bill would repeal the deduction for state and local income taxes.
Senate Democratic Leader Chuck Schumer immediately pounced. “Chairman Brady is now making clear that the Republican tax plan will double tax the income of millions of Americans,” he said. “If any American needed more proof this bill would be a boon for the wealthy at the expense of the middle class, they should look no further than this provision.”
McCarthy declined to talk about what might be in the legislative text, but simply said that people from high-tax states like his own are “going to come out on the positive end.”
The state and local tax deduction issue is just one of several major questions that will be addressed with the introduction of the bill.
Another unresolved question, as of Tuesday, was whether House Republicans would seek to change tax benefits for 401(k) retirement plans, another provision with significant implications for middle-class families that provided grist for Democratic attacks.
