The House’s main tax-writer said his chamber won’t accept a Senate plan to eliminate a property tax deduction that’s critical for states like New York and California, underscoring the thorny path Republicans face in settling on a final product by Christmas.
Overhauling the U.S. tax code is considered a must-do for congressional Republicans who’ve failed to deliver President Trump a major legislative win this year.
The House GOP, as part of a compromise with blue-state Republicans, axed the deductibility of state and local income taxes, known in policy speak as “SALT,” from their plan. But they would allow filers to deduct up to $10,000 for local property taxes.
The Senate version would eliminate the deduction entirely, setting up a clash with House leaders who moved their bill through the Ways and Means Committee last week.
“It’s important to make sure people keep more of what they earn, even in these high-tax states,” committee Chairman Kevin Brady, Texas Republican, told “Fox News Sunday.”
Leaders worked carefully with specific Republicans to strike the compromise, Mr. Brady noted, so he cannot accept the total elimination of the deduction.
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The Senate GOP framework diverges from the House bill in a number of ways, preserving popular tax breaks for medical expenses, home mortgage interest and adoptions, while still promising lower taxes for most Americans.
The blueprint also slashes the corporate income tax rate from 35 percent to 20 percent, as the House bill does, but delays its effectiveness for a year.
Treasury Secretary Steven Mnuchin said key differences can be ironed out in a conference between the chambers, paving the way for Mr. Trump’s signature by December.
“The good news is, both the House and the Senate and the administration have the same objectives,” Mr. Mnuchin told CNN’s “State of the Union.” “And that’s about middle-income tax relief. That’s about fixing the business tax system, so that we’re competitive.”
Mr. Mnuchin also said “most people” will see a cut under the GOP’s overhaul of the tax code, though it may not be “100 percent.”
The idea that some middle-class Americans could see their taxes go up in, particularly in later years, has been a political impediment to GOP leaders’ attempts to sell the plan.
“This tax code is so complicated that literally everybody may take advantage of a different piece. And we want to make this thing simple and fair and provide middle-income tax relief. And I’m comfortable we will end up doing that,” Mr. Mnuchin said.
Leading Democrats have opposed the GOP’s plans, which are using arcane budget rules to avoid a filibuster in the Senate. They say the proposals favor wealthy, corporate interests over middle-class relief, while producing $1.5 trillion in new deficits over the next decade.
Senate Minority Leader Charles E. Schumer said the disparity between the chambers isn’t the heart of the problem over SALT, but that GOP leaders touched the deduction from the get-go.
“The House’s so-called ‘compromise’ would be saying to the middle class we’ll only chop off four of your fingers instead of all five,” the New York Democrat said. “Both the House and the Senate bills would raise taxes on millions of middle-class families, particularly in the suburbs, while providing a huge giveaway to corporations and the wealthy.”