- The Washington Times - Friday, September 29, 2017

White House National Economic Council Director Gary Cohn on Friday said there could be some flexibility in how lawmakers treat the deduction people can take on state and local taxes paid, amid complaints from some Republicans on Capitol Hill that axing the provision could end up raising taxes on their constituents.

“That is not a red line,” Mr. Cohn said on Bloomberg TV.

He said the administration’s “red lines” are the proposed 20 percent corporate tax rate, down from 35 percent, and the proposed 25 percent rate for “pass-through” businesses, down from a top rate of 43.4 percent.

He also said there has to be a tax cut for “hard-working, middle-income Americans.”

“We are willing to work with the tax-writers on the other dials we have in the system,” he said.

Under the GOP tax framework unveiled this week, the state and local deduction would be eliminated.

But Republican lawmakers from blue, high-tax states like New York and New Jersey have already said they’re uneasy about the plans to ax the deduction, saying the move is likely to negatively affect many of their constituents.

Sen. Orrin G. Hatch, Republican of Utah and a key tax-writer who had a central role in helping craft the unified tax framework, also told reporters he’d like to keep the provision if possible.

Opponents of the provision argue that taxpayers across the country shouldn’t be put in the position of subsidizing the breaks for people living in higher-tax states who take advantage of the provision.

The Tax Foundation has estimated that eliminating the state and local deduction would raise nearly $2 trillion over 10 years — money lawmakers could use to lower rates elsewhere as part of a broader overhaul to the code.

But the immediate pushback over its proposed elimination highlights the tough path ahead as Republicans work to take the ideas into their framework and put them into actual legislation.

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