Trump Tax Plan Hits Snag Over Ending Deduction For High-Tax States

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Will Racke Immigration and Foreign Policy Reporter
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President Donald Trump may be having second thoughts about a key provision in his tax reform package, after learning that it could lead to a higher tax bill for some middle-income families.

Trump reportedly became angry when he realized that eliminating the deduction for state and local taxes — commonly known as SALT — could cost the White House tax plan critical Republican support, according to Bloomberg.

Doing away with the SALT would generate about $1.3 trillion in additional tax revenue over 10 years, partly offsetting revenue lost due to the plan’s big cuts to marginal and corporate tax rates. It would also disproportionately hurt middle-income filers in states and cities with high income taxes.

Those places tend to be Democratic-leaning, but they are also home to several Republican lawmakers whose support Trump needs to get his tax reform plan across the finish line. Some, including New York Rep. Peter King, are pressuring the Trump administration to back off its plan to eliminate the SALT deduction.

“This is really almost like a life or death issue for districts like mine,” King told reporters, according to FOX Business. “This cannot be called a rich district. It serves a lot of middle-income people.”

King has proposed maintaining the deduction, but only for people with incomes less than $400,000.

Eager for a signature legislative win, the Trump administration needs the support of 218 House Republicans to pass its tax plan. That could be a tall order, as blue-state Republicans come under increasing pressure from trade associations and chambers of commerce to keep the SALT deduction in place.

Those concerns notwithstanding, administration officials signaled Thursday that they expect Congress to send Trump a tax bill that kills the SALT deduction. Treasury Secretary Steven Mnuchin said ending the deduction remains an important part of the administration’s tax reform plan.

“We can’t have the federal government continue to subsidize the states,” he said during an appearance on CNBC’s “Squak Box.” “That’s a major loophole that we’re trying to close in simplifying taxes.”

Gary Cohn, the director of Trump’s National Economic Council, said Thursday that the president is not rethinking his position on SALT, reports Bloomberg. Cohn had previously suggested the issue was open to negotiation.

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