SALT Deduction Becomes Latest Sticking Point In Tax Reform
The lower chamber’s passage of the Senate’s 2018 budget resolution Thursday brought GOP lawmakers one step closer to their goal of overhauling the tax code, but tensions remain over a proposal to eliminate state and local deductions.
Twenty Republicans joined Democrats in voting against the measure, which included reconciliation instructions allowing Republicans to fast-track tax reform and add $1.5 trillion to the deficit over the course of a decade. Members from high tax-rate states including New York, New Jersey, Illinois and California are fighting to keep the deduction in place, arguing the change would lead to a significant tax hike for their constituents. Critics of the proposal met with top tax writers shortly after the vote, but have yet to strike a compromise on the issue.
“This is a serious issue, and we’re taking it seriously. I’m going to stay at the table, so is leadership, with our New York and New Jersey lawmakers to try to find a solution where their tax taxpayers are better off after tax reform in their states,” House Ways and Means Committee Chairman Kevin Brady told reporters after the meeting. “We continue to hone through some solutions and what it means for their taxpayers — we’re making progress, but we still have work to do.”
GOP Rep. John Katko of New York said he and his colleagues who also voted against the budget sent a message with their opposition that they aren’t going to back down on the matter.
“The budget was a statement from the New York delegation basically that we’re serious about the state the tax reduction, we’re all willing to be flexible, we’re all willing to find a compromise,” he told reporters. “We want to make it clear to them that we’re not going to stand for language in the budget which basically says The state and local deduction is one of our targeted things to take out.”
Proponents of eliminating SALT noted it would provide roughly $1.8 trillion in revenue to help offset their plans for tax cuts, but acknowledged they need to ensure their plan doesn’t increase the burden on the middle class.
“They made it clear they need this problem sov before they vote yes on tax reform,” Brady said. “And so they’ve been straight up with me on their budget challenges, and we’re straight up with them about getting this done.”
The narrow passage of the budget signals GOP leadership could be facing an uphill battle in accomplishing their top legislative priority before the end of the year.
Katko said they received assurances their concerns would be addressed, but weren’t given specifics during the meeting.
“If we can find a compromise, and they have assured us that we can find one, I think we’ll be OK,” Katko said. “But the bottom line is the ball’s in their court now, and they know it, and we’re going to work toward yes.”
House Speaker Paul Ryan has repeatedly said the lower chamber plans to have their bill passed before Thanksgiving.
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