House Ways and Means Chairman Kevin Brady confirmed Wednesday that at least a partial revival of the state and local income tax deduction is under consideration as part of the tax code overhaul, but did not provide details.
“We just continue to explore ways to make sure that we provide tax relief to families regardless of where they live,” the Texas Republican said. “That’s a commitment I’ve made to lawmakers in high-tax states and I’m going to continue to work to improve it.”
Chief Deputy Whip Patrick T. McHenry of North Carolina said Tuesday that House GOP leaders are working on the deduction tweak to appease lawmakers from California, one of the states hit hard by the full repeal of the deduction for state and local income taxes, also known as SALT, in the House-passed tax bill. The measure would retain the property tax deduction with a $10,000 cap.
Three California Republicans — Reps. Darrell Issa, Tom McClintock and Dana Rohrabacher — were among the 12 GOP lawmakers who voted against the tax bill because of concerns over the SALT deduction. The others were from New York and New Jersey.
New York Rep. Tom Reed, who voted for the tax bill believing the $10,000 property tax deduction was enough to ensure his constituents would benefit from the bill, also confirmed that the income tax deduction is back on the table.
“I think having a natural conversation about the income tax at the local level is good,” he said, noting property taxes are the top issue in his district and parts of New York but income taxes are more important in places like California.
Reed said leaders are still negotiating details of what they can do to restore the income tax deduction. “As you saw with the cap on the property taxes, similar type of cap conversations are expected in regards to the income tax side of that because that makes a lot of sense,” he said.
Rohrabacher said leadership has not talked to him about reviving the income tax deduction but he’s “anxious” to hear about any plans to do so.
“They know that as they calculate everything out that that provision ensures that the people of California, at least in my district, will have a major increase in the tax law,” he said. “Thus, if they want to try to do something about it, I’m happy to take that and I’d be happy to take a look at what they’ve got. It would make a lot of difference to me.”
Whether a change will benefit their constituents will depend how its structured, Zeldin said. If, for example, the income tax deduction was added back in but as an alternative to claiming the property tax deduction, that wouldn’t be helpful, he said. But if an income tax deduction cap were added on top of the property deduction cap it could be, Zeldin added.
“It could possibly have little to no effect for us in New York, it could potentially have a great effect, but I’ve just been hearing rumors,” Zeldin said. “But the conversations with us I think have not been on purpose; they haven’t been specific to those California concerns. Maybe it’s a divide and conquer strategy, but I don’t want to speculate.”
Zeldin said he’s had conversations with California Republicans who voted for the tax bill with the understanding that there would be further changes to the state and local tax deduction.
“I think that they’re trying to pass a bill,” Zeldin said when asked if GOP leaders were just trying to provide political cover to California Republicans. “And they know how many votes they had on the floor, and there’s going to be more votes ahead in order to get a bill to the president’s desk, and they’re going to want to have enough votes to be ale to pass their bill. And I think that’s a big driver above some of the other dynamics.”
King said “there’s a lot of anxiety among California Republicans, and every time they go home they feel more anxiety.”
President Donald Trump offered his support Tuesday for including the House’s SALT provision in the Senate tax bill, according to Maine GOP Sen. Susan Collins.