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Key US House lawmaker sees progress allaying tax deduction concerns

28 October 2017

On Wednesday, Gov. Jerry Brown wrote a letter to every House Republican from the state, urging them to vote against the tax plan because of the elimination of the SALT deduction.

I'm certainly aware of the broader circumstances: Republicans have made massive tax breaks for people who don't need them the centerpiece of their governing agenda, and if they fail, GOP officials fear looking inept.

Most economists scoff at such claims, and a new report by the Urban-Brookings Tax Policy Center finds that, even using a "dynamic" analysis that factors in economic feedback effects, the blueprint released last month would only boost growth for the first few years - and then lead to slower growth. And tax experts note that the vast majority of the savings from the state and local deduction go to households that earn more than $100,000, which is considered wealthy in many parts of the country.

Battles over the state and local tax deduction and tax-free contributions to retirement accounts have already broken open, and Republican tax writers have yet to lock down dozens of crucial details on tax rates and preferences. A final bill - expected November 1 - could include some sort of compromise, such as limiting the SALT deduction instead of eliminating it altogether.

Gross domestic product increased at a 3 percent annual rate in the July-September period, supported by strong business spending on equipment, the Commerce Department said on Friday. Knight, Royce, Walters, Rohrbacher and Issa all face competitive reelection races next year.

President Donald Trump and congressional Republican leaders have proposed abolishing the state and local tax deduction - a prospect that prompted many GOP lawmakers in those states to vote against the budget.

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Trump's plan, by contrast, would slash taxes for the top tax bracket, repeal the estate tax, and create a huge new loophole by reducing the rate on pass-through entities, allowing wealthy law firms and hedge fund managers to circumvent higher tax rates.

Republicans view passage of the upcoming tax measure as a career-defining dream, and its importance has only grown in the wake of the party's debacle on health care.

The Republican sales pitch for the "Unified Framework" tax plan released last month has often relied on claims that slashing rates for corporations, combined with other elements of the plan, would spur economic growth - enough growth, some posit, that the tax cuts would ultimately pay for themselves. "What they are doing is looting" California taxpayers, Pelosi said of her Republican colleagues. McClintock, Knight, Royce, Walters, Issa and Denham did not respond to McClatchy's requests to speak about taxes this week, or whether they are involved in the ongoing negotiations in the House. But the Trump plan, he said, is assuming unrealistic gains.

And not one California Republican signed onto their Democratic colleagues' October 23 letter, which called on congressional leaders to preserve the deduction.

California's Republican delegation tends to "hang together pretty reliably in a way that is supportive of McCarthy and the leadership", said Republican strategist Rob Stutzman, especially on votes like this that move along the legislative process.

Key US House lawmaker sees progress allaying tax deduction concerns