Senate GOP: We are unified on controversial tax policy change

Senate Republicans say that a brewing controversy in the House on state and local tax deductions won’t be much of a problem in the upper chamber.

They point out that a test vote held earlier this year shows the Senate GOP conference is unified on changing the deductibility of state and local taxes to pay for significant reductions to individual and corporate rates.

Senate Majority Leader Mitch McConnell (R-Ky.) is helped by the fact that there isn’t one Senate Republican who represents the nation’s largest high-tax states — California, New York, New Jersey and Illinois. 

{mosads}“I don’t think it’s going to be a problem,” said Senate Finance Committee Chairman Orrin Hatch (R-Utah), when asked Monday if any of his Senate colleagues are demanding that the deduction for state and local taxes remain in the law. “I don’t know anybody who’s advocating strongly for that.”

“Not on this side,” Senate Republican Whip John Cornyn (Texas) said Monday when pressed if anyone in his conference is opposed to eliminating the deductions.

It’s more of a problem in the House, where 35 Republicans hail from those four states, enough to defeat a tax-reform package if Democrats vote en bloc against it, as expected.

Republican leaders have rallied around eliminating deductibility for state and local taxes as a reform that would raise $1.3 trillion in revenue and help offset the cost of overhauling the tax code.

Senate Republicans voted mostly along party lines earlier this month for an amendment by Sen. Shelley Moore Capito (R-W.Va.) to the budget resolution favoring the elimination of the tax break and using the money saved to “provide tax relief to the middle class.”

Only conservative Sen. Rand Paul (R-Ky.), who regularly differs with his party leadership, voted no.

The Senate also voted during the budget debate against an amendment sponsored by Democratic Sen. Maria Cantwell (Wash.) that would have established a higher procedural hurdle for changing or scrapping the state and local tax deduction.

Every single Republican senator voted against the Cantwell amendment. 

A senior Senate Republican aide said GOP moderates in the upper chamber are more concerned about making sure their colleagues are willing to make hard choices about ending deductions and tax credits that can be used to keep the cost of the bill in check.

“We have our own problems,” the aide said.

Sen. Susan Collins (R-Maine), a key moderate, on Monday told Bloomberg News that she does not support repealing the tax on large estates or cutting taxes for millionaires.

Senate Republicans control 52 seats and cannot afford any more than two defections, as Vice President Pence would break a 50-50 tie. 

House Ways and Means Committee Chairman Kevin Brady (R-Texas) told reporters last week that he expects the Senate to accept whatever deal House Republicans strike on state and local taxes.

“My discussions with Chairman Hatch are pretty regular, and he’s fully aware that this is an important issue for our House members and that we are taking the lead to find a solution,” Brady told reporters. “I’m confident that will be honored.”

A group of House Republicans from New York and New Jersey voted against the budget last week in an effort to send a message that the state and local tax deduction can’t be fully repealed. The resolution, however, passed despite their concerns.

Even so, Brady has modified the bill to keep opposition from growing.

He pledged in a statement over the weekend to include language in the tax package that would allow people to take deductions for property taxes.

“At the urging of lawmakers, we are restoring an itemized property tax deduction to help taxpayers with local tax burdens,” he said.

It’s not much of an issue in the Senate, where moderate Republicans such as Sen. Bob Corker (R-Tenn.) are more concerned about how much the tax package will add to future deficits.

Grover Norquist, president of Americans for Tax Reform, said he’s not aware of any significant Senate GOP opposition to eliminating the so-called SALT deduction.

He argues that it would affect relatively few people, as many Americans would stop itemizing their tax deductions and instead take advantage of the doubling of the standard deduction — a core component of President Trump’s plan.

Many wealthy taxpayers already cannot deduct state and local taxes because their incomes exceed the threshold set by the alternative minimum tax, which would be scrapped by the GOP plan.

“In the Senate, I don’t see it” as a problem, Norquist said in an interview. “It’s not a very defensible tax credit. It’s a subsidy for big government.”

He contends the deduction favors states with big governments that need to be funded with heavier tax burdens and that taxpayers in states with lower taxes such as Texas have to pay comparatively more in federal taxes.

“I thought it would be a bigger deal than it appears to be,” he said.

Senate Republicans are waiting for the House Ways and Means Committee to unveil its package later this week, but they are coalescing around a plan that would only keep intact deductions for charitable contributions, home mortgage interest payments and complex medical expenses.

“The proposal on the Senate side is going to be to double the standard deduction, keep the mortgage interest deduction, the charitable deduction and for some complex medical issues,” Cornyn said Monday. “That’s sort of the current discussion.”