The new congressional tax reform plan faced quick criticism on Thursday from both Democrats and Republicans who object to changes in the way it would allow Americans to take deductions for the taxes they pay to state and local governments.
Members of Congress from high-tax states like California, New Jersey and New York are preparing for a tense battle over the GOP’s proposed reforms because their taxpayers get the greatest advantage from the existing rules.
The final draft unveiled by House Speaker Paul Ryan and House Ways and Means Committee Chairman Kevin Brady calls for a $10,000 cap on deductions for state and local property taxes.
But income taxes paid to states will no longer be eligible for federal deductions.
The Republican tax plan will disallow deductions for income taxes paid to states, and lawmakers from heavily taxed states – mostly run by Democrats – are crying foul
California Democratic Rep. Nancy Pelosi, the House Minority Leader, blasted Republicans from her state for being ‘lemmings’ and costing their own constituents money
Treasury Secretary Steven Mnuchin told NBC’s ‘Meet The Press’ on Sunday that he wants to get ‘the federal government out of the business of subsidizing the states.’
House Minority Leader Nancy Pelosi, a California Democrat, took aim Thursday at the so-called ‘SALT’ (State And Local Taxes) proposal, slamming Republicans from her state in a bid to shame them into scuttling the tax bill.
‘The Republicans from California have gone straight down the line like lemmings to the sea to vote against the interests of their constituents, against the interests of our states,’ Pelosi said.
‘Our colleagues have gone off this deep end. We want to pull them back,’ she declared.
The tax plan will adjust the brackets with new rates
President Donald Trump said he will ‘deliver historic tax cuts and reforms,’ while Treasury Secretary Steven Mnuchin (left) declared that he wants to get ‘the federal government out of the business of subsidizing the states’
It’s unclear how many Republicans from heavily taxed states will balk at the idea of denying their voters a treasured perk.
But more than half the total savings from the deduction goes to taxpayers in California, Illinois, New Jersey, New York, Pennsylvania and Texas.
Among those six states, only Texas is a reliable Republican bastion.
Trump won Pennsylvania in the 2016 presidential election.
The IRS says that for the 2015 tax year, the average U.S. taxpayer deducted about $3,600 from their gross income to account for state and local taxes.
Bloomberg reports that in New York’s 12th congressional district, on Manhattan’s tony east side, the average was more than $31,000.
In California’s 18th district on the pricey San Francisco Bay, it was over $26,000.
High-tax states’ Republicans are already balking.
Gov. Andrew Cuomo of New York, where income taxes are among the nation’s highest, complained that disallowing federal deductions for those taxes would ‘destroy’ the Empire State
‘I view the elimination of the deduction as a geographic redistribution of wealth, picking winners and losers,’ New York Republican Rep. Lee Zeldin said in a statement.
‘I don’t want my home state to be a loser, and that really shouldn’t come as any surprise.’
The change would only affect the 30 percent of tax filers who itemize their annual returns – largely middle- and upper-middle-class earners.
For the rest of Americans, including low-income families that take the standard deduction instead, the change will have no impact at all.
Eliminating the SALT deduction could raise as much as $1.3 trillion for the U.S. Treasury over the next decade.
Ryan said during a press conference on Capitol Hill that Republicans are ‘leveling the playing field’ with their proposal.
He claimed that the average U.S. family of four would save $1,182 per year on their federal tax bill.
‘That $1,182 more covers about a year’s worth of gas for the car. … It can help you pay down your debt faster. It can help you renovate your house faster,’ he said.
President Trump said in a statement that ‘[t]he special interests will distort the facts, the lobbyists will try to save their special deals, and some in the media will unfairly report on our efforts.’
‘But my Administration will work tirelessly to make good on our promise to the working people who built our Nation and deliver historic tax cuts and reforms — the rocket fuel our economy needs to soar higher than ever before.’