WASHINGTON – U.S. Senate Finance Committee Chairman Orrin Hatch said Thursday that the future status of the federal deduction for state and local taxes will be part of tax reform deliberations.

But Hatch, R-Utah, said in a brief interview following a committee hearing on individual tax rates that he’s doubtful Congress will make significant changes to the most common deductions claimed by individuals.

“I don’t think you are going to see too many changes, to be honest with you,’’ Hatch said. “It depends, but I don’t think so.’’

He made the comments after Rep. Kevin Brady, R-Texas, chairman of the House Ways and Means Committee said earlier this week that a framework for tax reform would be released by Sept. 25.

Asked about Brady’s plan, Hatch said, “We are very interested what he does. I haven’t seen it yet. We may agree with it. I’ll have to look at it.’’

Tax legislation originates in the House before it can be voted on in the Senate.

At Thursday’s hearing, committee members discussed federal tax deductions and tax credits, including the deduction for state and local taxes, also known as SALT, and the tax credit for childcare costs.

Senators and witnesses debated whether Congress should double or triple the standard deduction that’s claimed by households that don’t itemize their deductions.

Sen. Ron Wyden of Oregon, the ranking Democrat on the committee, said he released a proposal to triple the standard deduction a few years ago.

That sort of increase would significantly reduce the number of taxpayers who itemize on their tax returns, he said.

U.S. Senate Finance Committee Chairman Orrin Hatch, R-Utah, said the federal deduction for state and local taxes is on the table will be part of tax reform deliberations.
U.S. Senate Finance Committee Chairman Orrin Hatch, R-Utah, said the federal deduction for state and local taxes is on the table will be part of tax reform deliberations.

Iona Harrison, a Maryland realtor who testified on behalf of the National Association of Realtors, said that the combination of a larger standard deduction and repeal of the SALT deduction would "wipe out the incentive value of the tax benefits of owning a home for all but the most affluent."

"This would drop the value of all homes, wrenching the economy," she said. Homeowners would pay more taxes while most renters would get tax cuts.

Fifty three percent of homeowners claiming the itemized deduction for real estate taxes for the 2014 tax year earned less than $100,000, Harrison said.

Elimination of the SALT deduction is part of a tax reform blueprint released earlier this year by House Republicans.

Hatch and Senate Majority Leader Mitch McConnell, R-Ky., have negotiated a joint statement on tax reform with their Republican counterparts in the House and two top Trump administration officials.

Despite that progress, Hatch said the Senate will have a lot to debate. “I think everything is being considered but you know, we have a long way to go to get this tax reform done right,’’ he said after the hearing.

Hatch said at the hearing he would prefer to develop bipartisan legislation. He assured Democrats "the tax writing committees will be tasked with writing this bill.''

"This group -- some have deemed us the Big Six -- will not dictate the direction we take in this committee,'' he said. "Any forthcoming documents may be viewed as guidance or potential signposts for drafting legislation.''

Hatch chuckled in front of a gaggle of reporters when one asked if tax reform could be completed by the end of 2017.

“How many years has it been since the last tax reform?’’ he asked. When told it has been 31 years, he observed, “Nobody is convinced this can be done in a very short time frame.’’

He then hedged, adding that the administration will helping so he hopes it is possible.

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