WASHINGTON – The federal deduction for state and local income taxes could be partially restored in the tax bill as a result of ongoing discussions between House Republican leaders and members of the California delegation.

House Ways and Means Committee Chairman Kevin Brady, R-Texas, told reporters about the negotiations on Wednesday.

Rep. Peter King, R-N.Y, speaks from a podium outside the U.S. Capitol joined by fellow New York House Republicans Lee Zeldin, right, and Dan Donovan.
Rep. Peter King, R-N.Y, speaks from a podium outside the U.S. Capitol joined by fellow New York House Republicans Lee Zeldin, right, and Dan Donovan. Brian Tumulty, The Bond Buyer

The tax reform legislation that passed the House Nov. 16 would repeal federal deduction for state and local income and sales taxes, but would allow homeowners to deduct up to $10,000 in property taxes.

Some of the 11 California Republicans who voted for the tax reform bill did so with an understanding that their party leaders would make further changes to the SALT deduction provision.

Three of the 14 Republicans in California’s delegation – Reps. Darrell Issa of San Diego County, Tom McClintock of Sacramento County and Dana Rohrabacher of Orange County – opposed the bill because of the partial repeal of the SALT deduction.

Overall, 12 of the 13 House Republicans who opposed the tax bill said they did so because of the SALT issue.

Republicans can afford no more than 22 no votes among members of their party in the House on passage of a final tax bill. Democrats have been unified in their opposition to the tax legislation.

The Senate is expected to vote on its version of the bill either later this week or next week.

Three New York House Republicans who voted against the tax bill because of the SALT issue said on Wednesday they have been cut out of the negotiations, although New York lawmakers do have informal conversations with their California colleagues.

“I’ve had conversations consistently, including today, with California Republicans who are fighting for improvements to the tax bill as it relates to the state and local tax deduction,” said Rep. Lee Zeldin, R-N.Y.

Zeldin said the California Republicans are concerned because many Californians pay higher state income taxes than property taxes.

Zeldin is concerned that Republican leaders might choose to give taxpayers the option of deducting state income taxes or home property taxes, but not both.

That wouldn’t help a homeowner who already would be claiming a $10,000 deduction for their property taxes, Zeldin said. “When you add it together, now you are getting closer to capturing all the middle income people in our area,” he said.

Rep. Peter King, another New York Republican who along with Zeldin represents parts of Long Island, expressed dissatisfaction with the $10,000 cap.

“You’ll find many homes on Long Island of middle income people where their combined property taxes and income taxes total $20,000 or $25,000,” King said. “So $10,000 doesn’t cover that. No. Not at all. It also doesn’t help the state overall because those with high incomes sustain a lot of the state budget. They are going to get hit and you’ll find more of them moving out of the state.”

Rep. Dan Donovan, R-N.Y., joined Zeldin and King at a news conference Wednesday with American Federation of Teacher President Randi Weingarten and U.S. Black Chamber of Commerce President Ron Busby Jr. to denounce the partial repeal of the SALT deduction.

Weingarten said 46% of state and local taxes go to education, so repeal of SALT would have an adverse impact on elementary and higher education.

Busby said 61% of small businesses oppose legislation that would increase the national debt.

The tax bill in the Senate and House tax bill would add $1.4 trillion to $1.5 trillion to the national debt.

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