WASHINGTON – A day after a White House official promised to have a tax reform plan “locked in place’’ before the congressional August recess, state and local government officials lobbied House lawmakers to keep the federal deduction for state and local taxes.
White House Director of Legislative Affairs Marc Short suggested to reporters on Monday the Trump administration is nearing an agreement on tax reform with top House and Senate Republicans.
“I think that hopefully before the August recess is when we have it locked in place,’’ Short said at a briefing when a reporter asked for an update on tax reform legislation. “And that we would look to begin the markup process when we return from August recess.’’
The fear among mayors and county officials who were at Capitol Hill on Tuesday is that the effort to lower the overall federal income tax rate will be offset by eliminating the deduction for state and local taxes, also known as SALT.
The groups issued a report -- The Impact of Eliminating the State and Local Tax Deduction -- that said the repeal of the SALT deduction would adversely impact almost 30% of taxpayers in every state and all income brackets.
“We’re a gigantic low hanging fruit,’’ Mayor Bob Coiner of Gordonsville, Va. told House staffers who attended a Tuesday briefing with mayors and representatives of the National Association of Counties and the Government Finance Officers Association. Other sponsors included the National Governors Association, the Council of State Governments and the National League of Cities.
Ending the deduction will result on double taxation, Coiner said, warning, “You will harm us. You will harm the middle class. This is one part of the government working fine.’’
Mayor Allison Silberberg of Alexandria, Va. said there would be an “irrevocably damaging’’ impact on those that take the SALT deduction, including an estimated 40% of households in her city. “It would be a shift from one level of government to another level of government,’’ she said.
Silberberg said her city’s Community Development Block Grant has already been cut 50% and the Trump administration has threatened to eliminate that program along with federal Home Investment Partnership grants. “That is the lens through which we have to look,’’ she said.
Although numerous House lawmakers have signed letters to Treasury Secretary Steven Mnuchin in support of continuing the deduction, the Republicans who have gone on record in support of it are mostly lawmakers in the New York-New Jersey area.
Meanwhile, Mnuchin on Sunday rejected a suggestion that White House advisor Steve Bannon had suggested raising the top rate for wealthy Americans to 40% to help pay for tax cuts for the middle class.
“I think it's very clear ... we have a proposal out there that the administration has put out with a top rate of 35% where we reduce and eliminate almost every single deduction,’’ Mnuchin said during an interview on ABC-TV’s This Week. “So that means that people who are in the high tax states also have no tax reduction and it'll be offset by reduced deductions.’’
In recent weeks Mnuchin has talked about having a plan ready when Congress returns after Labor Day, But Short suggested it will be sooner than that.
The recess for the Senate is to be delayed until mid-August so that members can deal with health care legislation and other issues, Senate Majority Leader Mitch McConnell, R-Ky., announced on Tuesday.