Trump’s State-Tax Plan Could Cause Headaches for 52 Republican Lawmakers

President Donald Trump’s promised tax overhaul may force dozens of Republican congressmen in states including New York and New Jersey into a politically damaging vote to repeal a $1.3 trillion tax break their districts use heavily.

But not if Representative Peter King of New York can help it. King, a Republican who represents Long Island, said he’ll oppose any attempt to repeal the state and local tax deduction, calling it “absolutely essential to my district.”

Photographer: Albin Lohr-Jones/Pool via Bloomberg

King is one of 52 Republicans — more than enough to scuttle any bill that lacks Democratic support — who hail from districts that use the state tax deduction disproportionately. He thinks enough of those Republican colleagues will band together to keep its repeal out of any comprehensive tax legislation this fall, complicating GOP plans.

“I can’t vote for a bill that would eliminate the state and local tax deduction,” King said in an interview. In New Jersey, where lawmakers say losing the break would increase taxes on the average taxpayer by $3,500 per year, Representative Leonard Lance says he’ll also work to save the so-called SALT deduction. But would Lance vote against a tax-overhaul bill that repeals it?

“Let’s just say I would have the gravest of reservations,” said Lance, whose constituents reported paying $4.9 billion in state and local taxes in 2015, the highest amount of any Republican congressional district.

If they and like-minded Republicans prevail, any tax-overhaul bill — which Trump and Republican congressional leaders plan to preview on Wednesday — may have to be sharply curtailed. The White House and lawmakers have avoided confirming details of their tax-bill framework, but lobbyists citing multiple leaks have said it will target a corporate tax rate of 20 percent or so, down from the current 35 percent. It would also provide middle-class tax relief and substantial rate cuts for many of the highest earners.

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Year’s End

The framework’s contents appear to be subject to change. While Trump told reporters Sunday that it was “totally finalized,” White House Press Secretary Sarah Huckabee Sanders said Monday that only certain details were final, and she didn’t specify which. Trump is scheduled to meet Tuesday with a bipartisan group of lawmakers from the House Ways and Means Committee, which would begin hearings once legislation is introduced.

After that, Trump anticipates rapid legislative progress. During a dinner meeting Monday night at the White House, the president told leaders of several conservative groups that he expects the House will approve a bill in October and the Senate by year’s end, according to two people who attended.

That timeline is aggressive. Under the procedure that Senate leaders plan to use to pass the tax bill, both chambers will have to first adopt identical budget resolutions before the House can act on tax legislation.

Amid the uncertainty, independent analysts say the revenue costs of some provisions that have surfaced may total $5 trillion or more over 10 years. Without hefty “pay-for” provisions — like repealing the SALT deduction — the rate cuts might have to be shallower, or shorter-lived.

Democrats’ Defense

Many Republicans oppose the deduction because they say it creates an incentive for state and local governments to raise taxes, knowing that the federal government will cushion the burden. Democrats such as Senate Minority Leader Chuck Schumer are staunch defenders of the SALT deduction, and argue that eliminating it would hurt middle class families. One-third of the value of the tax break is used by tax filers in New York, New Jersey and California collectively, according to a study by the nonpartisan Center For a Responsible Federal Budget

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Already, a coalition of groups that includes the U.S. Conference of Mayors, the National Governors Association and public-employee unions including the Service Employees International Union has formed to lobby against repeal. The coalition will target all lawmakers in districts that use the deduction heavily.

The mayors’ group is sending a bipartisan delegation to speak to members of Congress Tuesday, according to Sara Durr, a spokeswoman.

House Ways and Means Chairman Kevin Brady, who’ll play a key role in writing the tax bill, wouldn’t confirm that the SALT deduction is on the chopping block. But he said Monday that his committee still plans to simplify tax rules so returns can be submitted on a “postcard” — a goal that has called for eliminating the deduction in prior iterations.

“That allows us to significantly lower rates on Americans,” Brady said. “And so that’s the approach we’re taking.”

High-Tax States

Trump’s top economic aides also proposed ending the state and local tax break earlier this year, as they released a one-page outline of the president’s tax goals. Conservatives view the proposal as a way to tame high-tax states, which tend to vote Democratic.

But nationwide, 52 congressional districts held by Republicans registered above-average use of the SALT deduction in 2015, according to Internal Revenue Service data. They included several districts in New York, New Jersey and California, along with the Illinois district of Representative Peter Roskam, the chairman of a key panel on tax policy.

Roskam has avoided taking a position on the issue. “I’ve got to look carefully at state and local taxes because of my home,” he said in an interview last month. His constituents reported paying $3.4 billion in state and local taxes in 2015. “What I’m working for is to make sure that — net, net — the bottom line is that they’re going to be better off from a tax point of view.”

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In New York, lawmakers aren’t convinced that their districts would be.