House Republican leaders are making last-minute changes to their tax bill in an attempt to win over skeptical members within their own party, crafting a provision that would allow Americans to deduct their local property taxes from their federal taxable income.
House Ways and Means Committee Chairman Kevin Brady (R-Tex.) had planned for months to prohibit people from deducting any state or local taxes from their federal taxable income as part of a sweeping overhaul of tax rules, but huge pushback from Republicans in states such as New York and New Jersey precipitated the change. Discussions are still ongoing and the precise details of the change couldn’t be learned.
Brady told reporters Monday that the ability to deduct property taxes from federal income would now be one of just three items that Americans could claim on a postcard-style filing system that the GOP is trying to market as a way to simplify the tax code.
“Right now on the postcard will be the mortgage deduction, the charitable [giving deduction] and the property tax deduction,” Brady said.
He is working to put the finishing touches on his draft of the tax overhaul, which he’s slated to release Wednesday. Brady plans to begin holding votes in his committee on the bill beginning on Monday, and the White House is hopeful that the House of Representatives can pass a full version of the bill by Thanksgiving.
The Senate is working on its own version of the tax changes, and Republicans hope they can pass matching tax-cut bills through the House and Senate by the end of the year. This will be a difficult task given their slim majority in the Senate and internal divisions that have delayed the effort so far.
Republicans are trying to blunt criticism that their tax bill would hurt homeowners and the real estate industry. The National Association of Home Builders announced over the weekend that it will work to kill the House bill because it thinks that forbidding Americans from deducting state and local taxes would remove incentives for home ownership. It couldn’t be learned whether the new property tax change would lessen the opposition from the NAHB, which is considered one of Washington’s most powerful lobbying groups.
The change Brady is looking to make would likely benefit property owners, because they are the ones who would have property taxes that they could deduct form their taxable income. Brady said they still planned to prohibit people from deducting their state and local income taxes and state and local sales taxes from their federal taxable income, a distinction that drew attacks from Democrats.
“No matter how they construct this compromise, Republicans are still socking it to the middle class and the upper-middle class, but this time picking winners and losers,” Senate Minority Leader Charles E. Schumer (D-N.Y.) said Monday.
Still, allowing Americans to deduct their property taxes from their taxable income could make the broader tax bill more expensive unless other changes are made to offset the adjustment. The bill is already expected to add $1.5 trillion to the deficit over 10 years, and Republicans are trying to ensure that any more changes they add don’t make it more costly.
The broader GOP tax plan would slash corporate rates, simplify the taxes paid by individuals and families, and create new incentives for companies to bring foreign earnings back into the United States. But many details of how these changes would work have been kept secret, fueling concern about the potential impact on companies, families, and a wide range of taxpayers.
Republicans want to lower the corporate tax rate from 35 percent to 20 percent.
Brady on Monday denied a report that the reduction would be phased in over a period of years, saying this was not the case. He also suggested, however, that some key details about the tax plan remained unresolved and were still being worked out. For example, while he denied that the corporate tax rate would be changed in a way that’s phased in, he also wouldn’t confirm that the corporate rate would be 20 percent in the first year the law goes into effect.
“To be determined,” he said.
Brady spoke outside a closed-door meeting of Republican Ways and Means members in a conference room on the fifth floor of the Longworth House Office Building, where tax writers have spent long hours in recent weeks honing their plan.
Details of the plan have been largely kept under wraps, and several lawmakers involved in the meeting declined to comment. One reporter followed Brady as he headed to the bathroom, only to be turned back by the chairman. After he emerged, Brady spoke briefly with reporters.
The Ways and Means Republicans are expected to convene again Tuesday to put the finishing touches on the bill.
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