House Tax Writer Gives Ground on a State and Local Tax Break

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Bowing to concerns from Republican House members in high-tax states, the chamber’s chief tax writer said he’ll preserve a federal income-tax break for property taxes.

“At the urging of lawmakers, we are restoring an itemized property tax deduction to help taxpayers with local tax burdens,” House Ways and Means Chairman Kevin Brady said in a statement Saturday afternoon.

The announcement was welcomed by Representative Chris Collins, a New York Republican, who said the compromise would address the need “to protect middle income working families” in states like his own. He predicted it would assuage Republicans’ concerns.

But in a sign of the complex balancing act that Brady must perform to produce a tax-overhaul bill this week, the property-tax announcement came on the same day that the National Association of Home Builders pulled its support for the legislation. The group’s chief cited concerns that the bill might undermine existing tax breaks that support the housing market. Likewise, a coalition that includes the National Association of Realtors said in an emailed statement that it “will vigorously oppose this plan.”

Brady’s statement was aimed at resolving an impasse between House leaders and roughly two dozen Republican lawmakers from states including New York and New Jersey over an attempt to repeal federal tax breaks for state and local taxes. The issue threatened the bill’s prospects in the House. Brady plans to introduce actual bill text Wednesday.

$1.3 Trillion

Congressional leaders and President Donald Trump have suggested ending the existing state and local tax deductions as a way to generate as much as $1.3 trillion over 10 years — revenue that would help offset the deep tax-rate cuts they want for businesses and individuals. Restoring the property-tax deduction would trim that revenue projection by about a third — or $430 billion — said a conservative tax lobbyist who asked not to be named because discussions about the bill were private.

It would appear that deductions for state and local income taxes and sales taxes would still be repealed under the planned House bill.

In an earlier blow, Jerry Howard, chief executive officer of the NAHB, said the group will oppose the legislation because House Speaker Paul Ryan told him it won’t include a tax credit for mortgage interest and state property taxes. The association, which claims 140,000 members, will “do everything that we can now to make sure that it doesn’t pass,” Howard said.

Brady’s office released a statement Saturday afternoon that praised the home-builders group and called on members of Congress to study the tax-credit proposal closely “to determine if they want it included before tax reform heads to the president’s desk.”

The Saturday flare-ups signal the difficult path ahead for the tax overhaul that Congress and Trump have pledged to deliver by year’s end.

Secretive Process

The bill’s appearance Wednesday will end a secretive drafting process. Even Republican members of his Brady’s own committee said they weren’t aware of the details that would be included in the final bill. Now, as Ryan and Brady decide the final contours of the legislation, they’ll have to contend with vocal opposition.

The compromise Brady offered “would insert the heavy hand of Washington into state and local finance decisions, dictate winners and losers among states and unfairly penalize states that rely significantly on income taxes,” said a statement issued Saturday night by Americans Against Double Taxation, a coalition that includes Realtors, a national teachers’ group and groups of state and local officials.

Howard, of the home-builders group, said Ryan called him on Saturday to say the NAHB’s sought-after credit won’t be included. The speaker said he didn’t believe rank-and-file Republicans understood the proposal well enough, Howard said.

The mortgage and property-tax credit would have helped lessen the impact of another proposal Ryan and Brady are pursuing. They want to almost double the standard deduction.

Taxpayers’ Choice



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