A bloc of GOP House lawmakers from high-tax states mustered a show of force Thursday that nearly sank the Republican budget setting up a major overhaul of the tax system, the party’s prime political goal and economic promise.
The rebellious lawmakers, from states such as New York and New Jersey, oppose the targeting of a prized deduction in the tax plan pushed by President Donald Trump and Republican congressional leaders.
The lawmakers insist the elimination of the federal deduction for state and local taxes would hurt many of their constituents and subject them to being taxed twice.
The breakaway bloc isn’t a solid block, though. Its members have widely differing definitions of what’s best for their constituents’ economic interests and who makes up the middle class.
The razor-thin 216-212 vote in the House for the budget allows Republicans to begin work on a follow-up $1.5 trillion tax cut and move it through Congress without fear of blocking tactics by Democrats.
Among the 20 Republicans who bucked their party to oppose the budget measure were 11 lawmakers from New York and New Jersey, who had supported the plan earlier this month but now registered their unhappiness over the imperiled state-local deduction.
A fevered series of meetings in recent weeks with top Republican leaders failed to produce a compromise to mollify the rebels. They began huddling anew minutes after the budget vote.
“We stood firm … to let them know we’re not kidding,” said Rep. John Katko, R-N.Y., a “no” vote on the budget.
Rep. Steve Scalise, the House Republican whip, promised to keep negotiating with the breakaway lawmakers: “We’re committed to working with them to try to fix it.”
“Obviously it’s complicated,” Scalise said. “It all deals with how people, especially in the middle class and upper-middle class, are going to be able to still benefit from our tax-cut plan.”
Rep. Lee Zeldin, R-N.Y., said the Republicans were given assurances that “there’s change coming.”
In fact, while Republicans are fractured along various lines over the tax plan, the bloc of high-tax state Republicans isn’t speaking with one voice. And they’re all claiming to carry the standard for the middle class.
Rep. Tom Reed says 99 percent of his district in western New York “will not be impacted” if the state-local deduction were repealed. He voted for the budget measure and totally supports the tax plan. Rep. Peter King, whose Long Island, New York district boasts high living costs and a large contingent of lower-salaried public employees like teachers and police officers, voted against the budget plan and may need some accommodation to move to a “yes” on the tax legislation.
Lawmakers representing wealthy suburbs in New York and New Jersey have a different take. High state income taxes can affect residents in the same areas unevenly. A local property tax bill of $25,000 in one jurisdiction brings vastly different hits to income and tax breaks in another.
And what exactly is middle class, anyway? Is it the so-called middle quintile (fifth section) of incomes as defined by economists, $44,000 to $72,000 a year per household, or the next higher one, $72,000 to $112,000?
The Republican tax plan hasn’t yet attached income levels to its proposed new tax brackets: three or four, at rates of 12 percent, 25 percent, 35 percent and to be determined.
Possible compromises under consideration, short of repealing the state-local deduction entirely, include capping the annual income level for using the deduction at between $250,000 and $400,000, and a new property tax credit to replace the deduction of local property taxes.
Other fractures among the Republicans over taxes also persist. A battle over tax-deferred contributions to 401(k) retirement savings accounts has broken open, and GOP tax writers have yet to lock down dozens of crucial details on tax rates and preferences. Republicans may also drop efforts to fully repeal taxes on multimillion-dollar estates, even though the idea is a longstanding feature of the party’s tax agenda.
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