In order to pass the largest change to the United States tax code since the 1980s, House Republicans, led by Speaker of the House Paul Ryan, are exploring options to revise the current tax bill to maintain support for it within their party’s ranks.
Republicans released details of the bill last week, which included cutting the corporate tax rate to 20 percent, as well as reforming the tax brackets wage earners face, ostensibly meant to simplify taxes for working Americans. Republicans attempted to sell Americans on the plan last week by showcasing a simple “postcard” tax return.
Republicans will plan to bring a revised bill to a vote before November 23. However, they will need to reconcile some key differences in order to maintain party unity, in addition to later reconciling the House bill with a similar plan introduced in the Senate.
However, some Republicans in heavily Democratic states such as New York or California, believe the plan puts them in a difficult position because the proposed changes would negatively impact their states.
One of the biggest sticking points is the potential elimination of the state and local tax, or SALT, deduction, which allows taxpayers to deduct what they pay in income tax to their state or municipality from their federal returns. As a compromise, taxpayers would still be allowed to deduct property taxes from their federal returns, though they will be capped at $10,000 per year.
The states with the highest top marginal rates include California, Minnesota, Hawaii, New York, and Vermont. Seven states, including Texas and Florida, do not levy income taxes on their citizens, which led to New York Republican Congressman Lee Zeldin describing this bill as a “geographic redistribution of wealth,” to the New York Times.
Proponents of eliminating SALT argue that this gives blue states an incentive to raise taxes without regard to potential consequences. However, some critics argue that blue states already pay more in taxes than they get back in services, making it unfair to further increase their burden. New York Governor Andrew Cuomo described the bill as using New Yorkers as a “piggy bank” in a tweet last week.
The GOP plan is harsher on New York than almost any other state. Taxation is supposed to be fair. Instead, we’re being used as a piggy bank.
— Archive: Governor Andrew Cuomo (@NYGovCuomo) November 4, 2017
Other potential sticking points include the increased standard deduction, which has been said to potentially lead to a decrease in charitable giving, as more taxpayers opt to take the deduction rather than itemizing their returns, as well as eliminating deductions for medical expenses exceeding 10 percent of a person’s income.
It will be critical for Republicans to maintain their unity, as Democrats are expected to provide unified opposition to the bill, led by Senate Minority Leader Chuck Schumer (NY) and House Minority Leader Nancy Pelosi (CA).
[Featured Image by J. Scott Applewhite/AP Images]