Republicans could limit SALT impact in
new tax legislation
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[September 07, 2018]
By David Morgan
WASHINGTON (Reuters) - U.S. Republicans,
aiming to get another round of tax legislation through the House of
Representatives before the Nov. 6 elections, said on Thursday that they
are considering ways to minimize political blowback from a new cap on
federal deductions for state and local tax payments.
House Ways and Means Committee Chairman Kevin Brady expects to unveil
"Tax Reform 2.0" legislation next week to make permanent the individual
tax cuts contained in President Donald Trump's tax overhaul in December.
It is also expected to expand savings opportunities for families and
write-offs for start-up businesses.
But faced with a possible rout in November, House Republicans could
avoid giving permanence to the state and local tax (SALT) reduction cap,
a measure that has helped make re-election difficult for Republican
incumbents in largely Democratic states including New York, New Jersey,
Illinois and California.
Instead, lawmakers said the cap could be extended for as little as a
year to make the legislation acceptable to vulnerable blue state
Republicans, whose votes may be needed for passage.
"There could be an extension. I think it has to be finalized, but that's
what they're ... discussing," said Representative Mark Walker of
Representative Tom Reed, a New York Republican who sits on Brady's tax
committee, said discussions about what to do with the SALT provision
were "a work in progress."
"That's one of the major conversations," Reed told reporters. "There are
obviously a lot of political concerns, a lot of substantive concerns."
Trump's tax overhaul, which became law last December, capped the SALT
deduction at $10,000. The deduction was previously unlimited.
[to top of second column]
Chairman of the House Ways and Means Committee Kevin Brady (R-TX)
holds up a sample tax form as he speaks during a media briefing
after the House Republican conference on Capitol Hill in Washington,
U.S., April 17, 2018. REUTERS/Joshua Roberts/File Photo
The move has hit taxpayers hard in high-tax states that lean
Democratic, where Republicans now face more than a dozen competitive
Four states have sued the federal government to overturn the
provision, while the U.S. Treasury and Internal Revenue Service
moved last month to prevent high-tax states from helping taxpayers
circumvent the cap.
Representative John Faso of New York, whose own re-election bid is
rated a tossup by analysts, said Republicans could still make the
SALT deduction cap permanent if they got rid of a tax on high
earners that Trump's overhaul only reduced.
"The elimination of the alternative minimum tax greatly lessens the
capping of the SALT deduction," he told reporters.
It is not clear how a limited SALT deduction cap would impact the
Republican goal of bringing permanence to $1.1 trillion of
individual tax cuts, which are currently set to expire after 2025.
The cap was among a number of revenue raisers in last year's
overhaul that the Joint Committee on Taxation said would generate
nearly $670 billion over a decade to help pay for tax cuts.
(Additional reporting by Lisa Lambert; editing by David Gregorio,
Chizu Nomiyama and Cynthia Osterman)
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