WASHINGTON — Two looming questions threaten to snag the seemingly smooth trajectory of the Republicans’ massive tax legislation now in its final leg in Congress. How to satisfy demands of the rebellious GOP lawmakers from high-tax states who demand concessions over a cherished deduction? And how to pay for those concessions?
Even President Donald Trump has dropped his stubborn resistance to a smaller cut in the corporate tax rate as Republican leaders consider it as a way to pay for the House GOP rebels’ demands.
About two dozen House and Senate lawmakers are in talks to iron out differences between the two bills. The Republicans aim to get a final blended package to Trump by Christmas. They want to chalk up a major legislative achievement to preserve the party’s majorities in next year’s elections and fulfill a Trump campaign promise.
Democrats, who are in the minority, will take part in the negotiations, too, but their imprint on the tax legislation will continue to be scant.
Behind some of the closed-door negotiations to meld the two bills, there will be rumblings of the rebellion by GOP lawmakers from high-tax states like New York, New Jersey and California that swept through the House this fall.
The original tax plan by Republican leaders in Congress and the Trump White House called for eliminating the federal deduction for state and local taxes, a benefit that’s claimed by around 44 million people. The tax plan architects eyed a honey pot of about $1.3 trillion over a decade in revenue lost from the deduction that could be reclaimed to help pay for the tax cuts.
That didn’t fly with the Republicans in the House from high-tax states: Some threatened to vote against their party’s sacrosanct tax bill. After months of negotiations and cajoling by GOP leaders, they wound up with a compromise in both the House and Senate bills. The state and local deductions for income and sales taxes would be totally repealed, but homeowners would be able to deduct up to $10,000 in local property taxes.
Now that’s not enough. The California GOP House members, especially, want to restore the ability to deduct income taxes. How to pay for it? One of the big targets being looked at is the cut in the tax rate for corporations, a linchpin of the tax plan. It would slide from 35 percent to 20 percent under both bills, but there are quiet talks of letting it go to 21 or 22 percent. That may create new problems.
