UPDATE — 10/4, 10:34 a.m. EDT: Congressional Republicans in states with Democratic majorities have started to signal opposition to the GOP’s tax plan, which would eliminate state and local deductions on federal returns.
So-called “blue” states generally have higher tax rates and congressional districts that lean Republican tend to be more politically moderate, making them susceptible to a Democratic challenge. California, New York, New Jersey and Illinois alone have 35 GOP representatives in the House of Representatives.
“I believe it is critically important to continue the deductibility of state and local taxes. I believe that this is essential to continue this in the code,” said Rep. Leonard Lance (R-N.J.), who added he is a “no” on any bill that eliminates the deduction.
After the GOP’s latest failed attempt to repeal Obamacare, Washington Republicans have decided to shift their legislative focus to tax reform. The new tax proposal could reach the Senate floor as early as November.
The plan would provide significant tax cuts to businesses and eliminate the alternative minimum and estate taxes. The proposal would also cut the number of federal income tax brackets from seven to three: 12, 25 and 35 percent.
The bill is expected to cost no more than $1.5 trillion due to lost revenue. However, GOP leaders like Treasury Secretary Steve Mnuchin believe they will make up for the loss with increased economic growth.
Senate budget committee member, Bob Corker (R-Tenn.), however, swiftly expressed criticism for the proposal last week.
“What I can tell you is that I am not about to vote for any bill that increases our deficit, period,” he said.
Corker, who announced Tuesday, Sept. 26, he would not seek reelection in 2018, was joined in his criticism on Monday by Sen. Rand Paul (R-Ky.), who cited a nonpartisan study by the Urban-Brookings Tax Policy Center which said nearly a third of middle-income earners may be facing a tax increase as a result of the plan.
The tax framework released last week, co-authored by the White House and Congress, would lower corporate and small business rates, get rid of some popular deductions and reduce the top income tax rate for high-earning Americans.
Republicans are hoping to approve a tax bill this year so they can enter the 2018 mid-term election with at least one significant legislative accomplishment. However, legislation is not expected to be introduced until after Congress makes progress on the fiscal year 2018 budget.
Democrats have expressed concern with the proposal saying it favors top-earning Americans over the middle-class. House Speaker Paul Ryan (R-Wis.) was quick to reject those concerns, stating middle-class families are the driving force behind the proposed tax overhaul.
Ryan went on to say that middle-class families would benefit from legislation that doubles the standard deduction, expands some existing tax credits and maintains breaks on mortgage interest and charitable giving.
“Those are all middle-class tax things,” Ryan said. “The purpose of this is to help people who are living by a paycheck to keep more of their hard-earned money but also get more jobs, a faster-growing economy.”
On the business side specifically, the Republican plan calls for a reduction in the corporate tax rate to 20 percent and slashes the top “pass-through” rate, which many small businesses use, from nearly 40 to 25 percent.
While White House officials are justifying across-the-board tax cuts for different reasons, the Tax Policy Center’s analysis shows $5.6 trillion in federal revenue will be lost as a result over the next two decades — a figure not lost on BlackRock Inc. CEO Larry Fink.
“What is being proposed is a pretty large expansion of our deficits,” the financial executive said Tuesday on Bloomberg TV.
Despite the concerns of some elites, a POLITICO/Morning Consult poll released Wednesday shows that nearly half of American voters familiar with the Republican tax proposal support it, compared to 37 percent who are opposed.
Editor’s note: This article has been updated.
[Washington Post] [USA Today] [The Hill] [Reuters] [CNBC] [Photo courtesy AP/Andrew Harnik via Portland Press Herald]