Tri-State Officials Blast Tax Overhaul Bill

Elected officials in the tri-state region Monday slammed the $1.4 trillion tax overhaul pending in the GOP-controlled Congress, saying it was a politically motivated attack that would hurt middle-class homeowners.

Democratic governors and lawmakers said the bill's move to partially repeal state and local tax write-offs amounted to "double taxation" and "redistribution." In a conference call with reporters, New York Gov. Andrew Cuomo and New Jersey Gov.-elect Phil Murphy, both Democrats, said limiting the deductions would increase taxes for homeowners in New York, New Jersey and Connecticut as a way to help pay for the overall proposal.

"This takes from the richer states and has them subsidize a tax cut in the less wealthy states," Mr. Cuomo said, noting that the states that would be most affected typically vote Democratic. "It's political retaliation through the tax code."

Both U.S. House and Senate bills would allow for up to a $10,000 write-off for property taxes but no break for state and local income or sales taxes, often referred to as SALT. Supporters of the bill want to use funds created by limiting the deductions to help pay for business tax cuts, which they argue will accelerate economic growth.

In New York about 35% of all filers claimed state and local tax deductions in 2015, along with 41% in both Connecticut and New Jersey, according the Pew Charitable Trusts. That compares with about 30% of all U.S. tax filers nationally.

Brian Riedl, a senior fellow at the Manhattan Institute, a conservative think tank, argues that the current system tilts in favor of high tax states at the expense of states with lower taxes.

While the tax bills drew heavy GOP support in red states, many Republicans in New Jersey and New York voted against the bill, citing their unhappiness with the changes to the state and local tax deductions. Out of New Jersey's delegation of five House Republican members, four broke rank and voted against the overhaul, and of the nine New York GOP members, five voted against the bill.

In Connecticut, all five of the state's members of Congress are Democrats and voted against the bill.

In New Jersey, Republican Congressman Tom MacArthur was the lone supporter of the tax bill. Mr. MacArthur hosted an event in his district last month with Treasury Secretary Steven Mnuchin and presidential adviser Ivanka Trump, who said the overhaul would simplify the tax code.

The Congressman resisted calls from Governor-elect Mr. Murphy on Monday to oppose the tax bill.

"Perhaps Phil Murphy should get his ducks in a row in Trenton, where legislative leaders are already questioning his disastrous fiscal policies," Mr. MacArthur said in a statement. "The reality is simple; the bill I voted for cut taxes."

Mr. Murphy, who takes office next month, said Republicans' argument that the changes would fuel economic expansion hasn't proved true in the past.

"It espouses the trickle-down theory," he said. "We've seen this time and time again, we know it doesn't work."

He and Mr. Cuomo said they would consider legal action to block the tax changes if the bill is approved.

Republican Rep. Tom Reed, who represents a rural New York congressional district along the Pennsylvania border, said Mr. Cuomo should focus on cutting taxes in the state. "No amount of bluster can hide the fact that the governor keeps feeding the tax monster eating up New Yorkers' hard earned cash," Mr. Reed said.

The GOP-controlled House and Senate now plan to merge their two tax plans and pass a final bill by the end of the year. In addition to the state and local income tax changes, both overhauls would set the corporate tax rate at 20%, raise the estate-tax exemption to about $11 million a person and nearly double the standard deduction.

U.S. Sen. Richard Blumenthal, a Democrat, said limiting the deductions would damage Connecticut's housing market.

"It will diminish the value of homes across the state," Mr. Blumenthal said.

Write to Joseph De Avila at joseph.deavila@wsj.com and Kate King at Kate.King@wsj.com

(END) Dow Jones Newswires

December 04, 2017 17:50 ET (22:50 GMT)