Mnuchin, Cohn field New York GOP concerns in late night call ahead of tax reform final plan

Mnuchin Cohn AP FBN

House Republicans from New York voiced their concerns  to Treasury Secretary Steven Mnuchin and National Economic Council Gary Cohn about the possibility of losing their coveted state and local tax deduction during a phone conference on Monday night, FOX Business has confirmed.

As earlier reported by FOX Business, all nine GOP representatives from New York, were scheduled to speak with Cohn and Mnuchin at 8:30 p.m. ET.

The call, according to those familiar with the matter, lasted approximately 30 minutes and both senior White House officials appeared sympathetic to the lawmakers desire to keep most of the tax break, also known as SALT, in the final tax reform bill and said they would try to get back to them with a compromise in the next few days.

"They recognized the situation and the intensity of the problem our constituents could face if we lose SALT," said one call participant, speaking to FOX Business on the condition of anonymity.

The lawmakers emphasized that they believed middle class individuals and small businesses from New York could get punished if the tax break was eliminated.

Still, that same source noted, while they hoped they could come to a compromise on Monday with the White House on including the deduction in the House tax bill with the legislative text expected to be unveiled on Wednesday,  "no specific solutions were discussed."

A White House spokeswoman did not return emails for comment when asked about the details of the call.

The conference comes after the House passed their budget by the slimmest of margins, 216 to 212 in favor of the budget, and as seven of the 20 “no” votes came from disgruntled New York Republicans.

Those lawmakers have been looking for a compromise on the deduction in meetings with House Republican leaders, including House Ways and Means Committee Chairman Kevin Brady (R-TX), since the tax reform blueprint was released in September.

The call between lawmakers and the White House also comes on the heels of Brady announcing he’s willing to concede to those same representatives as well as others from states that have the most to lose from eliminating SALT, such as New Jersey and California. Brady indicated that he will include a property tax deduction in the final bill.

“At the urging of lawmakers, we are restoring an itemized property tax deduction to help taxpayers with local tax burdens,” Brady said in a statement on Sunday.

Still, even with this concession, House members from New York and New Jersey gave a mixed reaction to the news and called for caution on whether there will be continued compromises leading into the bill’s publication.

In a text message, Rep, Steve King (R-NY) told FOX Business on Sunday that he’s happy with Brady’s decision but still has concerns. “It’s a good step forward, but still very concerned with losing state income tax deduction,” King said.

Rep. Thomas MacArthur (R-NJ) told FOX Business on Sunday that he’s “cautiously optimistic” but later added, “The devil is in the details."

SALT affects about 30% of all taxpayers, mainly in states such as New York, New Jersey, California, Connecticut, Virginia and Pennsylvania that impose significant state income and property taxes.

The GOP Congress is dominated by lawmakers from southern and western states that don’t impose such levies. They have argued for ditching the SALT deduction from the tax code on the grounds that it unfairly benefits taxpayers from just a handful of states and deprives the federal government of trillions in revenue.

Indeed, the Trump administration has called on the elimination of the SALT deduction that would produce close to $1.3 trillion in revenues over 10 years and help pay for his plan to slash taxes for individuals and take the corporate tax rate down from its current level of 35% to 20%.

But lawmakers from these high-tax states argue that the federal government receives a disproportionate share of tax revenues from states like New York and California, where a large percentage of wealthy people reside, thus the tax break provides some degree of fairness in the government’s revenue collection efforts.

Making the matter even more contentious as the Republican-controlled Congress and the Trump administration move toward the politically vital tax reform bill: close to 60 Republican members come from states that benefit most from the SALT deduction and could vote against tax reform if the tax break isn’t preserved in some way.