California House Republican hears it at home over tax bill

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In her district's biggest city and across its conservative bastions, Republican U.S. Rep. Mimi Walters is facing criticism over the GOP tax overhaul bill that she voted for last month. The bill might increase taxes for many of her constituents, rather than lower them.

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Under pressure from frustrated supporters, she is now working to modify the bill to ease the blow as lawmakers try to hash out a compromise with a measure passed by the Senate.

Three of California's 14 House Republicans voted against the bill last month, citing measures that would curb or even eliminate some key deductions used widely by Californians. Mrs. Walters's support for the bill, by contrast, has drawn scrutiny from some at a tense moment for the state's Republicans, ahead of competitive midterm elections next year.

"I'm not going to vote for a Democrat, but am I going to vote for a Republican that is going to raise my taxes? That is the question," said Jeffrey Lalloway, a divorce lawyer and Republican member of Irvine's City Council.

Stephen Miller, a registered Republican until 2016 -- he switched to independent ahead of the presidential election -- said he was furious with Mrs. Walters's endorsement of the bill. A former corporate tax attorney in Irvine, Mr. Miller created a spreadsheet calculator for Orange County residents to estimate how much in taxes they would owe if the bill passes.

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"When I step back at 30,000 feet, I see a bill that is taxing the rising middle class -- people going to college, getting ahead by their own labor -- at higher rates in order to lower taxes on income from existing wealth," said Mr. Miller, 45 years old. "I'm trying to spread information about this tax bill. I think that is most effective in switching independents, swing voters."

Analysts have said the GOP tax bill would give most people a modest tax break, at least in the first few years. But those benefits would be curbed in districts like Mrs. Walters's, where some affluent residents could be pinched by new limits on deductions for state and local taxes, known as SALT, and mortgage interest that are still being negotiated.

In an interview Tuesday, Mrs. Walters acknowledged the tax bill's limits to the SALT deduction sparked some worries and said she was pushing for changes to give constituents more flexibility. Currently, both the House and Senate bill only preserve the property-tax deduction up to $10,000.

Though she isn't part of the formal group of negotiations, "I've been making my feelings known what I think is important in a final bill," she said.

Mrs. Walters also said she is focused on trying to boost the mortgage-interest deduction, which the House voted to limit to loans totaling up to $500,000, down from $1 million in current law, which is also the level preserved by the Senate.

In 2015, the median property value in Orange County, where Mrs. Walters's 45th district sits, was $625,300, according to the U.S. Census Bureau. In the last quarter, the average price paid for a home in most neighborhoods in Mrs. Walters's inland district hovered around or above the county median, according to data from CoreLogic, a data analytics firm.

"I'd like to see us come to a compromise on that," potentially at around $750,000, said Mrs. Walters, who was first elected to Congress in 2014.

Without a change, people in Orange County worry that the measure would spur higher mortgage-interest rates, suppress home buying or bring other knock-on economic effects.

"You basically are creating a disincentive for people to buy those more expensive houses. It will have an impact on our real-estate prices here, " said Max Chao, continuing lecturer in accounting, tax, and law at the University of California, Irvine.

In addition to raising taxes on middle-income professionals such as teachers, dentists, and engineers, the bill may also increase taxes on the highest-income brackets -- including people like lawyers or bankers who, in some cases, are paying off student loans or starting and supporting families.

High-paid lawyers in Orange County are calling the bill the "millionaires-subsidizing-billionaires tax plan," in a nod to some of their own clients, who would benefit from lower taxes on businesses and estates.

Orange County is known as a Republican center in an overwhelmingly Democratic state, but Democratic presidential candidate Hillary Clinton won Mrs. Walters's district last year with 49% of the vote, even as the incumbent congresswoman was re-elected with nearly 59%. Mrs. Walters already has several Democratic challenges for what should be a competitive race next year.

Of the 23 GOP-controlled House districts won by Mrs. Clinton in 2016, Mrs. Walters's has the fourth-highest percentage of tax filers taking the state and local deduction, according to a Tax Policy Center analysis of IRS data.

"People are obviously concerned about the state and local tax income deduction," she said. "That makes it difficult for somebody like myself."

Write to Nour Malas at nour.malas@wsj.com and Kristina Peterson at kristina.peterson@wsj.com

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