As leadership within the House of Representatives prepares to unveil their signature tax reform plan, congressional lawmakers from New York are taking a final stand against the potential loss of their coveted state and local tax deduction in a phone conference with White House officials on Monday night, FOX Business has learned.
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Nine Republican lawmakers from New York are scheduled to speak to senior White House officials at 8:30 p.m. ET about their districts being negatively impacted by the elimination of the deduction, also known as SALT, in the hopes they can come to a compromise before the bill is released on Wednesday, according to numerous congressional aides familiar with the matter.
The officials expected to be on the call are National Economic Council Director Gary Cohn and possibly Treasury Secretary Steven Mnuchin, those same sources told FOX Business on the condition of anonymity.
White House Assistant Press Secretary Natalie Strom did not deny that Cohn and Mnuchin may be on the call with the lawmakers, saying, “Nothing to add from our end.”
Of the nine Republicans who are expected to be on the call, only Rep. Peter King (R-NY) confirmed to FOX Business on the record that he will be a participant. Spokespeople for New York Republican Reps. Lee Zeldin, Dan Donovan, John Faso, Elise Stefanik, Claudia Tenney, Tom Reed, John Katko and Chris Collins declined to comment but did not deny that their bosses were going to join the call.
The conference comes after 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, 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 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, King 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.”
For New York Republicans, the phone conference could be a major breakthrough in negotiations for the continuance of the SALT deduction after seven of them reached out to Mnuchin in July requesting that he reconsider eliminating the tax break.
“Without the SALT deduction, taxpayers in all 50 states and in the District of Columbia would be doubly taxed--they would pay federal income taxes on the money they pay to their state and local governments…. We hope you consider the impact on the people we represent as we continue crafting an innovative plan,” the letter read. It was signed by Reps. Donovan, Faso, Katko, King, Stefanik, Tenney and Zeldin.
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.