House Republicans Clear Way for Tax Reform, Eliminate State, Local Deductions

The House passed the Senate's budget resolution in the last step before the GOP can move to fast track their tax reform bill, leaving in place, at least for now, the contentious elimination of state and local tax (SALT) deductions—at least for now.

Every Democrat voted against the bill, along with 20 Republicans. 

Passing the budget resolution allows Republicans to fast track their tax plan, which is slated for release on November 1, said House Ways and Means Committee Chairman Kevin Brady. Tax brackets for taxpayers and corporations and the fate of 401(k) deductions will be decided in the House by then, Brady said.

“Americans deserve tax breaks and this allows Americans to move forward with their dream,” House Speaker Paul Ryan said in a press conference after the vote.

Minority Leader Nancy Pelosi asked lawmakers to vote no on the measure. “Forty-four million Americans will pay more taxes if the state and local tax exemption is removed, which by the way will not be eliminated for corporations. This tax bill comes at the expense of working Americans and their children.”

In fact, the Republican framework for tax reform centered on the elimination of the state and local tax  deduction. The deduction allows people to shave off what they pay in state and local taxes from their federal tax bill.

By eliminating the SALT deduction, Republicans would offset a significant amount of their planned tax cuts — saving $1.3 trillion over 10 years,  analysis from the Tax Policy Center found.

Republicans from high-tax states like California, New York, New Jersey and Massachusetts, where many people take the deduction, have expressed grave concerns about the elimination of the deduction.

New analysis from Chris Krueger, an analyst at Cowen Washington Research Group, said there were enough members from these high SALT deduction states to block the budget if they decide to rally against it.

"There are 52 House Republicans in the 24-seat majority who represent districts that over-index to the deduction (California, Illinois, New York, New Jersey, Minnesota, etc.)," Krueger wrote Thursday. "There is a core group who are threatening to withhold their votes on the budget if there is not a guarantee to protect SALT."