Months after the White House proposed ending a tax break for people in high-tax states, President Donald Trump grew angry when he learned that the change would hurt some middle-income taxpayers, according to two people familiar with his thinking.
Trump’s concerns led him to say this week that “we’ll be adjusting” the tax-overhaul framework, the people said -- but it’s not clear how he and congressional leaders would make up for the revenue that would be lost without ballooning the deficit or torpedoing support for the plan.
The White House press office on Wednesday night declined to comment on internal deliberations, but released a general statement that said in part: “The president has made it unequivocally clear that a key priority for tax reform is to cut taxes for America’s hardworking middle class families.”
The tax break in question -- which allows households to deduct state and local taxes on their federal returns -- has emerged as a key flash point in the tax debate, one that could determine whether Trump has enough votes or will fail again on one of his top legislative priorities.
“This is probably the biggest obstacle they have to overcome to get to 218,” the number of votes needed to pass a tax bill in the House, said Representative Peter King, a Republican who represents Long Island. “Right now, they can’t get there without us.”
The numbers are daunting for Trump: Roughly two dozen House Republicans are concerned about eliminating the deduction -- and he can’t afford to lose too many more votes than that in the House. Concerned lawmakers are scheduled to meet Thursday with the House’s chief tax writer, Ways and Means Chairman Kevin Brady, to discuss the issue. Many come from the high-tax states that would be hardest hit, including New York and New Jersey.
King on Wednesday floated the idea of limiting the use of the deduction to people with incomes less than $400,000 -- a cap that that has drawn some support, including from New Jersey’s Tom MacArthur. MacArthur was one of the key Republicans who forged a compromise in the House over a bill to repeal Obamacare. That effort ended last month when the Senate failed to vote on its own repeal-and-replace legislation.
‘Not Fair’
MacArthur said he’s taken his concerns to House leaders and the White House “because I think it’s important that everyone involved understands -- you can’t gloss over this, this is a big issue, and we can’t do tax reform on the backs of six or seven states. It’s just not fair.”
House Speaker Paul Ryan defended the repeal of state and local tax deductions at an event in Washington on Thursday, criticizing the break for “propping up profligate big government states.”