Longshot: Why the GOP plan to permanently cap the SALT deduction may never become law

Herb Jackson | NorthJersey

Show Caption Hide Caption Video: Gottheimer plan to combat cap on tax deduction Rep. Josh Gottheimer, D-Wyckoff, announces a plan at a Jan. 5, 2018 news conference to combat the cap on deducting property taxes included in a new federal tax law.

WASHINGTON — House Republicans last week doubled down on the tax overhaul the GOP and President Donald Trump enacted last year, offering a plan to extend tax changes that are due to expire in 2025.

But along with making permanent the lower tax brackets and higher standard deductible and child tax credits that were among the key features of the tax overall, what the Republican members of the Ways and Means Committee are calling Tax Reform 2.0 would make permanent the new $10,000 cap on the deduction for state and local taxes, or SALT.

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On average, a majority of people at every income level will pay lower taxes under the new law this year, but a minority will end up paying more because of the cap. And that minority is bigger in New Jersey than most other states because of its high property taxes and state income taxes.

New Jersey is among a handful of states suing to overturn the cap, and every member of Congress from the Garden State other than Rep. Tom MacArthur, R-Toms River, voted against the tax bill because of it. Democrats renewed their outrage when the new plan was outlined last week.

But unlike last year's plan, this year's may not reach Trump's desk, for several reasons.

Higher vote tally

In 2017, both chambers of Congress passed a budget resolution that provided an outline for the tax overhaul. Having that language in the budget meant that a tax bill could come up in the Senate under rules called "reconciliation," which prevent an opponent from using a filibuster to block it.

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Filibusters require 60 votes to overcome, and using reconciliation allowed Senate Republicans to bring up and pass the tax law with only 51 votes.

But Congress has not passed a budget framework this year, so the Senate cannot use reconciliation on a new tax bill. That means a new bill would need 60 votes, but the GOP holds only 51 seats.

Senate has different priorities

In states that don't have a major SALT deduction problem, the biggest political drawback of the tax bill is the expiration date. According to the Tax Policy Center, while only 5 percent of taxpayers will pay higher taxes this year because of the law Trump signed in December, 53 percent will pay more in 2027, two years after the breaks expire.

So groups opposed to the tax bill have been attacking Republicans for making the individual tax cuts temporary and the corporate tax cuts permanent.

More: Four states sue over federal tax reform law capping state, local deductions

House Republicans want to use the extension bill to stop criticism about what might happen in the future. But in the Senate, one of the GOP's main lines of attack against vulnerable Democrats running in states where Trump is popular is that they opposed the tax bill in December.

Holding a new vote on an extension just before the election could give some of those vulnerable Democrats a chance to vote yes, even if the bill does not pass. That would take away one of the GOP's main weapons.

In April, Senate Majority Leader Mitch McConnell would say only that he would "take a look at" a bill making tax breaks permanent if it came over from the House. That's a sharp contrast from last year, when the two chambers were working together to meet deadlines to get the bill to Trump's desk before Christmas.

Crowded calendar

It's not clear whether there would be time to pass a tax bill.

Congress has not settled key questions about how to fund the government before the fiscal year ends on Sept. 30. And Trump renewed threats of a shutdown over the weekend, saying Democrats must provide funding for a border wall with Mexico and changes to immigration policy.

On top of that, the Senate has a confirmation fight ahead over a Supreme Court nominee.

Not as popular as hoped

Republicans expected that once voters saw the effect of the tax law in their paychecks, it would become a political winner.

But that has not been the case, according to a Monmouth University poll released in June. The poll found that 34 percent of the public approved of the tax plan, compared with 41 percent who disapproved. In March, those figures were 41 percent approve and 42 percent disapprove. In January, they were split, 44 percent each.

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The poll's director, Patrick Murray, said the public was never positive about the tax plan's effect.

“But potentially growing uncertainty about how American taxpayers will be affected does not seem to be helping the GOP’s prospects for November,” Murray said.

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