WASHINGTON -- Congressional Republicans agreed Wednesday to gut a major tax break for middle-class families -- especially those in New Jersey -- while giving wealthy Americans a bigger tax cut.

The plan would take aim at the federal deduction for your state income tax and property tax.

The tax cut legislation scheduled to reach the full House and Senate next week would cap the deduction at $10,000, though also allow it to include income or sales taxes in addition to property taxes. Still to be decided is whether someone could deduct only property taxes or income taxes, or can combine both to reach the threshold.

Either way, the measure would eliminate most of a tax break that has been part of the income tax code since the beginning, one that is taken most often by residents of New Jersey and other high-tax states that send billions of dollars more to Washington than they receive in services.

"We are being penalized in this tax reform plan," said Tom Bracken, president of the New Jersey Chamber of Commerce, which opposes the GOP legislation. "To me, a tax reform plan should benefit everybody. If there was a way to tweak what the offering was so we could also benefit, we'd be all for it."

The measure, which is still being drafted, would take effect next year and therefore would not affect 2017 income tax returns residents will begin filling out next month.

President Donald Trump, who promised to sign the measure into law, said Americans could start seeing bigger paychecks by February as companies start withholding less in taxes.

"Millions of middle-class families will win under our plan," Trump said at the White House.

Of New Jersey's 14 members of Congress, only Rep. Tom MacArthur supported the original House bill. MacArthur said he wanted to read the bill before making a final decision but expected to support the measure.

MacArthur, R-3rd Dist,, sald the loss of deductions were more than offset by increased tax credits, such as those for dependent children and a new credit for other family members.

"Credits are always better than deductions," he said. "These things are direct dollars in a family's pocket."

But Rep. Leonard Lance, R-7th Dist., said the $10,000 cap "doesn't go far enough" and that he would vote no.

The diminished deduction also could force home values down by more than 10 percent, according to the National Association of Realtors. Twelve of the 20 counties expected to suffer the biggest decline in projected home prices are in New Jersey, according to a study by Moody's Analytics.

Republicans saying we won't have a final tax bill to look at until the end of the week! I'm supposed to ask questions about a tax bill that I’ve never seen!



I might as well ask questions about life on Mars... pic.twitter.com/Ezd950gULm — Senator Bob Menendez (@SenatorMenendez) December 13, 2017

Also under the legislation, homeowners would be able to deduct the interest on the first $750,000 of their mortgage, down from the current $1 million. It had not been determined whether the mortgage interest deduction also would cover vacation homes, such as those along the Jersey Shore.

The tax bill would eliminate the requirement that everyone carry health insurance or pay a penalty. That would result in 340,000 additional Garden State residents without health coverage by 2027, according to New Jersey Policy Perspective, a progressive research group.

The diminished state and local tax break will be of little help to many Garden State residents, where the deduction now averages $21,720, according to the progressive Institute for Taxation and Economic Policy.

Indeed, most New Jersey taxpayers won't be able to use the shrunken tax break at all since their remaining expenses won't exceed the higher $24,000 standard deduction in the Republican tax bill, according to NJPP.

Of the 44.3 million taxpayers who took the state and local tax deduction in 2015, 38 million, or 86 percent, reported income of $200,000 or less, according to the Government Finance Officers Association.

Savings from curbing that tax break would help fund a reduction in the top income tax rate, paid only by those earning more than $418,401, to 37 percent from 39.6 percent; and a doubled exemption for the estate tax so it affects only those families with more than $22 million in assets.

The corporate tax would drop to 21 percent from 35 percent, and businesses whose income is passed through to their owners and taxed on individual returns also would receive a tax break. More than half of that income currently goes to the top 1 percent of taxpayers, according to the progressive Center on Budget and Policy Priorities.

"This is a middle class tax hike forced on the American people as a Christmas gift to corporations and the top 1 percent," said U.S. Sen. Robert Menendez, D-N.J., a member of the tax-writing Senate Finance Committee.

Jonathan D. Salant may be reached at jsalant@njadvancemedia.com. Follow him on Twitter @JDSalant or on Facebook. Find NJ.com Politics on Facebook.