Filling in tax ‘framework’

Congressional Republicans, faced with a fair amount of pushback over the part of their tax reform proposal that would end the deduction for state and local taxes, are reportedly reconsidering their options.

If, after all, this is truly a middle class tax cut — as it is being billed — then how can it possibly target already burdened middle-class taxpayers in states like Massachusetts, California and New York? That many of those high tax states are blue states initially made the tax reform “framework” agreed to by congressional Republicans and the White House even sweeter. You know, payback is, well . . .

And there is the argument made by those who represent lower tax states that they are tired of “subsidizing” those of us in high-tax states. At the macro level that makes sense. But for the nice middle-class couple who just had to write a check for their real estate tax bill, it would amount to double taxation.

U.S. Rep. Chris Collins (RN.Y.) told The New York Times this week that party leaders have assured him “there’s not going to be full repeal” of the state and local tax deduction.

Now that also raises the cost of the tax reform package by about $1 trillion over its first decade. So there will be considerable negotiation over how to ultimately retain all or part of the deduction. One idea is to allow taxpayers to choose either the mortgage deduction or a deduction for real estate taxes, but not both — something that might help older taxpayers who have paid off their mortgages but are still faced with rising real estate taxes. Or perhaps allow both deductions but only up to a certain amount, say, $1 million.

That’s why this is still at the “framework” stage.

It is also critical that this best hope for a genuine restructuring of the tax code in more than a generation be accomplished with bipartisan support. Being flexible on the future of the state and local tax deduction will help achieve that.