New tax cuts de­bate un­der­cut by GOP elec­tion pres­sure

Daily Freeman (Kingston, NY) - - LOCAL NEWS - By Marcy Gor­don

House law­mak­ers re­cently de­bated a Repub­li­can proposal to ex­pand the new tax law by mak­ing per­ma­nent the in­di­vid­ual tax cuts now set to ex­pire in 2026. But the move is un­der­cut by elec­tion pres­sures faced by GOP law­mak­ers from high­tax states where res­i­dents are hurt by the law’s lim­its on state and lo­cal tax de­duc­tions.

The tax-writ­ing House Ways and Means Com­mit­tee took up the leg­is­la­tion, with the Repub­li­can ma­jor­ity pre­vail­ing to ap­prove it in a 2115 party-line vote. Prospects for the mea­sure, which Democrats unan­i­mously op­pose, are dim in the Se­nate — and it may not come to a vote by the full House be­fore the Novem­ber elec­tions.

House Repub­li­can lead­ers are por­tray­ing the sec­ond crack at tax cuts as cham­pi­oning the mid­dle class and small busi­nesses.

“We must keep build­ing off the mo­men­tum from last year’s tax re­form to en­sure our econ­omy keeps boom­ing,” Repub­li­can Rep. Kevin Brady of Texas, who heads the com­mit­tee, said at the start of the ses­sion.

But as the midterm elec­tions loom in two months, polls are show­ing only luke­warm sup­port among vot­ers for the $1.5 tril­lion pack­age of in­di­vid­ual and cor­po­rate tax cuts that Pres­i­dent Don­ald Trump signed into law in De­cem­ber as his sig­na­ture leg­isla­tive achieve­ment.

And about a dozen Repub­li­can House mem­bers, fac­ing tough re-elec­tion fights in the high-tax, Demo­crat­i­clean­ing states of New York, New Jersey and California, voted against their party’s tax leg­is­la­tion last year. They’re likely to op­pose this new ver­sion, which would make the $10,000 cap on state and lo­cal de­duc­tions per­ma­nent. The GOP law­mak­ers are push­ing to hold onto their seats in rel­a­tively af­flu­ent sub­ur­ban districts where Trump is un­pop­u­lar.

The vul­ner­a­bil­ity of a crit­i­cal bloc of GOP law­mak­ers presents an op­por­tu­nity for Democrats, who are look­ing to re­cap­ture a ma­jor­ity in the House.

The new Repub­li­can proposal also calls for new tax in­cen­tives for sav­ings by creat­ing a “uni­ver­sal sav­ings ac­count” for fam­i­lies that could be used for a range of pur­poses and would al­low the tax-free earn­ings to be more eas­ily with­drawn than is the case with ex­ist­ing re­tire­ment ac­counts. In ad­di­tion, the Repub­li­can plan would al­low the pop­u­lar, tax-free 529 col­lege sav­ings ac­counts to also be used to pay for ap­pren­tice­ship fees and home school­ing ex­penses, as well as to pay off stu­dent debt. Also, work­ers would be able to tap their re­tire­ment sav­ings ac­counts with­out tax penalty to cover ex­penses from the birth of a child or an adop­tion.

Startup busi­nesses would be per­mit­ted to write off more of their ini­tial costs.

Democrats, mean­while, kept up their crit­i­cism of the Repub­li­can tax law, as well as the pro­posed ex­pan­sion, in the com­mit­tee ses­sion.

“Repub­li­cans are cut­ting taxes on the rich for the sec­ond time in less than a year,” said Rep. Richard Neal of Mas­sachusetts, the panel’s se­nior Demo­crat.

Rep. Ron Kind, D-Wis., called the ses­sion “strictly a po­lit­i­cal ex­er­cise” with an eye to the com­ing elec­tions. In re­cent months, the new tax law “went over like a wet blan­ket with our con­stituents back home,” said Kind, who sug­gested vot­ers are aware that the bulk of tax breaks are go­ing to wealthy Amer­i­cans and big cor­po­ra­tions.

The ses­sion led by Brady was in­tended to fin­ish shap­ing the new leg­is­la­tion and point it to­ward a vote by the House. A se­ries of Demo­cratic amend­ments were swiftly de­feated by the Repub­li­can ma­jor­ity on the panel.

They in­cluded a mea­sure by Rep. Bill Pascrell of New Jersey to re­peal the cap on fed­eral de­duc­tions for state and lo­cal taxes that came in the new tax law.

Res­i­dents in states like New York, New Jersey and California could see sub­stan­tial in­creases in their fed­eral tax bills next spring be­cause of the de­duc­tion cap.

Four high-tax states — Con­necti­cut, Mary­land, New Jersey and New York — al­ready have sued the fed­eral govern­ment over the cap, as­sert­ing it’s aimed at hurt­ing a group of Demo­cratic states and tram­ples on their con­sti­tu­tional bud­get-mak­ing au­thor­ity.

And a dozen high-tax states have taken or are con­sid­er­ing mea­sures to get around the cap. Most of the work­arounds take ad­van­tage of fed­eral de­duc­tions for char­i­ta­ble con­tri­bu­tions — which aren’t capped — in place of the old de­duc­tions for pay­ing state and lo­cal in­come taxes.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.