Democrats Fail to Save Full SALT De­duc­tion

The Bond Buyer - - Front Page - BY BRIAN TU­MULTY

WASH­ING­TON – Repub­li­cans on the House Ways and Means Com­mit­tee on Tues­day de­feated an amend­ment that would have main­tained the cur­rent fed­eral de­duc­tion for state and lo­cal taxes, while they con­tin­ued an in­ter­nal de­bate over keep­ing tax-ex­empt pri­vate ac­tiv­ity bonds.

Rep. Bill Pascrell, D-N.J., of­fered the un­suc­cess­ful amend­ment, which was de­feated in a 23-16 party line vote af­ter Repub­li­cans de­fended their pro­posal to al­low the de­duc­tion of up to $10,000 in an­nual prop­erty taxes. The House GOP tax re­form bill would ter­mi­nate the de­duc­tion for state and lo­cal in­come taxes and sales taxes.

State and lo­cal govern­ment of­fi­cials who have fought for the full restora­tion of the SALT de­duc­tion are ex­pected to con­tinue their fight when tax leg­is­la­tion reaches the House floor later this week. A Se­nate ver­sion of the tax re­form leg­is­la­tion is ex­pected to be un­veiled Thurs­day with votes by the Se­nate Fi­nance Com­mit­tee next week.

Rep. Tom Reed, R-N.Y., de­fended the SALT com­pro­mise dur­ing the com­mit­tee’s de­lib­er­a­tions, say­ing it would cover most home­own­ers.

Reed, mean­while, is among a group of com­mit­tee Repub­li­cans lob­by­ing be­hind the scenes for main­tain­ing tax-ex­empt pri­vate ac­tiv­ity bonds, which un­der the bill would be ter­mi­nated af­ter the

end of the year. Reed said he will con­tinue to ad­vo­cate for PABs even if a change isn’t made to the tax bill in the com­mit­tee.

“It’s not as if Ways and Means is go­ing to dis­band once tax re­form gets to the fin­ish line,” Reed said. “There’s al­ways go­ing to be a need to make tech­ni­cal cor­rec­tions. You’ve heard us talk about nat­u­ral dis­as­ters. There are a lot of is­sues there.”

Reed is a sup­porter of PABs and the 20% tax credit for restor­ing his­toric, in­come-pro­duc­ing build­ings, which is also sched­uled for ter­mi­na­tion. He is the lead spon­sor of the Na­tional Dis­as­ter Tax Relief Act. That bill would cre­ate a new class of PABs -qual­i­fied dis­as­ter area re­cov­ery bonds -- for dis­as­ters that oc­curred be­tween 2012 and 2015.

Repub­li­cans who sup­port PABs said they have re­minded Chair­man Kevin Brady, R-Texas, of these uses of PABs in their so far un­suc­cess­ful at­tempt to main­tain them be­fore the tax bill moves out of com­mit­tee later this week.

“If you are go­ing down the P3 ap­proach and get to $1 tril­lion in in­fra­struc­ture, you are go­ing to need ev­ery tool in the tool­box to get this done,” Reed said.

Rep. Kenny Marchant, R-Texas, an­other com­mit­tee mem­ber, agrees on the im­por­tance of keep­ing PABs to fi­nance P3s. “I think that’s some­thing many peo­ple are try­ing to con­vince the chair­man, how in­te­gral they are,” he said. “But as the bill stands now they are not in there.”

Brady has taken the po­si­tion that keep­ing the over­all tax ex­emp­tion for mu­nic­i­pal bonds is enough to pre­serve the muni mar­ket.

The $38.9 bil­lion over 10 years that would be raised by ter­mi­nat­ing tax-ex­empt PABs would help Repub­li­cans fi­nance lower tax rates, es­pe­cially the 20% rate for cor­po­ra­tions. An­other $17.3 bil­lion would be gen­er­ated by ter­mi­nat­ing ad­vance re­fund­ings. Ter­mi­nat­ing tax credit bonds would ac­tu­ally lose $500 mil­lion in rev­enue be­cause they are tax­able bonds. End­ing the tax ex­emp­tion for sports sta­di­ums and are­nas as of Nov. 2 would raise $200 mil­lion.

Marchant said he agrees with the chair­man’s em­pha­sis on low­er­ing tax rates.

“I’m go­ing to have to stick with the chair­man at this point,” he said. “My over­ar­ch­ing in­ter­est is that my home­own­ers and my cit­i­zens get lower tax rates. I also rep­re­sent a very ex­ten­sive cor­po­rate head­quar­ters district with Exxon, Fluor, Kim­ber­ley Clarke, AT&T and Toy­ota. And I can go on. I have 5 mil­lion square feet of Ama­zon ful­fill­ment space in my district. My con­stituents can cor­re­late that if their cor­po­rate em­ployer does bet­ter, they are go­ing to do bet­ter.”

Rep. Mike Kel­ley, R-Pa., lead spon­sor of a bi­par­ti­san bill (H.R. 960) to ex­pand the use of PABs to cer­tain gov­ern­men­tally owned pub­lic build­ings, said he was un­der the im­pres­sion the Trump ad­min­is­tra­tion sup­ported PABs for in­fra­struc­ture in­vest­ment.

“But I’m not in­cluded in a lot of those con­ver­sa­tions,” he said.

Kel­ley said he has not given up on his bill. “We’re hav­ing dis­cus­sions with the chair­man right now to see that we can do,” he said. “I think it’s a great jobs bill so we’re try­ing to work with him to see that we can do.”

Rep. Erik Paulsen, R-Minn., ob­served, “Some of these pro­vi­sions are still a work in progress.”

“Some of us who rec­og­nize the value that ex­ists un­der pri­vate ac­tiv­ity bonds, I think we are go­ing to look at op­por­tu­ni­ties to move for­ward,” Paulsen said. “I can’t hand­i­cap it. You have the House process. You also have the Se­nate process. I think as more peo­ple be­come aware of the value it has for se­nior hous­ing, for col­leges, for char­ter schools, there’s go­ing to be an in­ter­est in fine tun­ing or pay­ing at­ten­tion to that.”

Democrats are con­sid­er­ing of­fer­ing sep­a­rate amend­ments to the tax plan to main­tain tax-ex­empt PABs and ad­vance re­fund­ings.

That would put at least 14 of the 24 Repub­li­cans on the panel on the spot be­cause they are spon­sors of leg­is­la­tion to ei­ther ex­pand the use of PABs or to shoreup the low-in­come tax credit that’s of­ten paired with PABs in mul­ti­fam­ily hous­ing projects.

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