Americans might face choice of property tax or home deductions

WASHINGTON» Homeowners would be forced to choose between two popular tax deductions — one for local property taxes, the other for mortgage interest — under a potential compromise that House Republicans are considering as they craft the evolving tax revamp.

The nearly $6 trillion tax overhaul plan being pushed by President Donald Trump and Republican leaders in Congress promises to retain the deduction of mortgage interest from federal income taxes — a cherished tax break used by about 30 million Americans that supporters say is a catalyst to home ownership.

Republicans in high-tax states such as New York, New Jersey and California are balking at the proposal from Trump and GOP leaders to eliminate the federal deduction for state and local taxes, fearing the financial hit on their constituents.

The possible deduction tradeoff is among several compromises being floated on state and local tax deductions, Collins said Tuesday at the Capitol.

But Republican Sen. Tim Scott of South Carolina, a member of the Senate’s tax-writing Finance Committee, wasn’t sold on the deduction tradeoff idea.

“What does it save and where does it get us? Should the average South Carolinian subsidize the high property taxes in other states?”

Scott noted that the state and local deduction costs the government an estimated $1.3 trillion in lost revenue over 10 years. It covers local property taxes and state income taxes. With more than $1 trillion having to be mined from closing loopholes and ending deductions to finance the Republican plan’s sweeping tax cuts, regional divisions within the GOP have jumped to the fore.

The high-tax, high-income states — New York, Connecticut, New Jersey and California — that urgently want to preserve the state and local deduction are Democratic strongholds, but with plenty of Republican lawmakers.