House Republicans consider adding few state deductions

WASHINGTON » Top House Republicans said Tuesday that they were exploring how to provide more relief to Californians and others who pay high state income taxes in their tax overhaul — including by making a limited amount of state income taxes deductible.

House Ways and Means Chairman Kevin Brady, R-Texas, told reporters Tuesday that tax writers are looking at a number of ways to give relief to residents of high tax states. One would involve opening up the property tax deduction, capped at $10,000, to state and local income and perhaps sales taxes. Others would involve expanding eligibility for the child tax credit to more affluent households or simply rearranging the individual tax brackets so taxpayers pay lower rates.

House Majority Leader Kevin McCarthy, R-Calif., said that he, too, favored expanding state and local tax deductibility, and also said he hoped the House bill’s limit on the deductibility of mortgage interest would be raised. The House bill excludes deductions of interest on loans larger than $500,000; the Senate bill keeps the current $1 million threshold intact.

McCarthy also said he was looking at provisions that could help victims of disasters such as the wildfires that have hit California in recent months, including a deduction for property casualty losses. “There’s a lot of things that Californians are working on,” he said.

The negotiations took place as House and Senate Republicans prepared for a so-called conference committee that would meld the tax bills passed separately by each chamber into a final conference report.

Rep. Devin Nunes, RCalif., a senior Ways and Means Committee member who is also serving on the conference committee, said he did not personally believe that the state and local tax deduction needed to be addressed in the final bill, but said he’d be open to discussions.

He said his Golden State colleagues were “listening to the mainstream media, who continue to perpetuate a rumor which is that somehow people aren’t getting tax breaks” when “it only gets better for the people of California, not worse.”

Rep. Darrell Issa, R-Calif., who represents a hightax coastal area north of San Diego, voted “no” on the House tax bill and dismissed the changes McCarthy is seeking as “minuscule.” He said the ability to deduct $10,000 in state taxes from their federal tax bill would not go far enough to help his constituents.

“If two people go to college, do what’s right, and they’re at the height of their career and they’re making $150,000 apiece — which, by the way, would include school administrators [and] it’s not that hard in California to be making that at the pinnacle point of their career,” Issa said, “they’re being completely disenfranchised by the existing bill or by the one that we just mentioned where they would have this ‘$10,000.’ ”

Issa said he was open to compromise but said he didn’t foresee the bill being able to move far enough in his direction.