Homeowners may face choice between deductions
State, local taxes or mortgage interest are in play as Republicans split by region
WASHINGTON — Homeowners would be forced to choose between two popular tax deductions — one for 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 by Republican lawmakers to gain the support of their defecting colleagues from high-tax states. Their opposition threatens to derail tax legislation that’s seen as a political imperative for Republicans and Trump.
Rep. Chris Collins, R-N.Y., said Tuesday he and several other Republicans discussed possible ways around the current impasse on Monday with Rep. Kevin Brady, R-Texas, who heads the tax-writing House Ways and Means Committee.
“It looks like we’re going to have some compromise” on state and local tax deductions, Collins said Tuesday at the Capitol. “I am confident there will be an accommodation for the high-tax states.”
But Republican Sen. Tim Scott of South Carolina, a member of the Senate’s taxwriting Finance Committee, wasn’t sold on the deduction tradeoff idea.
“Should the average South Carolinian subsidize the high property taxes in other states?”
Scott noted that the state and local deductions cost the government an estimated $1.3 trillion in revenue over 10 years. With more than $1 trillion having to be mined from closing loopholes and ending deductions to finance the Republican’s tax cuts, regional divisions in 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 GOP lawmakers.