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U.S. House will reject total elimination of state and local tax deductions: Brady

WASHINGTON (Reuters) - The head of the House of Representatives’ tax-writing committee said on Sunday he would not accept elimination of a federal deduction for state and local taxes, opposing a proposal from Senate Republicans that would hike taxes for some middle class Americans.

House Ways and Means Committee Chairman Kevin Brady said he guaranteed the deduction would not be entirely scrapped in a final tax bill that emerges from dueling plans already unveiled by Republicans in the House and the Senate.

Asked on “Fox News Sunday” if House Republicans would reject a bid by Senate Republicans to do away with the deduction entirely, Brady said: “That’s what I’m saying.”

The deduction for state and local taxes, known as SALT, has been one of the most hotly contested issues as Republicans seek to achieve a significant overhaul of the U.S. tax code and hand President Donald Trump his first major legislative victory.

It is a chief concern for a group of House Republicans who face re-election battles next year in high-tax, typically Democratic-leaning states such as California, New York, New Jersey, Connecticut and Massachusetts.

Other sticking points include a proposal by the Senate to delay implementation of a cut in the corporate tax rate and a House plan to eliminate the estate tax on inheritances. Republicans control both the House and the Senate.

Lawmakers will debate their respective plans this week before heading home for the Thanksgiving Day holiday. Republicans hope to resolve their differences in time to reach their goal of enacting the legislation by the end of the year.

The Senate tax blueprint introduced on Thursday would repeal the SALT deduction entirely. The House bill would repeal it only for state and local income and sales taxes, but preserve it for property tax up to $10,000 a year.

Brady said there were many similarities in the rival tax proposals. “I know that everyone’s stressing the differences - there are some - but there’s far more common ground,” he said.

Both the House and Senate plans would add $1.5 trillion over 10 years to the budget deficit and national debt, an increase that has worried some fiscally conservative Republicans.

Both plans also call for deep tax cuts for high-earners and businesses and would reshape how the United States taxes multinational corporations. They are both widely seen as a boon for business.


Congressional Democrats have criticized the Republican plans as lopsided, favoring wealthy Americans and corporate interests.

“Both the House and the Senate bills would raise taxes on millions of middle-class families, particularly in the suburbs, while providing a huge giveaway to corporations and the wealthy,” Senate Democratic leader Chuck Schumer said.

“Republicans should go back to the drawing board and fully restore the SALT deduction,” he said in a statement.

Some analyses show that some Americans would see a tax increase under both plans. Treasury Secretary Steve Mnuchin acknowledged that on CNN’s “State of the Union” on Sunday, although he said most middle-class families would be better off.

“For most people - and, again, it may not be 100 percent, but by far the majority - both the House and Senate version provide middle-income tax relief,” he said.

White House economic adviser Gary Cohn said both plans adhere to Trump’s two main objectives in overhauling the tax code: a tax cut for middle-income Americans and a deep reduction in the corporate tax rate to make U.S. businesses competitive.

“That’s how we’re going to grow the economy. That’s how we’re going to pay for the tax bill,” Cohn said on Fox’s “Sunday Morning Futures.”

A report by Congress’ Joint Committee on Taxation estimated earlier this month that the House bill could raise taxes on as many as 38 million people who earn between $20,000 and $40,000 per year, beginning in 2023.

Republican Representative Peter King has fiercely opposed the elimination of the SALT deduction, saying many in his home state of New York earning $300,000 a year were hardworking, two-income families facing a very high cost of living.

“They’re not hedge fund people,” King said on “Sunday Morning Futures.” “These are hardworking people and they’re going to get screwed by this bill.”

Reporting by Doina Chiacu; Additional reporting by Sarah N. Lynch; Editing by Kieran Murray and Dan Grebler