Taxes

Republicans Already Backing Away From Biggest Pay-For in Their Tax Cut Plan

JM Ashby
Written by JM Ashby

I figured Republicans would eventually abandon their proposal to eliminate deductions for state and local taxes because it would raise taxes on too many Republican districts in blue states such as New York, but I didn't necessarily expect they would abandon it within two days of unveiling it.

Trump's top economic adviser Gary Cohn is already backing down from eliminating the deductions.

Cohn told Bloomberg TV on Friday that ending the state and local tax deduction is "not a red line" for the White House in a tax revamp. The GOP plan unveiled Wednesday contains an estimated $5.8 trillion in tax cuts.

The National Economic Council director’s signal that the tax break is negotiable could empower Republican opponents who want to preserve it, a move that would exacerbate the budget impact of the tax proposal and therefore make it harder to pass. The state and local deduction, which costs an estimated $1.3 trillion over a decade, is one of the few revenue raisers White House advisers have specified, and they frequently cite repealing the deduction as an example of carve-outs they want to end for the wealthy.

By their own admission, preserving deductions for state and local taxes would increase the cost of their tax cuts by over $1 trillion. Several House Republicans and Senate Finance Committee Chairman Orrin Hatch have come out against eliminating the deductions.

At some point you realize we're talking about 'a trillion here and a trillion there' and you understand how difficult it will be to actually cut taxes this deeply.

This is why I believe that they will pass purely deficit-financed tax cuts. The second coming of the Bush Tax Cuts.

  • swift_4

    It seems like only recently it became standard to report savings and costs on a ten year time scale. Is it because of the numbers involved? If you say 300 billion a year vs. 3 trillion over ten years, I think a large segment of the population thinks “300 is way bigger than 3. So 3 isn’t too bad. I’m ok with that.”

  • muselet

    Of course what will come out of the Rs is deficit-financed tax cuts. Of course that will have no positive effect on the economy. Of course the Rs will blame the Ds for the sluggish economy (because they didn’t clap hard enough, I suppose). Of course our glorious news media, Pompous Gasbag Division, will stroke their collective chin and declare Both Sides Are To Blame.

    Predictable as the sunrise, it is.

    –alopecia