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.