Democrats counter GOP tax-cut pitch by warning of long-term pain

As voters complete their tax returns this year, Kelly Mazeski and other Democratic candidates in high-income, high-tax congressional districts want them to be thinking about the possible pain ahead.

Republicans are leaning hard on the tax cuts that are boosting take-home pay now as a central theme in their campaigns for the November congressional elections. Mazeski is telling residents in the affluent Chicago suburbs, where she’s seeking to unseat Republican Representative Peter Roskam, that what the GOP is offering is just a sugar high.

She’s reminding voters that when they file their 2018 returns next year, they’ll be hit by a cap on state and local taxes, known as SALT, and may end up owing more long after the election is over.

1040 tax forms
U.S. Department of the Treasury Internal Revenue Service (IRS) 1040 Individual Income Tax forms for the 2016 tax year are arranged for a photograph in Tiskilwa, Illinois, U.S., on Tuesday, March 28, 2017. Due to the Emancipation day holiday, this year's income taxes will need to be filed by April 18 instead of April 15. Photographer: Daniel Acker/Bloomberg

“He’s thrown his district under the bus,” Mazeski said of Roskam, who represents a suburban area west and northwest of Chicago.

It’s a tricky political message, one that doesn’t fit easily on a bumper sticker or in a 30-second ad. To pull it off, the Democrats trying to win Republican districts in high-tax states including Illinois, New Jersey, New York and California will need to turn the GOP’s strongest talking point into a vulnerability by getting voters to look beyond the immediate benefit of a cut in their income taxes.

Reaching Voters

Mazeski often talks about the issue on the campaign trail and highlighted it in a recent district-wide mailing to likely Democratic primary voters. “Because Roskam’s tax scam caps the deductibility of state and local taxes at $10,000, many will pay federal taxes on state and local tax payments for the first time in history,” the flier says.

Other Democratic candidates in states with high income or property taxes also have been emphasizing the limited deduction. Party strategists in Washington say it’s a topic likely to be part of campaign advertising later this year.

In a suburban Minneapolis congressional district race, the SALT issue was the first mentioned by Democrat Dean Phillips during a local television interview on Feb. 18 as he outlined his case against Republican Representative Erik Paulsen. “I’m afraid this will only put Minnesota further down the list of all the states that send money to Washington, based on what we get back,” he said.

Prime Target

Roskam has easily won re-election every two years since voters first sent him to the U.S. House in 2006. But he’s now one of the prime targets for Democrats as they seek to overturn Republican control of the chamber in November, when every House seat and one-third of those in Senate will be on the ballot. The district’s swing toward Democrat Hillary Clinton over Republican Donald Trump in the 2016 presidential election and the potential hit voters will feel on their tax returns next year are among the reasons why.

The state and local tax deduction, which had been unlimited, is capped at $10,000 under the tax legislation passed in December with only Republican votes, but that won’t show up until taxpayers file their 2018 returns next year. A near-doubling of the standard deduction will mean fewer will itemize, but residents in high-tax, high-income areas could still end up paying thousands of dollars more.

California, Illinois, New Jersey and New York alone are home to eight of the 21 congressional districts currently ranked as toss-ups by the nonpartisan Cook Political Report. The list includes the 6th in Illinois, where Mazeski is among seven Democrats competing ahead of a March 20 primary for right to challenge Roskam.

High Income

Many voters in the suburban Chicago district are well-educated and own sprawling homes. The median household income there is $97,387, compared to a national average of $57,617. It also ranks 12th out of the 435 congressional districts in the nation for use of the state and local tax deduction, according to the nonpartisan Tax Policy Center.

“I think it’s a potent issue for this district,” Mazeski said.

Roskam, who was chairman of the tax policy subcommittee of the Ways and Means panel when the tax bill was passed, is closely tied to the issue. He’s had tax protesters gather outside his district office and Democrat Dick Durbin, the senior senator from Illinois, has held an event in Roskam’s district to draw attention to the SALT issue.

Roskam has aggressively sold the legislation as a win for taxpayers, if they look at the package as a whole.

Tax Message

“Peter Roskam delivered tax relief for families in Illinois by lowering rates, increasing the child-tax credit and eliminating the Alternative Minimum Tax (AMT), which will save taxpayers thousands of dollars and create jobs,” Veronica Vera, his campaign spokeswoman, said in a statement.

Republicans and their allies are already spending heavily to try to convince Americans that the new law will improve the economy and their lives. The political network backed by billionaires Charles and David Koch is in the midst of a planned $20 million effort to sell the law to voters through advertising, workshops, town-hall style events, phone banks and door-to-door visits.

Support for the tax law among registered voters has moved up since its passage. Just 32 percent supported the law in early January, while 39 percent felt that way in early February, recent national surveys by Quinnipiac University show. Other national polls also have found increasing support for the tax cuts.

The tax law is central to the midterm plan Republican strategists are mapping out as they seek to steer the campaign away from controversies swirling about Trump’s administration and the president’s historically low poll ratings. At least for now, it’s also the party’s main legislative accomplishment from Trump’s first term in a Republican-controlled Washington.

Complicated Message

But the equation for predicting the effects for an individual voter is hard to jam into a concise campaign message. It will depend on income, number of dependent children, property ownership and deductions taken by individual households. The Tax Policy Center estimates 80 percent of households nationally will get a tax cut in 2018 — with an average reduction of $1,600 — while 5 percent face a tax increase and the rest would pay roughly the same.

“It’s a process that people will have to slowly absorb this,” said Pat Callan, the managing broker and owner of a real estate office in Roskam’s district. “If they just focus on the SALT issue, they may be upset. But if they focus on the whole package, they probably are going to be better off.”

New Jersey’s 11th congressional district, which includes suburban and exurban areas outside New York City, is another area where the SALT issue is expected to get campaign attention. Among toss-up districts, it ranks the highest in the Tax Policy Center’s analysis for proportion of tax returns that use the deduction.

Open Seat

The contest there, in a district narrowly won by Trump, will be for an open seat following the announced retirement of Representative Rodney Frelinghuysen, one of 12 GOP House members to vote against the tax bill.

Former Congresswoman Ellen Tauscher, who worked for Clinton while she was secretary of state, is working to make sure the SALT issue is at the top of the list among those considered by California voters. She acknowledges it isn’t the easiest issue to explain.

“You have to connect the dots for people and that’s what our information campaign is doing,” said Tauscher, who is working with the Fight Back California political action committee that’s targeting seven Republican-held districts, including several where the deduction is heavily used.

Planned door-to-door canvasing will include both property owners and renters, since even those who don’t directly pay property taxes could still see higher housing costs. The message, Tauscher said, will be direct: “This was done to punish you. This was harvesting money from you to give to other people.”

Bloomberg News
Tax reform Trump tax plan Tax cuts Tax deductions State taxes
MORE FROM ACCOUNTING TODAY