Ryan says tax cut 2.0 vote still planned, despite SALT hangups

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House GOP leaders are forging ahead with a vote on a second phase of tax cuts this month, despite dissension from Republicans in high-tax states who say the measure would hurt their voters.

The legislation would make permanent all the individual changes in the 2017 tax law, including the $10,000 cap on state and local tax deductions. The decision to hold the vote shows leaders have decided they can sacrifice the support of some Republican lawmakers in New York, New Jersey and other high-tax states — and don’t mind putting them in the tricky spot of either supporting the cap, or voting against tax cuts backed by their party.

Bloomberg News reported Tuesday that largely because of the SALT cap dilemma, House Republicans were hitting the pause button on “Tax Reform 2.0” legislation, according to three GOP aides who requested anonymity to speak about the matter. The lawmakers had wanted to weigh the political benefits and risks of a vote.

On Wednesday, House Speaker Paul Ryan responded “yes” when reporters asked if the vote was still planned for later this month.

Ryan’s comment signals House leaders believe using a second bill to highlight the tax cuts in the two months leading up to the midterms will do more good than harm, even though some Republicans have steered away from campaigning on the law. The tax law’s approval has consistently hovered below 40 percent in recent polls.

“We’re not resting on our laurels,” said House Majority Whip Steve Scalise. “We’re seeing this great economic growth and so we’re starting to put together Tax Cuts 2.0.”

House Republicans have enough members to pass the bill without the support of the 11 lawmakers from high-tax states who voted no on the 2017 tax overhaul, and are likely to do so again. The legislation isn’t expected to win over any Democrats, who unanimously opposed last year’s tax bill. And it has slim chances of passing the Senate, where it would need Democratic support — which is why the effort has largely been viewed as a political messaging tool for Republicans.

Some Republican lawmakers in New York and New Jersey have urged leaders to strip the SALT provision from the bill so they wouldn’t be forced to take a difficult vote ahead of the midterm elections. Representative Tom Reed of New York said Tuesday: “I’m hoping to just let it sunset. I think a lot of other members would be open to that.”

So far there’s no sign House Ways and Means Chairman Kevin Brady would support the effort. Doing so could open the floodgates for members to start requesting tweaks to other tax breaks that the 2017 law scaled back and which are set to expire in 2026, such as decreasing the cap on the home mortgage interest deduction.

‘Fixing’ SALT

Several House GOP members from high-tax states weighed in to show their displeasure.

“I will not vote for anything that makes the SALT cap permanent,” Representative Peter King of New York said in an interview Tuesday. “Others I have spoken to feel the same way. They are more against it now than they were last November and December.”

Representative Frank LoBiondo of New Jersey said he would only look at the tax cut 2.0 legislation “if they fix SALT.” New Jersey has the highest property taxes in the country.

Still, most voters have state tax bills that fall under the $10,000 threshold and don’t feel the pain of the provision, according to Representative Randy Hultgren, an Illinois Republican.

“It’s tough. I’m in a high-tax state,” Hultgren. “But there are just a few high-tax states.”

Brady is scheduled to brief members on the legislation Thursday and his panel will start making up the legislation next week.

— With assistance from Arit John

Bloomberg News
Tax reform Tax cuts Tax planning SALT deduction Paul Ryan