WASHINGTON – Reps. Tom Reed and Chris Collins reveled Tuesday in helping force a likely compromise with Republican congressional leaders that would allow Americans to continue deducting their property tax payments on their federal tax returns.
But it wasn't nearly success enough for Gov. Andrew M. Cuomo and Senate Minority Leader Charles E. Schumer, New York Democrats who insist that despite the change, the GOP tax reform plan to be released Wednesday is likely to do grave damage to the state. Cuomo projected that even with the compromise, the GOP tax plan would cost the average middle class family in the state $1,715 annually.
That's because under the tax plan, taxpayers would no longer be able to deduct their local or state sales or income taxes on their federal returns. That means high-tax states like New York could get hammered under the bill, though not as much as they would have under earlier tax reform proposals that also would have ended the deductability of local property taxes.
Reed insisted, though, that the overall tax legislation would benefit most of the state's taxpayers through a combination of lower overall rates and a much higher standard deduction.
"We can lower the tax burden for all of the people of New York State as well as across the country, as we're doing under tax reform," said Reed, a Corning Republican who sits on the tax-writing Way and Means Committee. "And if we all unite on that process, that's going to empower generations of people to have more money in their pockets and to create the opportunities for generations to come."
Reed has been taking the lead in trying to craft a compromise to save at least part of the state and local tax deduction, which Republicans from lower-tax regions look at as a way to raise revenue so that overall tax rates can be reduced.
The Southern Tier congressman said Tuesday that he's been speaking with White House and congressional leaders on the issue, and that a compromise is looking clearer, if not yet definitive.
"I think that a deal that saves the property tax deduction is the one that's gaining traction," Reed said.
Collins, a Republican from Clarence, has been pushing for a compromise, too. Over dinner, he lobbied Rep. Kevin Brady, the Texas Republican who chairs the Ways and Means Committee, to keep the so-called "SALT" deduction. Separately, Collins pressed both House Majority Leader Kevin McCarthy of California and Vice President Mike Pence to try to save the deduction.
"Far too many families are struggling to get by, let alone get ahead, and removing the SALT deduction put the bill’s passage in jeopardy," Collins said. "I spoke up and raised our concerns, which have been heard and addressed by House leadership and the Trump Administration."
But Cuomo said in a letter to President Trump that the proposed change doesn't go nearly far enough.
"Considering the original federal proposal would cost New York State taxpayers $18.6 billion, this 'compromise' does little to help our state since it would still cost New York State taxpayers nearly $15 billion," Cuomo said.
Noting that Reed and Collins were the only two New York House members to back a GOP budget that made tax reform possible, Cuomo labeled the lawmakers "the Benedict Arnolds of their time."
Schumer also stressed that under the proposed Republican compromise, New Yorkers would lose the vast majority of the tax savings they get through the SALT deduction.
“This half-baked compromise will still double the tax on millions of Americans and is a hollow sham that would hammer huge numbers of middle-class families from Elmira to Syracuse with a tax hike in order to pay for a tax cut to already-profitable giant corporations and the super-rich," Schumer said.
Brady, the Ways and Means chairman, said Monday the property tax deduction would likely be preserved. He did so shortly after the National Association of Home Builders announced its opposition to the GOP tax bill, largely because of the proposed withdrawal of that tax deduction.
Keeping the property deduction but eliminating the state income tax deduction would have a particularly dire impact on New York's highest-income taxpayers, said E.J. McMahon, founder and research director for the right-leaning Empire Center for Public Policy in Albany. He said the GOP tax plan could, in effect, raise the state income tax rate from about 8 percent to 12.7 percent for the wealthiest New Yorkers, who primarily live downstate.
"That will erode the state's tax base, and the effects will be felt as far away as Buffalo," McMahon said.
Rep. Brian Higgins, a Buffalo Democrat, said he opposed the compromise on the SALT deduction because it merely serves as a protective cover for a regressive tax plan that will hurt most taxpayers.
"I don't think anything of the compromise," Higgins said. "I think it's ridiculous. I think the Republicans are blatantly lying about the beneficiaries of this tax plan."
But McCarthy, the Republican majority leader in the House, said tax reform will unleash a new wave of economic growth across the country. He also thanked Reed and the other lawmakers who helped forge the compromise on the SALT deduction.
"I want to give Representative Reed and a lot of the New York and California members credit," McCarthy said. "You will see that they were listened to."