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SALT deduction change could cost state taxpayers $16 billion, Cuomo says

WASHINGTON — The House Republican tax reform proposal would slash the state and local tax deduction affecting 91,041 taxpayers in Erie County, raising their taxes by an average of $2,884 a year, Gov. Andrew M. Cuomo said Thursday in an analysis of the proposal.

Statewide, the governor said, taxpayers would pay $16 billion more under the plan.

The effect would be even greater under the tax reform bill that Senate Republicans unveiled Thursday -- which would repeal entirely the so-called SALT deduction.

Cutting back on the ‘SALT’ deduction

In contrast, the House measure trims the benefit of the deduction by 71 percent.

The House bill wouldn't allow taxpayers to deduct what they pay in state and local income taxes, but unlike the Senate bill, the House measure allows taxpayers to deduct property tax bills of up to $10,000 annually.

Cuomo released his estimate of the effects, in his latest attempt to pressure House Republicans such as Reps. Tom Reed of Corning and Chris Collins of Clarence to oppose the tax measure.

Reed and Collins revel in tax compromise that Cuomo and Schumer abhor

The Cuomo analysis, based on data from 2015 compiled by the Internal Revenue Service, shows every county in Western New York includes thousands of taxpayers who would end up paying dramatically higher federal taxes because the plan limits the SALT deduction.

In Erie County, IRS figures show that 449,410 federal tax returns were filed in 2015, meaning about 20 percent of county taxpayers would be affected by the loss of the SALT deduction.

The governor argued that cutting the SALT deduction would devastate high-tax states such as New York, driving wealthier residents out of the state and forcing everyone who's left to pay higher state taxes.

"This devastating plan is positioned to use New York as a piggy bank to finance the rest of the nation, crippling hardworking families across the state," Cuomo said.

He called on Reed and Collins – strong supporters of the tax reform effort – to change course, and oppose the bill to protect the SALT deduction.

Asked about the report, Reed tried to discredit it.

"My conclusion is that is completely false," Reed said. "That’s not accurate. That's manipulation of the data in order to serve his political message that he's trying to deliver here."

But IRS data showed that 125,970 Erie County taxpayers claimed a deduction for state and local taxes in 2015 — nearly 35,o00 more than Cuomo said would lose out because of the end of the SALT deduction.

Reed acknowledged some higher-end taxpayers would pay more under the House's proposed tax bill.

Collins's spokeswoman, Sarah Minkel, said: “The governor doesn’t know what he’s talking about. Ninety-five percent of Congressman Collins' constituents will see a tax break with our reforms. Instead of his constant whining, the governor should work on easing the state tax burden of hard-working New Yorkers.”

Reed said most of his constituents would benefit from the GOP tax plan.

"As we have done the analysis, it is apparent to me -- and I'm 100 percent confident -- that if this bill was passed, we are looking at $1,600 being kept by the average family in the district," said Reed, whose district includes much of the Southern Tier.

The tax plan aims to cut rates and eliminate deductions in order to simplify the tax code.

A study by the bipartisan congressional Joint Tax Committee this week found that the House proposal would provide a tax break for the majority of families earning more than $50,000 a year, even though the largest dollar amount of savings goes to businesses and the wealthy.

Thursday became a whirlwind of activity on the tax bill -- with the House Ways and Means Committee completing its work on the House version and Senate Finance Committee Chairman Orrin Hatch, a Utah Republican, unveiling his chamber's version.

The bill "will bring our outdated tax code into the 21st century and provide much-needed tax relief for hardworking American families and small businesses," Hatch said.

For New York, the Senate bill includes at least one stark difference: the total repeal of the SALT deduction.

Reed said he would fight to try to prevent that proposal from being included in any eventual House-Senate compromise.

"As I've always said, and I've made it very clear to my colleagues, I will not support legislation that removes completely the ability to deduct state and local taxes," he said.

Given 73 House Republicans come from high-tax states such as New York and California, Reed predicted the party couldn't muster the required number of votes to pass a tax reform bill if it includes a complete repeal of the SALT deduction.

"I just do not know how the math to get to 218 (votes) would work in the House with complete elimination of the state and local tax deduction," he said.

With Republicans moving forward on reform plans on both sides of Capitol Hill, Democrats -- in the minority in both chambers -- railed against the GOP plans.

Senate Minority Leader Charles E. Schumer and Sen. Kirsten E. Gillibrand, both Democrats, joined to ask New York House members to oppose the bill because of what it does to the SALT deduction.

"State and local deductions are bedrock middle-class deductions that help steady the cost of many middle-class families living in New York and should not be eliminated or even reduced so people making millions of dollars a year can catch a tax break of their own," Schumer said.

Rep. Brian Higgins, a Buffalo Democrat, said Republicans such as Reed and Collins -- who successfully fought for a House compromise that trimmed the SALT deduction but didn't end it -- should now reconsider their support for the GOP tax reform effort in light of the Senate proposal.

"What does this mean to the compromise that they thought they reached?" Higgins asked. "It just got blown out of the water. There's no respect on the other side (of Capitol Hill) for the compromise that was reached."

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