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Key GOP senator won't support tax bill without SALT deduction

WASHINGTON – A key Republican senator said Thursday that she can't support a GOP tax reform bill unless it partially restores the deduction for state and local taxes that the current proposed legislation would eliminate.

Asked if the elimination of the SALT deduction would be enough to get her to oppose the bill, and if there were efforts to restore the provision, Sen. Susan Collins of Maine replied: "Yes, and yes."

Collins, whose support could be needed to pass the bill, told reporters that she is proposing an amendment to the tax measure that would allow homeowners to deduct the first $10,000 of property taxes they would pay. Collins' amendment mirrors the language in the House bill, which also trims the so-called SALT amendment without entirely eliminating it.

"I've had extensive discussions with administration officials and the Senate leaders and they understand that that is something that I have to have in the bill," Collins told reporters at a breakfast sponsored by the Christian Science Monitor.

Republicans have a 52-48 seat edge in the Senate, so they can afford to lose no more than two GOP votes in their efforts to pass their tax measure. The proposal aims to simplify the tax code, cut the corporate tax rate and slash taxes by $1.5 trillion over a decade.

Other Republican senators have expressed a number of concerns about the legislation, which moved to the Senate floor this week. GOP leaders have been trying to find ways to guarantee that wavering senators will support the measure, and Collins said she sees her SALT amendment as a must-have.

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"It would be very problematic for me if the SALT deduction is not in the Senate bill," she said.

To pay for her partial restoration of the SALT deduction, Collins is proposing reducing the corporate tax rate from 35 percent to 21 percent, rather than the 20 percent rate in the original House and Senate proposals.

In addition, Collins said she would partially pay for the SALT change by keeping the top individual tax rate at 39.6 percent for couples with incomes of more than $1 million. The current Senate proposal cuts the top individual tax rate to 38.5 percent.

Together, Collins said, those changes would more than pay for the $145.8 billion that the partial restoration of the SALT deduction is projected to cost over a decade.

Collins cited several reasons for her effort to partially restore the SALT deduction, which has been part of the U.S. tax code since the federal government established the income tax in 1913.

"I want to help middle-income families," she said. "I want to keep the provision that's been in the tax code since the very beginning – this isn't a special interest provision that's been added lately. And I think it's just a matter, also, of avoiding double taxation."

Collins' effort is good news for New York, one of the nation's highest-taxed states. Gov. Andrew M. Cuomo, a Democrat, has estimated that eliminating the SALT deduction would force the state's taxpayers to pay an additional $18 billion in federal taxes annually.

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Backers of the SALT deduction have also noted, as Collins did, that eliminating it would essentially leave people paying a tax on a tax – which Cuomo has said may be unconstitutional.

Cuomo and other New York Democrats – along with most House Republicans from the state – have insisted that the entire SALT deduction be restored. Only Rep. Chris Collins of Clarence and Rep. Tom Reed of Corning voted for the House tax bill that includes a limit on the SALT deduction to $10,000 in property taxes paid.

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The Maine senator said she would restore the full SALT deduction, covering state and local income taxes as well as property taxes, if she could.

"I'm trying to be a realist on what I can get through," Collins said. "And I decided that the best way was to mirror what the House did."

Doing so could improve the overall chances of passage for the GOP tax effort. That's because a final compromise bill that totally eliminates SALT could have trouble passing the House, given that some Republicans from New York, New Jersey, California and other high-tax states might feel compelled to vote against such a measure to protect taxpayers in their states.

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