Policy

House Leaders May Revive Income Tax Deduction for California, McHenry Says

‘We still have some tweaks to do to accommodate California, mainly’

Rep. Patrick McHenry, R-N.C. (Bill Clark/CQ Roll Call file photo)

House GOP leaders are working on a tweak to the state and local income tax deduction to appease California members, Chief Deputy Whip Patrick McHenry said Tuesday.

The bill the House passed before Thanksgiving would fully repeal the state and local income tax deduction and retain the property tax deduction with a $10,000 cap. Twelve members from the high-tax states of New York, New Jersey and California voted against the tax bill because of concerns over the so-called SALT deduction.

President Donald Trump offered Tuesday his support for including the House’s SALT provision in the Senate bill, according to Sen. Susan Collins.

“At least they’re making that positive moment,” McHenry said of the Senate. “We still have some tweaks to do to accommodate California, mainly.”

The North Carolina Republican confirmed those tweaks would be to the state and local income tax deduction. He did not offer further specifics. The House seeking to make further changes to SALT would be part of anticipated conference committee negotiations with the Senate.

House Majority Leader Kevin McCarthy said November 16 in the hours after the tax bill passed the House that he was working on something to get more California members to support the final measure but declined to say whether it was in relation to the state and local tax deduction.

Three California Republicans voted against the House tax overhaul: Reps. Darrell Issa, Tom McClintock and Dana Rohrabacher. Issa and Rohrabacher are both on Roll Call’s top ten list of the most vulnerable House incumbents.

SALT is just one of many differences in the House and Senate tax bills that could complicate negotiations between the two chambers over a final tax bill.

Some House Republicans on Tuesday expressed concern over an idea Senate Republicans are considering to add a “trigger” mechanism to their tax bill that would automatically increase taxes to prevent deficit increases if growth projections do not materialize.

Rep. Tom Cole initially called the idea “crazy” but then decided to change his description to “skeptical.”

“Senators are so easily offended these days,” the Oklahoma Republican said. “The reality is it could kick in at a really bad time for the economy. When you’re slowing down, you don’t want to be increasing taxes. ... This is an idea that dying a quick and quiet death would be a good thing.”

McHenry said it’s hard to judge the trigger idea without seeing text but said “generally it’s overly complicated and not in the interest of economic growth.”

“I want the Senate to pass a tax bill and we’re going to go to conference; we’re going to hammer out the details,” he added. “I like our plan better than their plan. And I think we’ve got a better approach.”

Republican Study Committee Chairman Mark Walker said he has yet to make a judgment about the trigger proposal.

“We want to make sure under the umbrella this gets done but the trigger and other things — we have to be able to make a case that this still connects to being pro-growth,” the North Carolina Republican said. “And if it doesn’t then it would cause some pause.”

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