Washington—According to multiple reports, congressional Republicans are reconsidering their plan to eliminate the roughly $1.3 to $1.8 trillion state and local tax deductions and nearly double the standard deduction as part of a sweeping tax reform unveiled last week. Aggressive lobbying from the National Association of Realtors and other special interest groups, along with pushback from Republican lawmakers from high-tax states, is behind the proposed change. Heritage Action released the following statement from Chief Executive Officer Michael A. Needham:
"It did not take long for Washington's swamp creatures to begin picking apart Republicans' sweeping tax reform proposal. The state and local tax deduction is bad policy, and the Trump administration was right to call for its elimination. To be clear, the only way the administration and congressional Republicans can deliver meaningful tax reform is if they hold the line against the special interests and push back against misleading analyses produced by left-leaning organizations."
Earlier this week, Heritage Action rebutted the myth that repealing the state and local tax deduction would hurt middle class families:
"The state and local tax deduction currently forces federal taxpayers in low-tax states to subsidize taxpayers in high-tax states. The biggest beneficiary of this provision are high-income earners, not middle class families, who live in states with high taxes. In practice, this provision incentivizes state and local governments to raise their tax rates since local voters can write off the high taxes and don't hold their local politicians accountable. By eliminating this provision, Congress can lower tax rates for all Americans by as much as 12.5 percent and apply pressure on big-government states like New York, Illinois and California to lower rates on their taxpayers. The state and local tax deduction is bad policy and Congress should eliminate it as part of tax reform."
Related:
Heritage: Time to End the Federal Subsidy for High-Tax States (2015)
Heritage: Tax Reform Should Eliminate the Deduction for State and Local Taxes (2013)
Heritage: The Deduction for State and Local Taxes Undermines Tax Reform and Subsidizes High-Tax State (2005)