Treasury Secretary Steven Mnuchin insisted on Tuesday that he’s “incredibly hopeful” that sweeping changes in the tax code will be done “by the end of the year.”
That means all the bargaining chips and pieces of a possible megadeal on taxes are expected to be tossed around over the next three months at the White House and in the Congress.
For New York, and especially Long Island, at least one big question has been hanging since last year — whether Republican-led changes will include killing deductibility of state and local taxes.
The right-leaning nonprofit Tax Policy Center has reported that about 40 percent of New York households benefit from the current system versus less than 20 percent in Texas, for example.
Removing these deductions, as red-staters may prefer, could add to the burden on middle-class residents of high-tax suburbs in this region.
Presumably that would be offset, however, by lower tax rates or a raise in standard deductions.
Possibly the alternative-minimum tax, which is onerous for some, would be modified or eliminated. A proposed cut in corporate taxes will also be on the Washington, D.C., bargaining tables.
According to Dan Kopf, who covers economics and markets for the Quartz website, a cap on the deductions is much more likely than outright repeal.
But only the details of a tax proposal would hint at the possible compromises. And there are neither details nor a proposal yet, with less than a third of the year left.
“This time around, there is no room for error. This has got to be a home run,” Rep. Dave Brat (R-Va.) told Politico, citing lawmakers’ recent failure to change the Affordable Care Act.
Some congressional members from New York and New Jersey have already signed a letter to Mnuchin urging that state and local deductibility be preserved.
For months, Sen. Chuck Schumer (D-N.Y.) has been promising a “strong fight” against what Trump outlined as his tax plan, saying the proposal provided “massive tax cuts for the very wealthy and crumbs, at best, for everyone else.”
“The worst part of the president’s plan is that he eliminates state and local deductibility,” Schumer said back in April. “Eliminating state and local deductibility is a dagger aimed at the heart of middle-class folks throughout New York State.”
In the negotiations, the size of the cut in corporate rates looms large for the revenue the government would sacrifice.
“The president’s been out there talking about a 15 percent rate, the House has talked about 20, but to get it down from 35 to 20 it’s about $100 billion per point,” Sen. John Thune (R-S.D.) told Politico.