Senate bill to unwrap with tax cuts, end to local deduction

WASHINGTON — All state and local tax deductions would be scrapped in the Senate Republican version of the sweeping tax overhaul released Thursday, despite the strong objections of many Republican lawmakers from New York and New Jersey.

Tax rates on corporations, small businesses and individuals would be deeply cut in the $6 trillion tax overhaul framework underlying both the House and Senate bills, but the two plans diverge on some key details being fought over by lobbyists and regional interests.

Unlike the House bill, the Senate tax plan also includes a one-year delay for slashing tax rates for corporations, even though President Donald Trump said his top priority is for that tax cut to go into effect next year to boost economic growth and paychecks.

The Senate plan keeps seven individual brackets of 10 percent, 12 percent, 22.5 percent, 25 percent, 32.5 percent, 35 percent and, as its top rate, 38.5 percent, down from current rate of 39.6 percent. The House bill has four brackets.

The Senate approach preserves some popular tax breaks stripped by the House bill, including deductions for student loan interest and some high medical expenses, Republican senators told reporters after being briefed behind closed doors.

The Senate plan also retains the estate tax, but doubles the threshold for it to more than $10 million — something the House does temporarily before eliminating what it calls the “death tax.”

The tax plan crafted in secrecy by the Senate Finance Committee was released Thursday after the House Ways and Means Committee ended three days in a sometimes heated session with a party-line approval of its tax legislation over the solid opposition of Democrats.

“We’re going to get this over the finish line because we need to get this done for families,” said House Speaker Paul Ryan (R-Wis.), while acknowledging details were still being worked out as Republicans faced increased pressure to act after losing in Tuesday’s election.

The Republican majority in Congress has made the tax overhaul its top priority as it rushes the legislation through the House for a vote next week and aims for the Senate to vote after Thanksgiving to meet Trump’s deadline to get a tax bill on his desk by Christmas.

White House press secretary Sarah Huckabee Sanders said in a statement that the president “applauds” the Senate tax plan and sees unity on the tax-cutting goals in both versions. “We will continue working with Congress to deliver tax cuts and reforms for hard-working Americans by the end of the year,” she said.

But with the first major revamp of the nation’s tax code in three decades, one that will create winners and losers, both the House and Senate versions are expected to face some objections and heavy lobbying by special and regional interests.

While the Senate plan keeps the current mortgage interest deduction up $1 million, which the House bill cut in half, it also omits the House compromise of allowing filers to deduct property taxes up to $10,000.

New York business associations and members of Congress strongly criticized both the House and Senate versions of the bill, condemning them particularly for ending the much used and prized deductions for the state’s high state and local taxes.

“While the House plan is terrible for a majority of Long Islanders, the Senate version is terrible for all Long Islanders,” said Kevin Law, CEO and president of the pro-business Long Island Association, in a statement.

The New York State Business Council, the leading business lobby in the state, said it was “deeply dismayed” at the Senate bill’s elimination of the state and local tax deduction, often referred to as SALT.

“As we have said repeatedly throughout this process, New York is a net donor state, giving far more in tax dollars to the federal government than we receive,” said Heather C. Briccetti, the council’s president and CEO, in a statement. “Eliminating SALT will only exacerbate that disparity.”

Both Republican congressmen from Long Island rejected the Senate plan because of the axing of the SALT deduction and the House plan for not allowing deductions for sales and state income taxes.

Rep. Peter King (R-Seaford) said he was adamantly opposed to the Senate version. “It makes a bad situation worse,” he said.

And King said he remains opposed to the House bill. “They’re going to bring a vote nextweek,” he said. “We’re doing all we can to vote against it.”

“I remain a NO on both the House and Senate proposals in the current form,” Rep. Lee Zeldin (R-Shirley) said in a statement.

“It is disappointing that the draft Senate bill is likely to completely eliminate SALT,” he said. “However, the fight is not over, and while securing a $10,000 property tax deduction cap in the House draft was progress, it is not enough progress.”

Senate Minority Leader Chuck Schumer (D-N.Y.) said the Senate plan, like the House bill, would harm middle and upper middle-class taxpayers on Long Island and in suburbs across the country — and warned House Republicans voting for their bills they could face defeat next year.

Asked if the Senate bill’s retention of some tax breaks for the middle class and the estate tax would make it easier for middle class families as Republicans argued, Schumer said no.

“What they giveth to the middle class with one hand, they take away with the other,” he said.