GOP eyes popular tax breaks to finance overhaul
By MARCY GORDON
AP Business Writer
Republicans straining to find about $1 trillion to finance sweeping tax cuts are homing in on two popular deductions that are woven into the nation’s fiscal fabric – the mortgage interest deduction that millions of homeowners prize and the deduction for state and local taxes popular in Democratic strongholds.
About 30 million Americans, or about 20 percent of taxpayers, deduct mortgage interest from their income taxes, a deduction Realtors and homebuilders argue is a catalyst to home ownership in the United States. According to the most recent IRS tally, nearly 44 million people claimed the deduction for state and local taxes in 2014, especially in the high-tax, high-income states of California, New York, New Jersey and Connecticut.
Republicans are determined to overhaul the nation’s tax code after more than three decades, delivering on a top legislative priority for President Donald Trump. Highlighting items that have been modernized since 1986, the last year the tax code was overhauled, Speaker Paul Ryan, R-Wis., made a pitch for reform, saying on Monday, “Just like the rotary phone of the ’80s, the American tax code is seriously outdated.”
The two deductions are in the cross-hairs as Republicans look to slash the corporate and individual tax rates, according to congressional aides and strong hints from some lawmakers. The aides spoke on condition of anonymity because they weren’t authorized to speak publicly. The deductions point up how what’s seen by some as a special-deal loophole is embraced by others as a revered middle-class touchstone. That’s a major reason why an overhaul of the tax system – a political imperative for the GOP – is so difficult.
House Republicans are promising to reveal details of their plan next week.
The Trump administration has thrown its weight behind a revamp of the tax system, but Republicans are split on some core issues.
They are divided over whether to add to the nation’s soaring debt with tax cuts. In the Senate, Orrin Hatch, R-Utah, who heads the tax-writing Finance Committee, says his panel won’t be “a rubber stamp” for the House Republicans’ plan. The GOP is at odds over eliminating the deduction for state and local taxes.
There are plenty of GOP lawmakers in Democratic-controlled New York, Connecticut, New Jersey and California, and they’re pushing back.