So far, the new Republican tax cut plan is getting pretty good reviews, and it avoided a lot of the potential landmines that had conservatives and some Republican lawmakers grumbling before the unveiling. It doesn’t touch 401(k)s, which was such a boneheaded idea, that one wonders whether Republicans ever seriously considered it.
GOP lawmakers from California, New York, New Jersey and certain other states were deeply concerned about the itemized deduction for state and local taxes. Republicans from other parts of the country argue that the deduction amounts to low-tax states subsidizing high-tax ones. The GOP plan adds a cap to the deduction for state and local property taxes, but it’s a pretty high one, at $10,000. The Tax Foundation calculated which counties’ taxpayers deduct their state and local taxes the most by taking 2014 returns, adding up the total of all of the deductions for state and local taxes, and dividing by the number of returns filed. They created a really cool interactive map with the data, and the average taxpayer in the vast majority of the counties in the United States will be well under $10,000.
The two limits on the mortgage interest deduction are pretty reasonable. Taxpayers can now only deduct interest on the first $500,000 of loans for newly purchased homes, down from $1 million. (Expect loud objections from taxpayers in communities with high real estate prices.) The GOP plan would also eliminate the mortgage interest deduction for payments on second homes. The government and American society may have an interest in promoting home ownership, but it’s tougher to argue that it needs to promote second home ownership.
Nonetheless, it is likely that there will be few if any Democrats voting for the legislation. Even West Virginia Sen. Joe Manchin, the Democratic senator who has voted with the Trump administration’s position the most, came out as a no – or at least a “no, for now” today:
“My test for a good tax reform proposal is simple: does it enable working West Virginians to keep more of their hard-earned money, does it help West Virginia businesses create jobs, and does it do these things without exploding our debt. The tax reform proposal unveiled today does not pass this test and does not reflect the goals President Trump and I have discussed over the last several months. It puts investors ahead of workers, raises rates on the small businesses who create most of our jobs, and dramatically increases our national debt. None-the-less, I believe tax reform is something we must do, so in the coming days, I will do what West Virginians do best – bring people together and find common ground so that we can get something done. I am hopeful that my Republican colleagues will listen to my feedback and work with me to improve this package.”
Will the tax plan pass on an entirely party-line vote?