National Politics

Republicans threaten to block budget over tax deduction

GOP wants to dump state, local tax deduction

WASHINGTON (CNN) - Threatening the GOP's top priority of passing major tax reform, Republican Rep. Tom MacArthur warned Tuesday night that so many House Republicans are frustrated with plans to nix a popular deduction, they could block the budget this week.

"I haven't done a whip count, but yes, I think there's enough," the New Jersey congressman told reporters.

Meanwhile, Republican leaders, who can afford to lose only 22 members of their caucus, are scrambling to find a solution that would get enough Republicans on board to move forward with the budget, which is considered the first step in tax reform.

The Republican tax reform framework proposes eliminating the State and Local Tax deduction (SALT), a popular tax break that affects nearly one-third of filers, letting them deduct levies like state income taxes and property taxes. It's been in place since the birth of the federal income tax in 1913.

About 30 GOP members represent districts that heavily rely on the deduction, and if they stick together they could derail the resolution.

"There is a concern about that," Florida Rep. Dennis Ross, a member of the GOP whip team, told CNN.

But Ross said the actual bill is still being finalized and the situation is fluid. As for the leadership's posture on the issue as these lawmakers demand changes, he said, "they are holding firm on not budging."

At the House GOP's closed-door conference meeting Tuesday morning, leaders told members they were working on a software application that would let members show district-specific data on how the tax reform plan would affect their constituents. Leaders urged members with concerns to be patient and embrace the broader picture of the benefits of the legislation instead of being fixated on one provision.

Republicans from high-tax states like New York, New Jersey, California and Illinois have been negotiating behind the scenes with Republican leaders, hoping to either preserve the deduction or find some sort of compromise.

With just days before the House votes on a budget, MacArthur said he's disappointed by what he described as a lack of progress in the negotiations.

The lawmaker from New Jersey, which has the highest property tax in the country, is taking issue with language added to the Senate budget that targets deductions like SALT in order to help raise money for tax cuts.

"If the deductibility of SALT is just wholesale gone, I don't think it can pass the House," he said.

In a sign of the concern about the group continuing to use their leverage, top leaders have scheduled another meeting for 9 p.m. ET Wednesday, the eve of the expected House vote Thursday.

Ways and Means Committee Chairman Kevin Brady, who has been leading negotiations on the issue, said, "I feel confident that we'll have the votes to pass this because everyone knows that no budget, no tax reform, no middle class relief, no relief for our local businesses, and US jobs will continue to move overseas."

But Brady acknowledged that they still don't have support from many of the members, saying, "We're making progress, we're not there yet."

Any move to compromise with the group of lawmakers would mean GOP leaders would complicate the already tough hurdle of figuring out how to pay for the overall tax reform proposal. Rank-and-file members are frustrated that they still haven't seen details or an actual bill, but were told Tuesday morning that once the budget is approved, they expect to roll out the bill next week.

MacArthur met with Vice President Mike Pence earlier Tuesday at the White House, and separately with Brady and House Majority Leader Kevin McCarthy.

"I had hoped the meeting this afternoon with our leadership in the House would yield an actual proposal, and we're not there yet," MacArthur said.

North Carolina GOP Rep. Patrick McHenry, the deputy whip gauging support for the fiscal blueprint, told CNN "budgets are hard to pass, but I feel good about where we stand." He predicted the budget would be approved by the end of the week.

As a potential compromise, some Republicans from high-tax states have floated placing a cap at a certain income level that would prevent wealthier Americans from using the deduction. Some members, however, want to see no changes made to the deduction at all.

Leaders would not comment on whether there was some tweak they could make to satisfy these members. McHenry suggested leaders were still running numbers on some policy proposals, saying, "you've got to make sure the model works for districts and states."


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